Shanghai’s COVID-19 lockdown faces new challenges for global supply chains

Phase 2 lockdown, halving the city and shutting it down
Tesla’s Shanghai Gigafactory halts production for four days
International cargo flights canceled one after another… Ports lack manpower
“The containment shock is managed, but the problem is that the shock increases”

▲ In Shanghai, China, on the 28th, police block the road and prevent vehicles from entering.  Shanghai/AP News

▲ In Shanghai, China, on the 28th, police block the road and prevent vehicles from entering. Shanghai/AP News

The global supply chain faces new challenges as China’s economic capital, Shanghai, enters the second phase of lockdown due to the spread of the novel coronavirus (COVID-19). The company stopped operating, and the sea and sky roads responsible for exports also started to suffer.

On the 28th (local time), the Wall Street Journal (WSJ) reported that Tesla, citing sources, had decided to halt production at the Shanghai Gigafactory for four days from today.

As the number of confirmed COVID-19 cases surged, the city of Shanghai decided to block half of the city for nine days and conduct group tests. For the first four days, the eastern part of Shanghai is locked down, and it is said that there are many Gigafactory employees living there. During this period, the authorities banned residents from going out in principle, such as stopping the use of public transportation, making it difficult to even go to work.

Shanghai, with a population of 25 million, recorded 3,500 new cases the day before, accounting for 60% of the total number of confirmed cases in China. Among them, 3,450 asymptomatic patients account for 99%, making early detection difficult, making it difficult to prevent the spread. On this day, the number of confirmed cases in Shanghai reached 4,477, an increase of nearly 1,000 from the previous day.

Cameron Johnson, head of strategy at FAO Global, a business consulting firm, pointed out that “even if companies can continue to produce at their factories, they don’t have the manpower to ship goods because of the lockdown.”

Lockdown orders are not just an issue for individual companies. International cargo flights are being canceled one after another at Pudong International Airport. This is because airline mechanics and personnel in charge of cargo loading and disinfection work are blocked from going to work. All Nippon Airways (ANA) and Japan Airlines (JAL) have canceled cargo flights scheduled for the day to Shanghai.

Ports are still open, but exporters have experienced delays in transport as exporters have experienced disruptions in manpower due to the lockdown. Businesses are having a hard time departing, and the Shanghai Port is operating its manpower on a 24-hour emergency system, referring to the Shenzhen Port, which has experienced a similar situation in the past.

Authorities emphasized that businesses and factories could continue to operate in a ‘closed-loop’ way, where employees work and sleep in offices or factories. However, an official from Shenzhen Hongxin Photo Electric, which manufactures LED lighting in Shanghai, said, “The lockdown did not have a significant impact on production, but it did have a significant impact on logistics. are facing,” he said.

Some companies are also moving to respond individually based on their experience of being tied to supply chains in the past. Germany’s Bosch moved 200 workers to the dormitory prior to the lockdown to keep the factory running, and Foxconn, which manufactures Apple iPhones, also built a dormitory next to the factory, reducing the period of plant shutdown to just two days.

Still, repeated logistics and supply chain disruptions caused by COVID-19 burden the industry and cause high inflation. Huisan, China chief economist at Goldman Sachs, said, “China is better managing the impact of the lockdown, but the problem is that the shock itself gets bigger.”

“We are concerned that pressures on global supply chains will not diminish while omicron mutations continue to occur,” the WSJ said. They say the flow is slowing down.”

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