China has locked down Shenzhen, a city of 17.5 million people, in an attempt to control its worst Covid-19 outbreak since the pandemic began in 2020.  As China seeks to maintain its zero-Covid strategy, all of Shenzhen’s residents must undergo three rounds of city-wide mass testing, and public transportation has been suspended.  All non-essential businesses have been ordered to close or work from home.  No one is allowed to leave the city unless under special circumstances and with a negative test result obtained within 24 hours before exiting.  These restrictions began Monday, March 14, and will remain in place until at least March 20.

Shenzhen is China’s tech hub and the second biggest port.  Since non-essential workers must stay at home, this outbreak threatens production delays, as factories making goods like iPhones, semiconductor chips, computers, and other tech products will not be functioning this week.  Yantian’s free trade zone will also shut down.

While ports in Shenzhen are maintaining normal operations at this time, they will see tighter Covid control measures, and port activity may be impacted:

• Warehouse operations will see disruptions.
• Container volume could drop due to closed factories and the current restrictions.
• Some container depots are closed, which may affect empty pickups.
• No cargo will load in Yantian, and vessels will likely omit the port.
• Truck drivers that enter Shenzhen will be required to hold negative Covid test results within 24 hours and receive another test upon arrival at the port.

Shenzhen is not the only Chinese city seeing Covid surges, and some other areas have instituted partial lockdowns of schools, businesses, restaurants, etc.  At a time when shippers are already experiencing extremely high container shipping costs, the lockdowns and restrictions in China may further drive up prices.  Deringer will continue to monitor this situation and keep you updated as changes arise.