Supply chain shock from China COVID-19 lockdowns 'going to be short-lived,' expert says

While China's recent COVID-19 lockdowns are sparking concerns about another massive shockwave through global supply chains, some industry analysts and insiders are anticipating minimal impact as Shanghai — home to the world's largest container port — begins to ease lockdown measures.

"When those ports do come fully back online, there might be a little ripple effect, but... the data is telling us right now it's going to be short-lived," Lucas Falasca, enterprise account executive at Freightwaves SONAR, told Yahoo Finance. "It's not gonna send like a giant ripple through the supply chain... like we saw COVID do. It might be something that'll be smoothed out over a couple of weeks."

Freightwaves SONAR data showed that ocean bookings are down year to date, signaling fewer shipments, which suggests less demand for goods from China.

"The capacity for these ocean lines hasn't tightened up as much as it has in the past even though ports don't have the capacity that they traditionally have," Falasca said. "That would basically tell us that there's just less demand for freight from China to the U.S. right now."

And why is there less freight moving from China into the U.S. overall?

"A lot of theories are around consumers are spending less money right now on physical goods," Falasca said. "Consumers can spend a lot of money, but if they aren't spending it on physical goods, it doesn't translate to freight. You could spend money on going to a concert. You could spend money on travel. You can spend money on software entertainment — but that doesn't translate to freight. You don't move a concert on a truck or on a ship."

Port of Los Angeles Executive Director Gene Seroka recently told Yahoo Finance Live that the port has not seen any slowdown in cargo following the Shanghai closures.

"We have not seen any slowdown to date," Seroka said on Tuesday, "but we're watching very closely and not just reading the news clippings."

Marine Exchange of Southern California’s data shows that 51 container ships are backed up, which is 58 fewer than the record of 109 in early January.

"It's a little bit more than normal," Seroka said. "I would say that the outcome of this will be a short-term lull in arrivals, yet weeks out from where we're at today, with a pretty quick bounce back to catch up on purchase orders."

'We will likely see volume shift into the East Coast ports or other West Coast ports'

Tens of millions of people have been cooped up in their homes for weeks while over 20 Chinese cities have been under lockdowns or heavy movement restrictions as Chinese President Xi Jinping doubled down on the country's zero-COVID tolerance policy.

The strict lockdowns left residents in Shanghai desperate for food supplies and led to limited truck access, which in turn has caused shipping containers to stack up.

Data and analysis from the supply chain visibility platform FourKites showed that across major U.S. West Coast ports including LA and Long Beach, the 14-day average ocean import volume for loads originating in China is down 16% compared to March 12th.

FourKites noted that further decreases could occur in the coming weeks as the supply chain adapts to new realities.

"Two things you have: Chinese ports closing due to COVID, causing a disruption, and you have the West Coast labor union agreement coming up in July are going to cause shippers to change volume from a sourcing perspective in Asia, but also from an import location into the U.S.," Glenn Koepke, GM of Network Collaboration at FourKites, told Yahoo Finance.

"We will likely see volume shift into the East Coast ports or other West Coast ports," Koepke added. "It is very challenging from a data perspective to say at a macro standpoint, 'Here's the exact volume swing because of how large the volume is coming into the U.S.,' but that is what we expect to see happen over the next one to three months."

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter: @daniromerotv

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