After the conflict between Russia and Ukraine, the global supply chain wobbles again when the Shanghai government announced a blockade of the city, including the port of Shanghai.

Causes of global supply chain wobbles

In the early days of April, Shanghai – the financial center of the country of a million people China – added blockade orders, restrictions in many parts of the city. Shanghai Port also has a number of berths located in the blockade area, which causes congestion and congestion of container ships.

It is known that the port of Shanghai is the busiest seaport in the world, here handling 4 times the total volume of goods at the port of Los Angeles by 2021. According to Vessels Value – a company specializing in providing global data – for Know: The number of ships waiting to load or unload at the port of Shanghai has skyrocketed to more than 300 this week, a nearly fivefold increase from more than two weeks earlier.

global supply chain wobbles

Global supply chain wobbles due to blockade order in Shanghai

It is the strict measures of the Zero-Covid strategy that have caused the Shanghai port to experience unprecedented disruption, increasing congestion and driving up transportation costs.

Goldman Sachs has calculated and said that the areas affected by the blockade order account for more than 30% of China’s GDP. The growth rate in the first quarter fell by about 1.8% due to the impact of sanctions and blockades – Natixis SA has estimated.

To deal with the knock-on effects of the blockade, managers and supply chain analysts around the world have begun to come up with a plan.

“The freight service to and from Shanghai will be affected by up to 30%, because the Pudong and Pu-West areas of the city are completely blocked,” Maersk said. It is known that the Huangpu River is the river that separates the Pudong and the West of Shanghai, so delivery times and transportation costs will increase.

According to Louis Kuijs, the impact of Covid on the world economy is gradually decreasing, but for China alone, the Omicron strain could become a threat to domestic demand, output and global supply chain wobbles.

Global supply chains wobbles again

In the first months of 2022, Shanghai International Port Group – a port operator – said it would launch a “closed system”, require employees to be in specific areas and to adhere to certain measures to prevent the widespread spread of Covid.

However, due to travel restrictions, prolonged waiting times through checkpoints, plus mandatory testing and isolation requirements, many truck drivers in China have difficulty in delivering their goods goods within the contract period.

The blockade of Shanghai is seen as a setback for the global supply chain, which has previously been affected by the conflict between Russia and Ukraine.

Although the port of Shanghai is still operating, but only partially, the staff and operations at the port have been seriously affected by the Covid epidemic, which leads to congestion and congestion.

According to an analysis team at Nomura Holdings Inc, if Shanghai does not lift the blockade orders soon, congestion at ports, delays in delivery and lack of logistics capacity will become more and more serious.

China will pay dearly for its Zero-Covid strategic measures, Nomura said. Because Nomura believes that the severity of the epidemic situation in China is not too serious and alarming.

Source: Synthesized from the Internet

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