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Mar 18,2022

As the epidemic in Shenzhen, China heats up, will it affect the supply chain of international companies?

Recently, the rapid spread of the new coronavirus variant Omicron has led to a rebound in the epidemic in China. On March 13, the Shenzhen Epidemic Prevention and Control Headquarters announced the closure of public transportation (buses and subways) from March 14 to March 20. On March 14, Dongguan also announced a blockade of the city. Office staff in all institutions are required to work from home (except for essential services), and citizens are temporarily banned from leaving the city. On the basis of ensuring the supply of citizens' home life, closed management will be implemented for each community, urban village, and industrial park, and multiple rounds of nucleic acid tests will be carried out for all members of the city.


Coincidentally, Jiangsu, Zhejiang, and Shanghai areas in East China have also been affected by the epidemic, and the number of infected cases has increased. At present, the Shanghai Municipal Health Commission is "taking measures to actively improve". In addition to screening key areas for prevention and control, some offices, schools, and some communities are closed, and companies and units are encouraged to commute to and from get-off work or work from home to reduce the flow of people. Some factories are closed for at least 2 days. The expressway system entering Shanghai is affected by the epidemic prevention and control in nearby provinces and local areas, and the restrictions on inter-provincial transportation are more serious.



What are the implications for global supply chains?
Shenzhen and Hong Kong are important shipping centers for the global supply chain. Supply chain congestion and delays that were partly caused by the pandemic have yet to ease, according to the latest Air/Ocean Timelines Indicator. New outbreak controls threaten to exacerbate supply chain disruptions. As a result, we may see further increases in shipping prices and more severe delays in the coming days and weeks.


Shipments from China Shenzhen are expected to remain stranded for at least the next week. At present, dozens of electronics factories in Shenzhen have been suspended, including Foxconn, Flextronics, Inventec, etc. Even with some open factories, their industrial parks are temporarily not allowing third-party truck drivers from outside the city to enter and pick up their goods. Most shippers are on standby awaiting further updates from the local government.


Airfreight was less directly affected and cargo was not held at the airport. However, air freight is also expected to suffer in the future as staffing becomes a growing issue.


The border for commercial cargo between Shenzhen Airport and Hong Kong Airport is temporarily closed for at least 1 week (expected 2-4 weeks). More and more goods are trying to be transported through Shenzhen Baoan Airport or Guangzhou Baiyun Airport, and the market freight price also rises rapidly. Long-distance transport between provinces is limited by quarantine measures, limiting route options.