China’s zero-Covid policies causing ‘major’ knock-on effects for snarled global supply chains
- China has continued to prohibit crew changes for foreign crew and recently imposed as much as a seven-week mandatory quarantine for returning Chinese seafarers
- Shipowners and managers have to divert ships, delaying shipments and crew changes, adding to the global supply chain crisis
China’s increasingly extreme zero-Covid policies are standing in the way of a full recovery for the shipping industry and prolonging a crisis that has snarled ports and emptied shelves worldwide.
In its attempts to keep the coronavirus out, China has continued to prohibit crew changes for foreign crew and recently imposed as much as a seven-week mandatory quarantine for returning Chinese seafarers.
Even vessels that have refreshed their crew elsewhere have to wait two weeks before they are allowed to port in China.
“China’s restrictions cause knock-on effects,” said Guy Platten, the secretary general of the International Chamber of Shipping, which represents shipowners and operators.
“Any restrictions to ship operations have an accumulative impact on the supply chain and cause real disruptions.”
The world’s biggest exporter, China is a key hub for the shipping industry. It is also the last country to axe its zero-Covid policy, with increasingly radical measures.
Around the world, factories, shipping and consumers are still adjusting for a pandemic that is not going anywhere. Supply shortages are showing signs of easing in the United States but worsening in the United Kingdom. Some ports in Asia are getting less congested, but in California, loaded vessels are still piling up.
Ship managers and operators are calling for China to relax its restrictions and governments to prioritise seafarers and shipping, or risk continued disruptions that may go deeper as mariners bear the brunt of the toll.
“The ports’ main focus is on quarantine and health matters,” he said at an online industry forum on Monday. “The regulations change very often, depending on the local Covid situation.”
Even seafarers with emergency medical needs are not allowed to get care in China, ship managers said. An Anglo Eastern chief officer with a severe tooth abscess could not get off his vessel for treatment. He had to wait until the ship arrived in South Korea before he could see a dentist.
“China is a major issue,” said Bjorn Hojgaard, chief executive officer of ship manager Anglo-Eastern Univan Group and the chairman of the Hong Kong Shipowners Association.
“They are doing a good job at keeping Covid at bay but at the cost of not letting seafarers in – even Chinese seafarers sometimes can’t get back into China.”
Operating in China has become challenging even for the biggest operators, including Cargill.
“We’ve had vessels that ran into [late fees], we’ve had instances where we had to deviate, either before we call China, or after,” said Eman Abdalla, global operations and supply chain director at Cargill. “There are instances where the delays are within hours, but there are also instances where the delays could go on to days.”
Euronav NV, one of the world’s largest owners of oil supertankers, has spent an estimated US$6 million handling disruptions related to the crew change crisis, including the likes of deviations, quarantines and higher travel costs.
“In the past, it was pretty nice to do crew rotation when we were in China,” said chief executive officer Hugo De Stoop. “And now basically it’s not possible.”
The industry has largely absorbed the extra costs with some of the highest container rates on record due to demand, capacity constraints and port congestion.
At US$9,146 per 40-foot container at the end of last week, rates have soared six-fold compared to the five-year average through 2019. Rates for oil tankers and bulk carriers have not risen nearly as much.
Shipowners and operators also acknowledge that they are managing China’s restrictions by shifting the burden to the workers on board.
Chinese authorities will not allow more than three Chinese seafarers on a flight to the mainland, so their return home can be stretched to months after they have signed off from vessels, said Hojgaard.
Anglo-Eastern said about 800 out of its 16,000 active crew are overdue for relief, and more than 100 have been on ships for more than 11 months, the maximum mariners are allowed by international law to be on board.
“We are trying our best to get them off but can’t,” said Hojgaard.
This month, China’s coronavirus tsar defended the nation’s strict coronavirus measures and signalled there would not be an easing of rules.
Meanwhile, the industry’s supply chain disruptions do not show signs of abating. According to a new Oxford Economics survey of 148 businesses last month, nearly 80 per cent of respondents said they expect the supply crisis still has scope to worsen.
“China is determined to achieve zero-Covid and it will not relax regulations due to the policy,” said Singhai Marine’s Zhao. “It may even step up rules due to the Winter Olympics in February next year.”