BEIJING – China’s increasing Covid-19 restrictions are causing further disruptions to global supply chains for consumer electronics, auto parts and other goods.
More Chinese cities are requiring truck drivers to take daily Covid PCR tests before they are allowed to cross municipal borders, or are quarantining drivers deemed at risk of infection. The measures have limited the speed at which drivers can move components between factories and goods from factories to ports.
Shanghai and other major Chinese cities have imposed lengthy, strict lockdowns to try to control Covid outbreaks. Previous disruptions to shipments of goods from Chinese factories to buyers around the world have mainly involved the temporary closure of shipping ports, including in Southeast China’s Shenzhen in May and June last year and near Shanghai last summer.
“The problem isn’t the ships, it’s that cargo isn’t arriving because there aren’t any trucks,” said Jarrod Ward, chief east Asia business development officer at the Shanghai office of Yusen Logistics, a major Japanese supply chain management company.
Truck driver testing has been held up as some cities conduct mass testing of residents. Shanghai tested essentially all 25 million people within its borders in a single day on Monday and detected another 21,000 cases on Thursday.
Now there is an acute shortage of truck drivers in Shanghai and nearby cities like Kunshan, a hub of electronics manufacturing. Many electronic component manufacturers are closing in Kunshan.
“The main electronics suppliers to Apple and Tesla are all based there,” said Julie Gerdeman, chief executive of Everstream, a DHL supply chain risk management subsidiary based in San Marcos, California.
Apple declined comment and Tesla did not have an immediate response to questions.
Many factories have tried to stay open by letting workers stay on site instead of going home. In some cities in northeast China, employees have been sleeping on mats on the floor for four weeks. Businesses have been storing goods in nearby warehouses while waiting for normal truck traffic to resume.
But as lockdowns drag on in cities like Shanghai, Changchun and Shenyang, factories are starting to run out of materials for assembly. Some are sending their workers home until further notice.
For example, different springs, screws and other materials are needed to manufacture car seats. Mr Ward said car seat manufacturers were running out of components. Volkswagen said the company has closed a factory outside of Shanghai.
The Russia-Ukraine War and the World Economy
As Shanghai’s cases surge, its main rival in electronics manufacturing, Shenzhen, has emerged from the lockdown. This gives the workers and factories there the opportunity to resume production at full speed.
Western retailers and manufacturers have tried to adapt to previous supply chain difficulties in China by switching from sea to air freight, but air freight rates have more than doubled from last year.
The almost complete suspension of passenger flights to and from Shanghai has roughly halved its air freight capacity, said Zvi Schreiber, managing director of Freightos, a freight booking platform. The war in Ukraine has forced many airlines to schedule longer flights around Russia and Ukraine, meaning each plane can make fewer flights in a week and often carry less weight on each flight.
The war in Ukraine is also beginning to affect the availability of Soviet-era Antonov freighters, Mr Schreiber said. These workhorses of the air cargo industry have been powered almost exclusively by Ukrainian maintenance bases for the past few years, which have now closed.
For companies, additional disruptions to the global supply chain would come at a particularly tense moment, in addition to rising prices for raw materials and shipping, as well as extended delivery times and labor shortages.