Shanghai collapse will further delay the arrival of vehicles and electronics

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China’s incarceration will affect Spain’s supply chain, which started to recover after the covid

Now that the economy seemed to be recovering after the suffocation of a two-year pandemic, first the war in Ukraine and later the incarceration to which China subjected Shanghai due to an outbreak of the omicrom variant, the recovery is faltering. A city of 25 million inhabitants completely closed, with businesses and most factories paralyzed since the beginning of April. Zero covid policies could cost China up to 2.3 growth points this year, Nomura bank estimates, and grow less than the 4.4% forecast by the International Monetary Fund (IMF) in its latest report, half of what was expanded in 2021.

If the pandemic has taught us anything, it’s that the economy is fully globalized and what happens in one country – and even more so if it’s the Asian giant – affects the rest. And Shanghai is not only a global financial center, it is also the largest port in the world, transporting 47 million containers of goods annually and accounting for 30% of all Chinese exports. The lack of truck drivers transporting all these products in and out of the port has led to the collapse of the port, which experts say will be felt very soon in the lack of supplies in Europe.

This situation exacerbates a supply chain crisis that has intensified since the pandemic began in 2020 and worsened at the start of the year with the war in Ukraine. Some major companies have had to shut down production in the city known as the ‘factory of the world’. Such is the case with Tesla, which has closed its main production center in Shanghai for three weeks since March 28, where it produced some 2,000 cars a day, resulting in the loss of some 40,000 vehicles to date.

Another car company affected is BMW, which halted production in Shenyang, while Toyota suspended operations at four factories in China and Volkswagen did the same with the factories in Shanghai and Changchun due to the lack of semiconductors not arriving due to the collapse of the port and the lack of trucks.

In Spain, this chaos is already visible in the time it takes for containers to arrive from China. Sources from the logistics industry assure that waiting times for goods coming from Asia have tripled, from 30 or 40 days before the lockdown was declared, to the 90 days it is now.

The worst affected sectors are electronics, textiles and the automotive industry. Given the delays in the arrival of vehicles, more and more Spaniards are choosing to buy used cars. And it is that according to figures from Faconauto, the employers’ organization of dealers, the average waiting time for the delivery of new cars is six months.

The impact on the economy is clear: 0.5% of total Chinese exports come to our country, about 235,000 containers per year. And this impact will be noticed in the bills. Antonio Bonet, president of the Spanish Exporters Club, explains to this newspaper that if the situation continues over time, it is “very likely” that the growth outlook will be revised downwards, currently at 4.8% of GDP. GDP for 2022. And while there is no exact quantification of the impact of the Shanghai lockdown on foreign trade for now, Bonet foresees a major decline in March, April and May compared to figures recorded in the preceding months. to the confinement.

Spain exported products to China worth 8,600 million in 2021, almost 2,000 more than in 2019 and with 13,733 national companies selling their goods in the Asian giant, 5,200 of them on a regular basis, according to ICEX data. Most of the companies that export their products to China are located in Catalonia, Madrid, the Basque Country and the Valencian Community. But without a doubt, the volume of imports is well above it: 34.8 billion in 2021, 5 billion more than before the pandemic. In February alone, Spanish imports from China amounted to 3,674 million euros, a historic record.

But now the collapse of the world’s largest port will keep these numbers in check. First of all, the cost of containers has already risen, reaching maximums of 18,000 euros per unit during the pandemic (900% more), and now stands at 12,000, a price that will not stop rising, the president of the Exporters Club assures.

For this reason, container traffic decreased by more than 3% in March, which in the case of cars was more than 14%, confirms the president of UNO, a Spanish logistics and transport organization, Fransciso Aranda. He assures that the consequences of the collapse in Spain are already “more than obvious” due to the crowds, waiting times and container prices. “The global supply chain will be further emphasized and will hinder the competitiveness of our industry,” said Aranda.

In addition, it stresses that when restrictions are lifted and all activity in the ports recovers, the collapse will be “much greater” because the goods that are now paralyzed plus the usual ones will arrive, something that is difficult for the supply chain to manage. From UNO, they foresee that this problem will persist throughout 2022.

The logistics sector managed about 725 million shipments in 2021, 6% more than in 2020, but the difficult economic situation of recent months due to the war in Ukraine, the cessation of transport and now the collapse of the port of Shanghai has led to a “consumption cessation”, which is slowing down progress made so far and “endangering the country’s recovery,” Aranda explains.

And when China falls, they all fall behind. According to a report published this week by JP Morgan, China’s GDP growth accounted for 25% of all world growth in 2021. Economists warn that the lockdowns are putting a major drag on the Chinese economy, which is approaching a contraction in GDP this second quarter. They warn that manufacturing output was “alarming” in April, so quarterly GDP could be between 0% and -0.2%.

Source: La Verdad

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