Some factories in Shanghai are slowly restarting production after over three weeks of stringent lockdown in the Chinese financial hub but logistics stakeholders noted that supply chain issues remain and could linger for some time.

Companies in Shanghai are restarting operations through a "closed-loop system" after submitting plans to authorities on how to halt the spread of the coronavirus as the major air cargo and shipping hub continues to tally over 20,000 Covid cases reported daily.

Flexport said in its latest update that disruptions continue to hound supply chains in Shanghai.

"The central government is also assisting companies in key industries to resume production with the goal of stabilizing China's supply chains during virus outbreaks. This will take some time to implement as a shortage of raw materials also presents a challenge in resuming production and trucking capacity is still limited," the freight forwarder said in its latest update.

Flexport said the local government has set a target to stop the spread of the virus outside of quarantined areas by Wednesday, allowing the city to further ease its lockdown amid the public's frustration.

Nonetheless, nearby cities such as Suzhou, Wuxi, Kunshan, etc. are still in partial or full lockdown with very limited trucking capacity available.

Flight capacity "greatly reduced"

"Flight capacity continues to be greatly reduced during this period and ad-hoc cancellation is expected if demand is low. Market rates maintain at relatively high levels due to the ongoing supply chain disruptions," it added.

So far,  airfreight capacity out of Shanghai is still 40% below the previous month.

Shanghai placed its 25 million people on lockdown starting March 28 as the financial hub grappled to contain an outbreak of the Omicron variant.

Lars Jensen, CEO of liner consultancy Vespucci Maritime, earlier said the situation in China's financial hub is deteriorating.

"The supply chain situation in Shanghai continues to worsen. The port is running out of capacity for some types of cargo as importers cannot collect their goods," Jensen said.

China's logistics system is heavily reliant on-road transportation. Supply disruptions are currently driven by stringent anti-COVID travel and testing requirements, suspended expressway services, and traffic congestion around roadside testing sites.

Chinese state media reported that in order to ease the country's supply chain bottlenecks, Beijing's transport regulator has banned local governments and checkpoints from blocking the road network or ordering additional nucleic acid tests for truck drivers.

"According to the ministry [Ministry of Transport's road bureau], truckers with negative nucleic acid test results within 48 hours, a green health code, and normal body temperature should be allowed to pass interprovincial checkpoints," the State Council said in a release, adding that truck drivers are also required to stay in a closed management loop.

Vessels waiting doubles

Shipping is also feeling the drag of the Shanghai lockdown as ships are backed up, waiting to unload their cargo. 

Data from Windward’s Maritime AI platform showed that the number of container vessels waiting outside Chinese ports has doubled. 

"The trend is very clear in the April and March snapshots, there were 506 and 470 vessels,  respectively, stuck outside of Chinese ports. In February, that number was only 260. In essence, lockdowns in China have nearly doubled the congestion outside the country’s ports," Windward added.