China’s Lockdowns Can Further Hike Transport Costs And Disrupt The Global Supply Chain
A sudden rise in COVID-19 cases has once again prompted China to completely shut down the country’s largest city to curb the spread. Shanghai has started a two-stage lockdown that may further impact the global supply chain.
Joe Craig, a UCCS Economist, says that the ripple effect could be felt at the neighbourhood grocery stores. “Prices will rise slightly. How much we observe is going to be based on how long it may last and how fast they jump back as almost always there is a surplus in the supply chain.
Craig suggests that it may even compel local businesses to hike prices as they need to compensate for the prices they pay to purchase things for the buyers. Shipping giant Maersk said transport costs will continue increasing following Shanghai’s lockdown.
Shanghai closed down half of the city on Monday while the other will be shut from Friday following a four-day testing strategy. The company reported that trucking services in and outside Shanghai are going to be impacted by almost 30% owing to a complete lockdown on the Pudong and Puxi areas until April 5.
Even though ports and airports are open, authorities have curbed the movement of both passengers and goods, restricting unapproved vehicles from the streets and asking citizens to remain at home. Warehouses are also going to be shut till Friday.
As a result, there will be extended delivery time and even a rise in transport costs, such as detour and highway fees.
China, which is experiencing the highest Covid-19 cases since the start of the ongoing pandemic, placed restrictions on other industrial cities, such as Shenzhen and Changchun, resulting in long queues outside its ports.