'It's a knock-on effect': Shanghai's strict lockdown could have 'massive global effects' on supply chains

‘It’s a knock-on effect’: Shanghai’s strict lockdown could have ‘massive global effects’ on supply chains

Apr 14, 2022

Shanghai’s lockdown – and China’s zero COVID policy – could have “massive global effects in the supply chain”, experts have told Sky News.

Cameron Johnson, head of Asia Pacific at FAO Global, a consulting firm specialising in China, said: “It’s a knock-on effect through the whole supply chain.

“What you will see if this continues, is at some point it will affect business in the UK. It may be just that delivery is delayed by a month or two, or it could be costs going up.”

Shanghai continues with its strict lockdown. The city registered 27,719 more cases over the last 24 hours, another new record. There were 29,411 new infections across China.

The port of Shanghai continues to operate normally under a “closed loop” system where it is sealed off from the city but there have been difficulties with trucks entering and exiting, leading to delays.

“It might be a challenge – you might have wait times, longer lead times, shipping delays,” Mr Johnson said.

That has already led to delays in Europe, according to Josh Brazil, senior vice president of Supply Chain insight at project44, which tracks global supply chains.

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“We’re really seeing the shipment delays at major ports like Hamburg and Rotterdam rise,” he told Sky News. “We’re looking at 10-12 day delays coming into major European ports.”

“We already saw prices coming out of China increasing. The cost of production is going up, the cost of goods sold in China is already going up, so inflation is already on the rise, and these kinds of delays in manufactured outputs is not going to help that.”

European manufacturing businesses in the Shanghai region are struggling, both with the lockdown and with supply chain delays, according to Bettina Schoen-Behanzin, vice president of the European Union Chamber of Commerce in Shanghai.

“In the long run, it really will have quite an impact on the world economy and inflation definitely will go up,” she told Sky News.

“We do not know how long this lockdown will last and this is the essential question.

“It’s important that we find a way out because the biggest worry is that, given China’s commitment to its zero COVID policy, lockdowns could be extended to other manufacturing hubs.

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“If down-south goes offline – Guangzhou, Shenzhen, if Shanghai continues to stay offline, if another area goes offline – then you will start to see massive global effects in the supply chain. And they won’t be easily resolved,” Mr Johnson said.

“It’s not going to be pretty.”

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