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The port of Shanghai at a standstill: why should we expect new global shortages and a rise in inflation?


The city of Shanghai is chaining massive confinements to deal with the Omicron variant and the resurgence of Covid-19 cases. The country’s zero Covid strategy being very restrictive, the port of Shanghai, the largest in the world, is at a complete standstill and hundreds of carriers are blocked. Supply problems raise the specter of further shortages in Europe.

Nearly 500 ships are waiting off the port of Shanghai to unload and load their goods. the very restrictive confinement set up in the largest city in China (25 million inhabitants) to curb the Omicron variantand respecting Beijing’s “zero Covid” strategy, has led for several days to a real port plug.

The commercial port of Shanghai, The biggest in the world in terms of tonnage, thus operates at a slower pace due to government restrictions. For lack of dockers, pilots and port employees, the port is no longer able to manage the huge traffic that he normally receives.

Significant logistical problems which are reflected this Wednesday, April 20 by the presence of a hundred boats in hangzhou bay between the East China Sea and the Yangzi Jiang, Huangpu and Qiantang rivers.

With Shanghai in a near total lockdown, this is a map of the commercial ships currently waiting offshore to be loaded and offloaded of goods; exacerbating global supply chain woes pic.twitter.com/Md6PtpF3VE

— Scott Gottlieb, MD (@ScottGottliebMD) April 18, 2022

“With Shanghai in near-total lockdown, here is a map of commercial vessels currently waiting offshore to be loaded and unloaded with goods; exacerbating global supply chain issues,” Scot Gottlieb, former Commissioner of the Sea, said on Twitter. FDA in the United States.

Towards a shortage in Europe?

Result of this monster cap, global supply chains, which have already been severely disrupted since 2020, are unlikely to return to their pre-crisis cruising speed. Worse, problems could make make the already tense situation worse and lead to further shortages in Europe and the rest of the world.

If raw materials can therefore be disrupted, other goods should be affected. First, everything about the house: dishesplastic products, gardening… But also articles of sport or computer equipment indicates Paul Tourretdirector of the Isemar Maritime Observatory in Ouest-France.

The lockdown in Shanghai is not easing, right now. Port capacity continues to go down.

Inflation will be here for a while. Prices on many tradable goods will take some time to stabilize. pic.twitter.com/xdP3is4Bwo

—Rodrigo Zeidan (@RodZeidan) April 19, 2022

Rodrigo Zeidan, an associate professor of business and finance in Shanghai, incidentally showed a graph showing the strong tension current about the ability of the port to manage containers, compared to 2021.

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“Many of these products are manufactured in this part of China and transit through the port of Shanghai. In January 2022, 4 million containers were processed there,” he says. Many companies are impacted by this confinement if some are at a standstill, others are operating in slow motion. Employees even sometimes have to sleep on site.

At Carrefour, employees sleep on site

Since the start of containment in Shanghai at the beginning of April, employees of the French group Carrefour have been sleeping in the enclosure of a supermarket of the brand in order to respond to online orders from confined residents around.

Since April 1, Zhang Wei, the supermarket’s manager, and 43 of her colleagues have holed up inside the store in Shanghai’s western suburb of Xujing, isolated from the outside world. To prepare the more than 3,000 orders of vegetables, meat and produce first need that his supermarket sends to confined residents every day, Zhang Wei wakes up at five in the morning after spending the night in a sleeping bag in his office.

His Carrefour is one of more than 1,000 grocery stores open during Shanghai’s lockdown, though under strict requirements to prevent the spread of COVID-19. Local authorities are trying to increase the number of shops open.

Towards a relaxation of the measures?

The city has eased movement restrictions for some people in low-risk areas, but the vast majority of its 25 million people are under strict lockdown.

Public transport remains closed and unauthorized vehicles are banned from circulation. The only ones who can move are the police, the delivery men, the members of the neighborhood committees and the health personnel.

“There is no time to rest, we are busy all dayeven during meals, if neighborhood committee members show up to pick up orders, or if they have a request, we will help them immediately,” Zhang Wei told Reuters via video call.

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Each employee has their own sleeping area in the three-level store, with some settling into tents for more privacy. Carrefour provided them with protective equipment, such as overalls, and doubled their salaries.

The chain, which is majority-owned in China by electronics retailer Suning.Com, hopes most of the brand’s other stores will be open by Saturday. Finding food is the main concern for Shanghai residents, most of whom have been in strict confinement for at least three weeks, although the situation gradually improving.

Even higher inflation?

Yesterday, the International Monetary Fund (IMF), reported the arrival of “seismic waves” on the world economy in the coming months. Alarming forecasts exacerbated by the conflict in Ukraine and today this massive blockage in Shanghai.

The war adds to the series of supply shocks that have hit the world economy in recent years. Like seismic waves, its effects will ripple deep and far, through commodity markets, international trade and financial relationships. – Pierre-Olivier Gourinchas chief economist of the IMF.

For 2022, the IMF expects a inflation 5.7% in advanced economies and 8.7% in emerging and developing economies, respectively 1.8 points and 2.8 points more than in January. “Inflation has become a clear and present danger for many countries.”

In the whole world…

Liang Yan, an economics professor at Willamette University, told the South China Morning Post last week that “these transportation and supply chain disruptions will fuel already existing problems in the United States and Europe.”

Already in Midi Libre, Benoit Mulkay, professor of economics at the University of Montpellier and expert in purchasing power, evoked a global problem, especially on maritime trade: “We are in a situation of oil shock similar to what the t we experienced in the 1970s. Almost all sectors are affected, or will be affected. Between the embargoes on Russia and the situation in Ukraine, two major cereal producers, prices in the agricultural sector have already experienced sharp increases. This is also the case for the transport of goods, in particular by sea.”

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