Is the epidemic impacting the global supply chain? The Shanghai government is promoting the resumption of production and work

In the context of globalization, the world has gradually become an integrated whole, and one move affects the whole body. The continued epidemic in Shanghai has caused some manufacturing factories to stop working, which has had a certain impact on the global supply chain system .

While vigorously preventing and controlling the epidemic, the Shanghai government has also introduced relevant policies to actively promote the orderly resumption of production and work of enterprises and ensure the security and stability of the industrial chain and supply chain.

The epidemic affects transportation, and freight companies change routes to deal with emergencies

As one of the largest manufacturing centers in China, Shanghai has a high concentration of automobile and electronic product manufacturing factories , and the export products produced in Shanghai account for 7.2% of China's total export products . At the same time, Shanghai is also the world's largest container port and the location of the main airport providing inbound and outbound air cargo . About 20% of China's export container throughput is shipped to other countries through Shanghai Port .

However, due to the impact of this round of epidemic, many warehouses and factories have been closed, land transportation has been blocked, trucks have stopped operating, the functions of ports and airports cannot be fully utilized , transport units are stranded, and goods are piled up.

According to Project44 data, since the blockade of Shanghai in late March, imported containers at Shanghai Port have to wait for about a week to clear customs. Before the blockade, the delay time for shipping from China's three major ports to Hamburg and Amsterdam in Germany reached 12 days in the first quarter.

Under such circumstances, the import and export containers of Shanghai Port have been greatly affected. According to Freight Waves SONAR data, the rate of ocean carriers refusing to accept container bookings from Shanghai to the United States reached 34%, while the overall domestic rejection rate was about 20%.

Shippers have adopted contingency plans and used other import and export channels to optimize logistics and transportation. Some freight forwarders have tried to reroute goods to airports such as Zhengzhou, Xiamen, Shenzhen and Beijing, as well as Ningbo Port. These measures have alleviated the freight problems at Shanghai Port to a certain extent, but the rerouting of goods has also increased the time cost and freight cost of logistics.

Freight rates have soared due to limited supply, with shippers waiting three to five days to pick up cargo. Reduced manufacturing output and limited truck access to ports and airports have led to a sharp drop in air and sea exports. In response to labor and cargo shortages, airlines have canceled flights and some ocean carriers have chosen not to dock at the port of Shanghai.

Some shipping companies have also started unloading refrigerated containers at other ports along the way because storage areas in Shanghai with electrical plugs are too crowded and customers will face additional port charges and delays. Maersk, the world's second-largest container ship operator, said it has stopped accepting orders for refrigerated cargo, certain types of gas and flammable liquids to Shanghai.

In addition to affecting the freight and logistics industry, the Shanghai epidemic has also dealt varying degrees of blow to the normal production and operations of many Shanghai companies, with multinational companies such as Apple and Tesla being the hardest hit.

Tesla's Shanghai factory stopped production on March 28 after the blockade was implemented . This shutdown is the longest since Tesla's Shanghai factory started production. The shutdown resulted in a production reduction of more than 50,000 vehicles. As a result, many European buyers received notices that the delivery of new cars would be delayed by at least one month.

According to supply chain risk control agencies, auto assembly plants in the United States and Canada will also face delays and disruptions, and cross-border transportation of parts such as seats, tires, engines, bodies and brakes may be blocked. In addition, Apple's two foundry factories in Kunshan, Shanghai are also shut down.

The government has introduced policies to ensure smooth supply chain

The government is actively responding to the impact of the epidemic on the supply chain. Wu Chungeng, director of the Highway Bureau of the Ministry of Transport, said in Beijing on the 19th that the focus will be on Shanghai and the Yangtze River Delta and other regions to effectively solve the outstanding problems of the logistics supply chain in key areas.

The press conference held by the Joint Prevention and Control Mechanism of the State Council mentioned that the current problems in transportation and logistics are mainly reflected in the following aspects.

First, the problem of "layer upon layer of additional restrictions" is quite prominent, and the passage of trucks is still difficult. Some regions have adopted a "one-size-fits-all" control measure to persuade all trucks from cities in medium- and high-risk areas to return.

Second, the setting up of epidemic prevention checkpoints is unreasonable, and there is obvious congestion at highway entrances and exits. Some areas have illegally set up epidemic prevention checkpoints on the main line of highways or service areas.

Third, the main arteries of some highways were interrupted, the terminal traffic and logistics were not smooth, and some places arbitrarily closed highway toll stations and service areas.

In order to solve the corresponding problems, the government will accelerate the promotion and use of a nationwide unified and mutually recognized pass to ensure a unified format, convenient processing, sufficient issuance, nationwide mutual recognition, and smooth passage; focusing on Shanghai and the Yangtze River Delta and other regions, and effectively solving the outstanding problems in the logistics supply chain in key areas.

At the same time, strictly implement the measures of "take, go and chase" + "closed-loop management of personnel" for truck drivers ; speed up the preparation and establishment and make good use of logistics transit sites to ensure the connection and transportation of goods, closed-loop management of personnel, and no contact with each other; strengthen monitoring and early warning, plan and judge in advance, formulate work plans, and resolutely maintain the stability of the overall social situation.

The Shanghai government is also actively promoting the resumption of work and production of related enterprises. Recently, the Shanghai Economic and Information Commission issued the "Guidelines for Epidemic Prevention and Control for the Resumption of Work and Production of Shanghai Industrial Enterprises", which clearly stated that it is necessary to implement closed-loop management on the premise of ensuring that risks are controllable, effectively and orderly promote the resumption of work and production of enterprises, and ensure the safety and stability of the industrial chain and supply chain.

The guidelines for resuming work and production include: enterprises fulfilling their principal responsibilities; implementing zoning and classification management of sites; strengthening enterprise employee management; strengthening logistics management and storage of epidemic prevention materials; and making emergency response plans and work guarantees.

The Shanghai Economic and Information Technology Commission also announced the first batch of key enterprises to resume work and production . Among the first batch of 666 companies that resumed work, more than 250 were automobile-related companies. SAIC Motor and Tesla are both on the list of companies that will resume production and work . Industry analyst Ming-Chi Kuo said that Tesla's Shanghai factory will resume work as early as the 18th . However, there are reports that Tesla's production will be changed to a one-shift system after resuming work , and it is estimated that production capacity will not return to the pre-shutdown level until mid-May.

In order to promote the stable production and resumption of work and production of key industrial enterprises, the Ministry of Industry and Information Technology has recently dispatched a front-line working group in Shanghai to concentrate resources to prioritize the resumption of work and production of 666 key enterprises. At the same time, the Shanghai Municipal COVID-19 Prevention and Control Press Conference on April 19 revealed that in the next step, the three provinces and one city in the Yangtze River Delta will further optimize the supply chain supply "white list" to jointly guarantee and promote the coordinated resumption of work and production of the entire industrial chain in the Yangtze River Delta.

With the orderly resumption of work and production of Shanghai enterprises and the active efforts of relevant government departments, the smooth flow of industrial chain and supply chain is just around the corner, and Shanghai will return to the right track soon.

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