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The Increased Delays in China will Drive up Freight Rates.

In: Finance

The number of container ships waiting off Qingdao, one of China’s biggest ports, is continuing to rise as the country doubles down on its Covid Zero policy, adding more delays to a strained global supply chain. About 72 vessels were spotted off Qingdao port in Shandong on Monday, almost double the amount at the end of February, according to shipping data compiled.

The virus outbreaks are sprouting up in different parts of China, and lockdown measures do not seem effective. That leaves China with a situation that has worsened in the past few days at Qingdao, due to increasing delays, freight rates are expected to rise.

The rapid spread of the omicron variant in China is increasing the pressure on already strained supply chains reeling from Russia’s invasion of Ukraine. Shipping lines like AP Moller-Maersk have canceled services to Russia and halted some rail shipments from China into Europe.

There’s also a growing backlog of vessels off the ports of Shanghai, Ningbo and Zhoushan. There were 262 ships counted there, up from 243 a week ago. However the situation off Shenzhen and Hong Kong has eased a bit, dropping to 162 vessels from 208 on March 7.

The Yantian container port, Shenzhen’s largest, said that operations are continuing normally. China has locked down Shenzhen and the northeast province of Jilin in the latest effort to contain the pandemic, threatening technology and auto manufacturing output.

Surging global oil and gas prices due to the Russian invasion of Ukraine are adding to inflation risks in China as factory costs remain elevated. China’s zero tolerance approach to the virus has led to several partial port closures over the past year, exacerbating concerns about disruptions to supply chains and the subsequent rise in production costs.

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