Coming Down the Pike: Uncertainty out of China for US truckers

port of LA

LONG BEACH, April 19, 2022 — Uncertainty persists for the US trucking industry when it comes to predicting the exact flow of import and export containers being shipped across the Pacific to and from China.

Accurate predictions have been impeded since Beijing doubled down on its “Covid Zero” policy, especially in Shanghai – considered China’s economic capital – leaving truck and train traffic stalled, with hundreds of loaded container ships stranded in nearby ports.

Under that policy, China has relied on lockdowns of entire cities, restrictions on all movement – including trucking – mass testing of the populace, contact tracing, and isolating the infected.

All of this has had a dampening effect on the movement of cargo throughout the country, impacting trucks, trains and even ships in ports.

Ocean carrier alliance ONE on April 14 warned of a slow-down in the shipping of refrigerated containers into Shanghai amid worsening bottlenecks caused by the country’s Covid-19 restrictions.  

Slowdown a concern in the US

The slowdown has created concerns in the US, a point underlined by Mario Cordero, the executive director of the port of Long Beach, who noted in a televised interview, that government lockdowns have affected the supply chain in China, specifically trucking operations and factory labor.

“So that is concerning and that will definitely have an impact in terms of supply chain disruption here in the United States and in the global arena for that matter.”

He also said that if China’s Covid Zero policy continues in a “rigid way” it could have “ramifications” into 2023. “I think what we could best hope for is that they control the lockdowns there.”

That hope appeared to be realized during the weekend of April 16-17 with reports in China’s official media that authorities in Shanghai have issued the “first edition” of epidemic prevention guidelines that will allow the city’s industrial enterprises to resume production.

The Shanghai Municipal Commission of Economy and Informatization said that all district governments and authorities at different levels should actively support enterprises to resume operations.

Shanghai still not back to normal

The move by Shanghai authorities does not mean the city has returned to normalcy, but it does mean that the city has entered a “more controllable stage” according to Shen Meng, director of Beijing-based boutique investment bank Chanson & Co.

“If the city can explore ways to minimize the economic impact of anti-epidemic measures, it will be of great significance to China’s overall economy in the future,” Mr Shen told the Global Times.

Automaker Tesla has already taken advantage of the new decree, restarting production at its Shanghai factory and establishing “stringent measures” for its staff members now working in the “closed loop” system required by the authorities. That means employees will be living in the same facility where they work.

Other companies in Shanghai – mostly multinationals and leading tech giants – are preparing for anti-epidemic equipment for closed-loop production and consulting with communities to recall stranded workers.

Meanwhile, to ease the financial burdens caused by the extreme lockdown measures, China’s Vice Finance Minister Liao Min said the government would issue financial policies to help in the recovery of the country’s logistics industry, hard-hit by repeated outbreaks of Covid-19.

“I expect the financial departments to provide key logistics, warehousing and e-commerce companies with more services designed to keep logistics and their supply chains intact during this special time,” Mr Liao told the Tsinghua PBCSF Global Finance Forum 2022 on Saturday in Beijing.

State offers financial lifeline

On Monday, April 18, the People’s Bank of China and the State Administration of Foreign Exchange followed through by announcing that the country will increase financial support to relieve “market entities in difficulties, ensure unimpeded flows in the economy and promote exports.”

They said financial institutions should address “the financing needs of transportation and logistics enterprises and truck drivers” and make reasonable arrangements for “loan extension” or renewal as appropriate if those entities face difficulties in repaying their loans due to the Covid-19 epidemic.

That will mean considerable relief to China’s truck drivers, who have endured weeks-long quarantines, often leaving them unpaid even as the interest payments on their trucks still fall due.

Local governments to relax restrictions

Not least, in the effort to reboot manufacturing and transport, officials are urging local governments to relax restrictions on mobility for logistics workers at checkpoints, and to accept the results of their Covid tests performed in other regions of the country. 

That’s after rigid pandemic testing rules and lengthy quarantines imposed on truckers sharply reduced the country’s road freight capacity.

“Many truck drivers are still required to show local travel passes and 24-hour nucleic test results, while the epidemic prevention and logistics policies often vary from region to region, and those who have been to Shanghai will not be allowed to come back to town,” Zhang Hong, a panel supplier based in Kunshan, a city in East China’s Jiangsu Province, neighboring Shanghai, told the Global Times

The paper said manufacturers expect snags in the logistics chain to be removed but only gradually as “growing flare-ups continue to clog highways and ports and stranding truck drivers, which could be the last barrier in preventing firms from achieving a full recovery.”

Until then, predictability will remain uncertain.