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- The spread of the Omicron variant of the coronavirus is interfering with operations at the world’s largest port in Shanghai.
- The increase of outbreaks, paired with strict testing protocols, is leaving ports understaffed.
- Experts say backlogs in China will have a significant impact on the global supply chain.
The rapid spread of the Omicron variant of the coronavirus is leading to yet another wave of global supply chain backlogs that experts warn could be even worse than in previous months.
Congestion is mounting at the world’s largest port in Shanghai as ships reroute to the location to avoid bottlenecks at nearby facilities that have suspended or limited operations due to COVID-19 outbreaks, Bloomberg reported. The backlogs have been exacerbated by an increase of outbreaks across the country, leaving many ports and freight companies understaffed and functioning at reduced capacity.
According to Bloomberg, many companies have started mandating strict testing protocols in advance of the Chinese New Year next month, further slowing operations. An outbreak in Shenzhen, for example, has left a queue of ships as workers seek treatment and testing, leading officials to start restricting goods from entering the port.
Meanwhile, in Tianjin, trucking capacity is estimated to be running at half its standard output, after workers were ordered to take a half-day off work for required testing, Bloomberg reported.
Frederic Neumann, co-head of Asian Economics Research at HSBC, wrote in a note to clients this week that the delays could contribute to the “mother of all supply chain stumbles,” given China’s significant role in global trade.
According to Neumann, the Omicron variant is “potent enough to deprive Asia’s factory of a critical number of workers,” creating a scenario that will be “hugely disruptive.”
“A rapid spread of Omicron across Asia — from Korea to India, and mainland China to Indonesia — raises the risk of major production disruptions,” Neumann wrote in the note. “And, here, Omicron, might prove even more disruptive than past waves: with slower moving variants, many governments were able to shield essential manufacturing operations, limiting the impact on the output of essential goods and components.”
The disruption at ports across Asia also comes as the US continues to battle historic congestion at its large ports in Southern California. The rise in COVID-19 infections has left an estimated 800 dock workers ill this week, further slowing operations and contributing to port backlogs.
“Better hold tight. Looks like things will be volatile for a while,” Neumann wrote in the note.
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