China shuts down one of the world’s busiest ports, could affect supply chains

The Chinese industrial city of Ningbo has been closed due to COVID-19 and its port continues to back up due to the lockdown.

Located in the Zhejiang province of China, Ningbo is the third largest port in the world. However, the lockdown measures could worsen an already disrupted port as supply chain woes persist across the world. The city is currently experiencing a small but impressive wave of COVID-19 infections, with at least 23 cases being reported, according to a Chinese state-run media outlet. Global Times.

This spike in cases adds to the already tense times for the port of Ningbo. Of the 20,000 local drivers, only 6,000 have been given special passes to enter and leave the port. Such shortages can make supply chain issues worse.

“Some truck drivers stranded in the lockdown area are unable to apply for passes,” said an anonymous freight forwarder from the freight news website Lloyd’s List, “Some people are reluctant to go to Beilun and the terminals now considered a COVID-risk area could impose a quarantine requirement in other cities.”

Although there are currently no direct cases involving port employees, many of those infected work in a workshop owned by Shenzhou International, which frequently ships products from the port. More than 5,300 people work at the port.

A man walks past stacked containers at Beilun Port in Ningbo, Zhejiang Province, China. The city of Ningbo has been closed, raising questions about the future of Beilun Port.
Photo in Pictures Ltd. / Corbis via Getty Images

The lockdown in China’s major cities to fight the coronavirus outbreak is raising concerns about further disruptions to global industries as two makers of processor chips said their factories were affected.

This has increased uneasiness about the global economic impact of the Omicron variant. Analysts have warned Vietnam, Thailand and other countries could impose critical anti-disease measures for manufacturing chains that would delay deliveries.

“Lockdowns in China are already causing disruption,” economists at Nomura said in a report on Friday.

The Chinese economy was already cooling under pressure from unrelated official efforts to force real estate developers and other companies to reduce the mounting debt that fueled China’s boom over the past two decades.

The biggest city in China’s latest lockdown is Xi’an, a metropolis of 13 million people in the west. It is less important as a producer than the central city of Wuhan, which shut down in 2020 after seeing the first coronavirus cases there. But Xi’an has factories that make processor chips for smartphones, auto parts and other accessories for global and Chinese brands.

Samsung Electronics and Micron Technologies Ltd say their factories in Xi’an are affected, but they are trying to minimize disruptions by attracting a global production network. Micron said some deliveries may be delayed.

Those factories make DRAM and NAND memory chips used in smartphones, personal computers, and services.

According to Shelley Jung of Fitch Ratings, Xi’an accounts for 42 percent of Samsung’s NAND production and 15 percent of global supply. Samsung makes about a third of such chips.

The “lockdown” will negatively affect the NAND flash supply, if prolonged, Jung said in an email. The situation “adds more uncertainty” to supply.

Yuzhou, a city with a population of 1.2 million in the central province of Henan, was put on lockdown on Thursday. Access to Yongjie in neighboring Shanxi province was suspended and mass testing ordered after traces of the virus were found at a train station.

The ruling Communist Party’s intense controls on travel and trade as part of a “zero-Covid strategy”, which aims to keep the virus out of China, have kept the number of new infections relatively low.

On Friday, the government reported 174 new cases nationwide, 57 of them in Xi’an and 56 in Henan province.

Unlike the United States and other governments that have tried to downplay the economic impact of anti-virus controls, the zero-Covid strategy is imposing high costs.

Beijing last year took the unprecedented step of shutting down the world’s second-largest economy to fight the virus. Economic growth picked up in March after the ruling party declared victory over the virus, allowing factories, shops and offices to reopen. But since then scattered cities, towns and some isolated neighborhoods have faced more temporary lockdowns to contain the outbreak.

Economic growth was already slowing after Beijing tightened controls on the use of borrowed funds by real estate developers. This led to a slowdown in construction, which is one of the biggest contributors to economic growth.

Forecasters have lowered their outlook for China’s economic growth in the last quarter of 2021 to 3 percent from a year ago. This is down from 4.9 per cent in the previous quarter.

The Associated Press contributed to this report.

ningbo truck driver
This photo taken on December 18, 2021 shows a truck driver (L) with police officers wearing personal protective equipment (PPE) checking information at a check point in Ningbo, China’s eastern Zhejiang province. Of the 20,000 qualified drivers, only 6,000 have received passes to transport goods at Beilun port.
Photo by STR/AFP via Getty Images