It wasn’t quite New Year’s Eve – Chinese or Western – earlier this week when the city of Shanghai reopened following more than two months of pandemic-induced lockdown… but it was pretty close.
The 25 million citizens of China’s largest city –and a key manufacturing and shipping hub for the exports that still drive much of the country’s economy – returned to the streets, stores and restaurants, honking car horns and setting off fireworks, according to published reports.
More importantly for American importers who depend on the city and its surrounding region for so much of the products they sell, it marked the restart of full-scale deliveries from the port. For both sides, it couldn’t come soon enough: industrial production plummeted 62% and the value of Shanghai’s imports and exports sank 42% in April, according to the Wall Street Journal. May figures are not available yet.
With the resumption of economic activity kicking in now, it’s time to take stock of what’s happening with the supply chain issues that have flummoxed American companies for going on two-and-a-half years…and show few signs of letting up:
• With the sharp reduction in goods coming out of northern China for the past two months, it appears there has been a slight letup in the backlog of goods at U.S. ports. It’s hard to get a handle on actual numbers, but anecdotal reports suggest the amount of ships, containers and the goods within them stockpiled at shipping ports has begun to lessen.
• There also appear to be slight reductions in the costs associated with shipping. Recent reports say average container prices have declined – at least a little – though they still remain far above pre-pandemic levels. It should be noted that while spot prices for containers continue at astronomical levels, around $20,000 give or take a few bucks, most large consumer goods retailers and suppliers have annual contracts that lock in prices much closer to the approximate $8,000 global average.
• The ongoing issues in China – medical, political and otherwise – continue to cause American companies to look for alternatives for their production needs. The furniture industry has already moved a large percentage of its manufacturing out of the country, primarily to Vietnam, but also the Philippines and Indonesia. Bangladesh continues to gain share in apparel while home textiles products are increasingly going to nations like India and Pakistan with the additional incentive for both industries of avoiding banned Chinese cotton from the Xinjiang region.
• American and other Western importers remain spooked by their dealings with China knowing that President Xi’s take-no-Covid-prisoners policy could return parts of the country to lockdowns at the drop of a pandemic tissue. Even now, some areas in Shanghai where there have been Covid cases remain closed, although getting specifics is tough.
So, yes, large number of Shanghainese are back on the Bund, strolling, biking and taking in the fresh air again. And the factories surrounding the city are getting back up to speed while the activity at the port, the world’s largest, is ramping up. It will no doubt take a while for things to return to normal – normal being a relative term in the pandemic era – but the process has started.
Where it goes, nobody knows…literally.
WarrensReport 