The city of Shanghai has been put into lockdown due to covid cases and the result is backlogged ships, which are stuck off the coast of one of the worlds largest shipping cities. The effects around the world will soon be felt.
Lockdowns never did anything good, even when they were first implemented at the beginning of the covid pandemic. The only thing it managed to achieve was far more misery.
The supply chain is under a huge amount of strain and shop shelves are already looking empty. Shanghai has been under strict lock down and residents have been locked in their apartments to starve to death. Many residents have simply given up and are jumping from windows.
Now, hundreds, even thousands of ships are now floating offshore, unable to come into port because of the restrictions.
Craig Fuller, founder and CEO of Freight Waves and American Shipper, has said the drop in volume of ocean container volumes (TEUs), which are bound for the United States from China, are “staggering,” during a tweet, accompanied by a graph showing the data.
“The Chinese Communist Party is about to wreck your summer,” Fuller tweeted.
Fuller also stated that even if China restores its economy back to normal, there will be a surge in containers from China, “but no one knows when this will happen, how long it will take, and how backed up their domestic supply chains are,” Fuller says.
“For now, we know the freight market is slowing and [China] is only making things worse,” he went on to write in another tweet.
“Our Ocean TEU Volume Index in SONAR now has a 14-day forward look at volumes, and it looks ugly,” explained FreightWaves author Henry Byers. “By early May 2022, we could see the lowest levels we’ve seen since May of 2020.”
The global economy is shrinking as prices rise and Fuller warns that there has already been at least a 7 percent drop-in shipping rates over the last week, which could indicate that some sectors are experiencing deflation.
Food and consumer goods are still seeing a huge rise in inflation, and it does not look to be getting any better any time soon.
“A large private consumer kitchenware manufacturer told me that they have seen a large contraction in demand over the past 8 weeks,” Fuller added in another tweet.
While the rest of the world has moved away from covid lockdowns, it does not make sense why China would yet again engage in shutting down its economy when it has been proven repeatedly that lockdowns do not work.
“Is the slowdown in Shanghai at all welcome?” asks Mish at Mish Talk.
“To the extent U.S. merchants have ordered too much inventory in the face of falling demand, perhaps … But Fuller notes there are just too many questions. For starters, what is China doing? Every other country on the planet is loosening restrictions … What’s really going on?”
“A very hard landing is on the way,” said Mish.