BEIJING — Trucks are delayed due to driver testing. Container rates are rising as ships wait many hours in ports. Products pile up in warehouses.
As Chinese officials scramble to contain the country’s worst Covid-19 outbreak since early 2020, they are imposing lockdowns and restrictions that are adding chaos to global supply chains. The measures in China, home to about a third of global production, are disrupting the production of finished products such as Toyota and Volkswagen cars and Apple’s iPhones, as well as components such as printed circuit boards and computer cables.
The number of cases rose to more than 5,000 new infections across the country on Tuesday. That number is small compared to many other large countries’. But China is taking a zero-tolerance approach to outbreaks, requiring strict lockdowns, mass testing and quarantine in government facilities. As several of the country’s largest industrial cities now fight outbreaks, such measures are taking their toll on the factory and transportation networks that are the backbone of China’s manufacturing.
Officials in Beijing and an ever-growing list of cities and provinces say the virus is still spreading and the government must take increasingly tougher measures to stop it.
“Recently, there have been local clustered epidemics in many places in our country, mainly of the Omicron variant, which has spread rapidly and is very hidden,” said Mi Feng, a spokesman for the National Health and Health Commission, on Tuesday. . “The prevention and control of epidemics is more difficult and the situation is serious and complicated.”
In northeastern China’s Jilin province, which has the most recent cases and also many factories that make cars and auto parts, Zhang Li, a deputy director of the provincial health service, said residents and officials “should urgently mobilize.” and act to overcome difficulties with gritted teeth – we are racing against the clock.”
For some foreign investors, the outbreak itself may be less troubling than the unpredictability of government action. “Business risk in China is now higher than at any time since late spring 2020,” said Julian MacCormac, president of the British Chamber of Commerce in China.
Lockdowns have also suspended work at electronics factories in the south and a wide range of industrial companies in central China. Cities near Shanghai have closed highway exits or required every driver to show a negative PCR test — requirements that have also created miles of queues of trucks attempting to transport critical components between factories.
High international freight costs, a serious problem last year that contributed to inflation in the United States, have started to rise again after a dip during the Chinese New Year holiday last month.
The cost to ship a container of goods from Asia to the US west coast rose to $16,353 last Friday, before the latest coronavirus restrictions went into effect, compared to $16,155 a week earlier. According to data from Freightos, a freight booking platform, rates have nearly tripled from a year ago and are up 12-fold from two years ago.
Ports in China are now requiring workers to live and work in the port for two consecutive months, away from their families, to avoid infections. This allowed ports to continue operating even during ongoing outbreaks, in contrast to severe shipping delays last spring and summer when infections forced extended closures of major container terminals in Shenzhen and near Shanghai.
But now that cargo traffic to the docks has been interrupted, ships are experiencing delays in ports of at least 12 hours and may soon have to wait as long as two weeks, said Julie Gerdeman, chief executive of Everstream Analytics, a supply chain analytics firm.
“Even the most prepared companies will be affected by these new lockdowns in China as supply chain flexibility is minimal,” she said.
Air freight also faces new complications. The Civil Aviation Administration of China said on Tuesday that many of the remaining international flights to Shanghai’s massive Pudong Airport from next Monday to May 1 will be diverted to other Chinese cities. The measure would free up quarantine rooms in Shanghai for the city’s residents and close contacts, but further slow down exports.
At least five major manufacturing cities have been completely shut down due to the coronavirus: Dongguan and Shenzhen in southern China near Hong Kong, where Foxconn has huge factories making iPhones and other Apple products; Changchun and Jilin City in Northeast China’s Jilin Province; and Langfang, next to Beijing. Some smaller towns have also been locked, such as Suifenhe and Manzhouli on China’s border with Russia.
In Dongguan, an industrial city of 7.5 million people, some factory owners said they could still work as long as their workers lived in dormitories in factory complexes and no one was allowed to leave or enter.
Deng Shiwen, the owner of a small factory that makes packaging materials in Dongguan, said his several dozen employees still lived and worked in the compound, but he couldn’t ship anything to customers.
“I’ll just leave the newly made stuff here for now,” he said.
Other cities, notably Shanghai, have not announced citywide lockdowns, but have at least temporarily closed so many neighborhoods, shopping centers and industrial parks that companies are encouraging employees to work from home as much as possible.
From noon to Monday and Tuesday, the list of companies shutting down production due to lockdowns has grown. Toyota and Volkswagen closed their assembly plants and other factories in Changchun. A printed circuit board manufacturer, Unimicron Technology, in Shenzhen. Global Lighting Technologies, a maker of light-emitting diodes or LEDs in Shanghai.
Some companies, such as Foxconn, said they would try to move production to other factories. But Mary E. Lovely, a senior fellow at the Peterson Institute for International Economics, said it seemed “hard to believe” Foxconn would run short of their other facilities that would support the company’s massive operations near Hong Kong. can accommodate.
Ultimately, Foxconn and other companies would likely prioritize certain major customers, such as Apple. “So you’re going to see the same thing you’ve seen before, which is that smaller companies that depend on these imported parts and equipment from China will be affected,” said Ms Lovely.
“You know China is going to do everything it can to get this under control. The question is which is stronger, the Chinese government or the virus,” she said, adding: “We know Omicron is quite a formidable adversary.”
Ana Swanson† Li You and Joy Dong contributed to reporting and research.