Crisis averted? Latest data suggests that port congestion in Shanghai is normalizing
Draconian lockdown in Shanghai blocks economic activity except for the port area
In line with the Zero-Covid strategy, the Chinese authorities put the whole city of Shanghai under lockdown as cases began surging at the end of March 2022. The massive lockdown for over 25 million citizens paralysed economic activity in the Shanghai area. To examine levels of industrial activity in the area, QuantCube measured NO2 concentration levels above the city of Shanghai. As Exhibit 1 shows, the pollution levels in Shanghai dropped significantly a few days after the announcement of the lockdown. Around April 16 we saw the lowest levels of NO2 since we started the observation.
Although the pollution levels generally dropped, NO2 concentration in the north-eastern part of Shanghai remained elevated throughout the whole observation period. The international port situated in this area plays a key role in China’s foreign trade. It seems that the Chinese government decided to keep this port open to safeguard economic activity with other countries. This was made possible with a so called “closed loop management" system, where workers are isolated within the premises to prevent virus transmission. This measure might have helped to soften the negative impact of the lockdown on China’s production networks. According to QuantCube's latest observations on May 3 (Exhibit 1), activity levels at the port started to improve recently – a potential sign that the worst scenario for China’s economic outlook has been averted.
Exhibit 1: QuantCube NO2 concentration indicator – Shanghai
Will supply chain disruption continue or has the crisis been averted?
In order to measure the level of port congestion and its potential impact on supply chain networks, QuantCube developed two port congestion indicators based on AIS data and QuantCube's proprietary port mapping tools. The indicators are designed to monitor the number of vessels in anchorage waiting for a berth in a specific port and their average time spent in the anchorage zones before berthing.
As demonstrated in Exhibit 2, the level of port congestion for container vessels destined for Shanghai more than doubled between April 1 and the peak on April 21. This increase was also reflected in higher waiting times experienced by container vessels in the anchorage zones (Exhibit 3). A greater number of vessels in anchorage with longer waiting times suggests that some logistical issues started to develop in Shanghai after the lockdown was announced. However, the situation seems to have eased after the peak, and the port congestion in Shanghai is now almost back to pre-lockdown levels.
There are two notable developments that can explain these trends. Firstly, in mid-April the authorities allowed over 650 companies in key sectors such as automotive and semiconductors to gradually reopen their factories, and eased restrictions for container truck drivers to move goods in and out of the Shanghai port. This consequently ensured the city’s logistical networks could function properly.
Secondly, it seems that the number of container carriers stuck outside the ports of Shanghai and Ningbo reached a peak in mid-April as Exhibit 4 indicates. Our observations on May 2 indicate that the situation has started to improve recently.
Exhibit 4: Number of vessels waiting outside the ports of Shanghai and Ningbo
Did China succeed in averting a supply chain crisis despite shutting down the world’s busiest port city?
Our recent observations indicate that China’s supply chain networks have been improving. The Chinese government seems to have successfully implemented effective measures to contain logistical disruptions caused by the strict lockdown in Shanghai. It will be interesting to see how the situation unfolds in the future. QuantCube will continue to monitor the situation using real-time alternative data.
