Viewpoint: It’s a tangled game of Twister for drayage in China

Drayage is a forward-looking indicator on the impact of “zero COVID” in the movement of trade in China. People are needed to drive the trucks. Roads must be open to reach factories and warehouses — which, of course, must also be open. 

The drayage component of trade is essential, especially to ensure the fluid transportation of empty and full containers. 

Without all of this, it doesn’t matter how many vessels are available. 

The multiple testing hurdles and current stay-at-home orders in China are slowing down this critical movement of trade and increasing prices. This is yet another inflationary red flag.

Logistics managers in China are alerting clients to provide clarity on the evolving situation.

“To communicate more effectively with our clients, we have broken down restrictions and changes to airfreight, ocean freight and trucking by city affected, as dynamic zero-COVID measures vary by province,” explained Jasmine Wall, commercial manager of Asia-Pacific for Seko Logistics. 

“Some areas are more stringent than others. There is no set standard and it is very fluid, where things can change multiple times a day. Thankfully, what is helping us currently is we don’t have a large backlog of freight for customers being pushed out, similar to what we saw following the initial COVID wave in 2020.”

Wall said depending on what part of Shanghai a person resides in depends on the severity of the lockdown. For example, some areas of Shanghai are still locked down with people unable to leave their housing areas. They also face more enforced testing, while other zones have opened up with people free to move.  

For the Seko Shanghai office, it is now open but staff must have five days of COVID negative tests in order to enter — and 58% of the staff are still in residential areas of lockdown.

Seko provided American Shipper with a status update on key areas of Shanghai and what types of products come out of that region:

  • The Suzhou and Kunshan areas’ pandemic controls have begun to soften, with factories reopening Monday. These areas produce high-tech electronic products.
  • The Jiashan area has implemented serious controls, with pickups in this region unable to go ahead. This is an area where fixtures and textiles are manufactured, so it’s not a good update for U.S. companies selling these products.
  • The Waigaoqiao bonded area for all goods that have not cleared customs has reopened and warehousing services have returned to normal.

This patchwork system of COVID restrictions and lockdowns has created an expensive, tangled game of Twister for drayage.

For the critical movement of imports and exports, drayage drivers must have a negative COVID test report within 48 hours before arranging pickups and deliveries. Trucks must also be fully disinfected before entering warehouses. This adds more time to the flow of trade. 

Even when a drayage driver can get on the road, potholes remain. Many highways have been closed and the number of drivers allowed is limited for interprovince pickups. Trucking prices have also increased due to the interprovincial transportation risks and increasing fuel costs.

“The increase we are currently seeing in China with fuel surcharge is around 10%,” Wall said.

He added that  the mandatory 48-hour testing reports with checks at the gates of key highways is creating additional lead time for deliveries. To circumvent this travel trap, factories in nearby Zhejiang province have created a new elbow in the plumbing by changing their bookings to Ningbo instead of Shanghai. 

Seko is not alone in its warnings of drayage fluidity.

Paula Bellamy, managing director of OL U.K. and UAE, emailed clients, “China testing is aggressively being made in Shanghai, Ningbo, Nanjing and Qingdao. The province of Jilin was also closed due to COVID. In fact, the [health commission] director of the province was fired for allowing a COVID outbreak to happen.”

On Saturday, Jilin reported two COVID deaths — the first in China in more than a year.

“The issue will not be one of the ports being open or closed,” Bellamy added. “The issue will be workers unable to leave their homes. This will result in shortages of drivers and factory workers. Truck drivers may be refused entry to cities and prevented from crossing the city, district and provincial borders. Factories may be closed with workers unable to make it to work.”

For WorldWide Logistics, the message on Shanghai is similar, stressing the situation is fluid and still developing with no reopening date announced. This is creating another maneuver within the flow of trade.

“Carriers are shifting more allocation to Ningbo port or the river ports on Yangtze River to fill up the ship,” noted one company report.                         

While the ports of Yantian, Shekou and Chiwan are open, that does not mean drivers have the green flag on travel. WorldWide noted drivers need to provide testing in order to report in and out of the terminal.

“COVID is still disrupting China’s ability to deliver [the] product as workers get caught up in quarantines in their respective communities as they are locked down,” Jon Monroe, North American representative for WorldWide Logistics, posted on LinkedIn.

An area to watch, according to WorldWide’s alert, is Quanzhou, the chief cargo base for the Port of Xiamen. The world’s top ocean carriers have this port in their major shipping routes.

“Parts of Quanzhou affected areas are closed and no drivers can go in/out,” WorldWide reported. “The testing report is required for other areas. Expect delays and higher trucking costs. Expect a 30% drop in bookings. Since Xiamen port operation remains normal, some factories in nearby Chaozhou and Shantou area (three hours away) will choose to ship from Xiamen, making up for some booking loss.”

In Qingdao, COVID cases are being reported throughout major cities in the Shandong province. While ports are open, the testing report requirements are “greatly constraining” driver intercity movement. The logistics company warns, “Expect a 30% drop in trucking power.”

In an effort to curb the spread of COVID, the city of Tangshan, east of Beijing, halted all traffic for 24 hours on Sunday. The plan is for all 7.7 million people to be tested.

So while the ports are open because of the bubble “closed-loop system” in which workers are forced to live at the ports in shifts, the land pit crews of the maritime superhighway are left to navigate some serious potholes. 

Source: freightwaves - Viewpoint: It’s a tangled game of Twister for drayage in China
Editor: Lori Ann LaRocco