Ukraine War, China Lockdowns Expected to Worsen Supply Chain Problems

This aerial photo taken on Dec. 7, 2021 shows containers stacked at a port in Lianyungang in China's eastern Jiangsu province. (STR/AFP via Getty Images)

The Royal Bank of Canada (RBC) published a report on Monday that claims global supply chain issues are likely to worsen in upcoming months, as complications from China and Eastern Europe result in massive port congestion in key areas.

The report found that a fifth of the global container ship fleet had been stuck in congestion at one of the world’s major ports, which have struggled to keep up with demand since the beginning of the CCP (Chinese Communist Party) virus.

“Global port congestion is worsening and becoming increasingly widespread,” noted RBC’s Michael Tran and  Jack Evans, authors of the report.

Since the beginning of the pandemic lockdowns in 2020, such supply chain issues and port congestion have been a perennial issue for the global economy. Many experts believe that these issues are attributable to a massive rise in consumer spending at the dawn of the pandemic in the West, spurred on by the ennui of lockdown and disposable income from stimulus relief checks.

“To speak generally about what’s going on with congestion at port terminals, all of this originated because of a huge increase in consumer demand,” said Andrew Bower, director of sales at Liquid Logistics Solutions for OEC, a company which deals with logistics and data for global trade.

“When China started to open back up after their lockdown in Q4, we went into lockdown here,” Bower told The Epoch Times. “There was this huge increase in consumer demand, but the ports and the carriers and the truckers were not in a position to support that. Once we got behind, we never caught up.”

The RBC study also notes the impact of Russia’s invasion of Ukraine and China’s “zero-COVID” policy as culprits in the worsening status of the global supply chain, suggesting that these events have caused delays and supply setbacks among the two major economies.

When Russia invaded Ukraine in February this year, the Western bloc responded by sanctioning the Russian economy, with many American and European companies voluntarily choosing not to conduct business with state-backed firms run by Vladimir Putin. A consequence of this has been a greater scarcity of fossil fuels, as the global market adjusts to the absence of Russian oil and natural gas.

A general view of the liquefied natural gas plant operated by Sakhalin Energy at Prigorodnoye on the Pacific island of Sakhalin, Russia on July 15, 2021. (Vladimir Soldatkin/Reuters)

Exacerbating the issue is an increase in shipping insurance premiums in the Black Sea, which rose from pre-war levels of 0.25 percent to between 1 and 5 percent, making shipping even more costly throughout the region.

Furthermore, China has also become a source of supply chain strain, as the country’s exports are delayed by its severe and absolutist policies toward the virus that originated from Wuhan. While China’s economic hub Shanghai had maintained a relatively lax CCP virus policy, that changed on March 28, likely as a result of direct intervention from the central government in Beijing.

The RBC report notes that 344 ships presently await berth at the port of Shanghai, a 34 percent increase from last month certainly attributable to the government’s aggressive anti-COVID policies. Shipping goods from Chinese warehouses to the United States now takes 74 days more than usual, with no end in sight as the Chinese Communist Party doubles down on its lockdowns and quarantines, sending urban economies into stasis.

These issues, on top of an already strained global supply chain, suggest that port congestion and consequent supply chain issues are likely to remain for the foreseeable future.

For consumers, this will likely mean continuing scarcity of familiar goods, while the global economy must struggle to adjust as delays are likely to deprive oxygen from crucial organs of the global economic system, suggesting the possibility of further issues in the ensuing months.