Maersk & Goldman Warns China Restart Will Spark Renewed Supply Chain Congestion

A.P. Møller – Maersk A/S, the world’s largest container shipping company by capacity, and Goldman Sachs’ supply chain congestion analysis (in separate reports) indicate if China restarts, renewed supply chain congestion will be seen worldwide. 

Maersk told its Asia-Pacific customers that China’s zero COVID policy to lockdown Shanghai, the world’s largest port and China’s financial hub, for nearly two months, will “have an effect all over the world in the coming months.” 

For seven weeks, a massive parking lot of vessels has been building outside Shanghai ports as operations came to a crawl because of the lockdown of 26 million residents. 

Since the lockdown began in late March, Goldman Sachs’ weekly congestion index has slid as US West and East Coast port congestion plunged. This is because the trans-Atlantic volume of vessels from China to the US declined as port capacity was restricted due to lockdowns. 

Maersk told clients, “statically speaking, the virus is under control,” and this could soon indicate Chinese port capacity may expand and sailings could increase to the US, which will only complicate things down the line for US West Coast ports as a backlog of goods will flood US ports. 

Goldman also agrees and warns: “We could see a resurgence of ship bottlenecks if sudden restarts in China lead to renewed sailings all at once.”

A forward leading indicator of Chinese port activity and if a resurgence of bottlenecks is ahead for the US are global container freight rates. 

Weekly changes of the World Container Index show that when China went into lockdown, container rates for 40-foot boxes dropped. 

By shipping lane, if there’s a tick-up in freight rates between China and the US West Coast, then it would be safe to assume China is restarting. 

If China restarts and container rates begin to rise, the countdown will be about 1-2 months until a massive backlog hits US ports, renewing port congestion right before midterm elections.