next test for global supply chain crisis
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Qingdao Port’s Foreign Trade Container Terminal in Qingdao (East China’s Shandong Province), Nov 11-2021 – Cargo vessels load and unload container cargo ships
Yu Fangping | Costfoto | Barcroft Media | Getty Images
Since January, ports and businesses have had to battle the global supply-chain crisis. The industry could now be facing yet another challenge, just as the crisis appeared to be stabilizing. the new omicron Covid variant.
Per Hong (senior partner, Kearney) said that Omicron was “another test for resilience” in supply chain systems already under stress.
Sian Fenner (lead Asia economist, Oxford Economics) stated that supply chains are still vulnerable to disruptions caused by pandemics in an Omicron variant. This was said in a Wednesday note.
Omicron has many unknowns but it is certainly proving to be another example of resilience in global supply chains already suffering from stress or in the middle of a long recovery process.
Per Hong
Kearney, senior partner
The world first became aware of the new omicron variantThe strain was discovered by a South African scientist late last week. The World Health Organization quickly labeled the strain a “variant in concern”, adding that its spread could be further. could potentially become a “very high” global risk.
The strain has been around since then. been found among cases in the U.K., France, Israel, Belgium, the Netherlands, GermanyItaly, Australia, Canada, Hong Kong.
Lockdowns’ ‘Knock on Effects’
Hong confirmed that no cases have been reported in China of the omicron, but he said he was closely following China’s responses. cases surfacing in Hong Kong.
He wrote that China is likely to increase its “zero-COVID” policy, which in the past included massive lockdowns in entire cities and enforced quarantines as well as strict inspections at ports including cargo monitoring to stop cases coming in.
Other analysts have also warnedChina may intensify its zero Covid policies with the emergence omicron.
Hong noted that disruptions from the Covid pandemic in early stages have demonstrated that lockdown measures taken in one country can have “significant knock on effects both upstream and downstream to other areas,” Hong said.
He stated that if this happens, shipping will be restricted and we may see more shortages and longer order backlogs in key manufacturing components for consumer, electronic and automotive products, depending on the affected regions.
China is home to some of the busiest ports in the world. According to the World Shipping Council data, seven of the 10 busiest ports are located in China. Shanghai comes first. Ningbo Zhoushan is third. Shenzhen is fourth. Hong Kong, however, was the busiest port in last year’s statistics.
It is unclear, however, whether the WHO believes that the omicron variant can cause more severe diseases than others strains such as delta.
Omicron: “There are many unknowns. [is]Hong stated that the global supply chain resilience was being tested for those already in stress or in the midst a long healing process.
Omicron could help with regional export recovery
While most governments will resist the imposing of severe restrictions in the region, the reality is that supply chains are going to remain under threat while the Covid threat continues.
As restrictions eased in Asia, workers were able to return and factories came online again in September – although there were still some bumps along the way like reinstating of some restrictions to stabilize recent Covid waves, according to Fenner of Oxford Economics.
“Even though there is more production online, there are still logistical challenges in both shipping and air freight.” she stated. This includes shipping supply constraints in the short-term, because of the “multiyear lag” between orders for new ships and delivery.
Globally, less than half the ships arrived on time during 2021, and delays for late ships consistently add more than a week to delivery times — compared to about four days in 2018 and 2019, according to Oxford Economics.
According to research company TS Lombard, Vietnam is poised to regain its export share following a third Covid wave that was “especially severe”. A pandemic in Southeast Asia had forced the country’s factories to close. causing problems for many American firms with manufacturing facilities thereIn particular.
Analysts from TS Lombard wrote Monday that omicron could cause problems in recovery of supply chains and threaten regional exports.
According to them, “Most of the regional governments are unlikely to resist reimposing severe restrictions but the bottom-line is that supply chain pressure will continue while the Covid menace persists.”
According to Oxford Economics, if omicron strikes supply chains, it is expected that the effect on Asia’s GDP will be a drop of 1.6 percentage point for next year.
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