If you have not yet been paying close attention to what is going on at the ports in China, then this Two Minute Warning is especially for you.
In early April, in response to a Covid outbreak, the Chinese government imposed lockdowns and restrictions at the Port of Shanghai and other important ports throughout China. As we learned from Jon Gold, VP of Supply Chain at the National Retail Federation on our “Navigating Your Supply Chain in Survival Mode” webinar, there was not a “sudden” impact. Instead, the magnitude of the impact would grow with the passage of time.
Almost four weeks later, the situation at the ports isn’t just affecting the flow of containers, it is also having a significant impact on China’s manufacturers production capacity. And that is why the situation could be rapidly morphing in to being a “crisis” situation.
To learn more about the lockdown in Shanghai and its potential impact on supply chains, we reached out and interviewed our friend Peter Tirschwell, VP of Maritime & Trade at IHS Markit. Peter offered some great insights about what to expect and what could occur at the China’s ports and the broader ocean market.
In addition to the situation at the ports in China, we also discussed the contract situation with the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA). As we have shared in previous Two Minute Warnings, contract negotiations between the ILWU and PMA will begin next week and every shipper is hoping that they will reach an agreement on a new contract before the current contract expires on July 1.
As Peter noted, when the ports in China start to resume normal operations, the influx of containers could once again cause extreme congestion at the West Coast ports. And if the failure to reach an agreement between the ILWU and PMA results in slowdowns, or worse, a shutdown at the West Coast ports, well, folks, you do the math – it won’t be pretty.
Add it all up, and the Shanghai lockdown plus any impact from the ILWU contract situation could wreak havoc on an already stressed supply chain.
If you are looking for alternatives, or want to consider various options under different scenarios, let’s have a conversation. We’re here to serve and would welcome the opportunity to continue the dialogue.
BY MIKE REGAN, CO-FOUNDER OF TRANZACT
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