Zero COVID-19 lockdowns will harm China’s supply chain more than Russia-Ukraine crisis

In the two weeks since Russia’s invasion of Ukraine, there seems to be a negligible impact on container prices and leasing rates in China. Container availability has improved from soon after the Chinese New Year until Friday across key ports in China. However, with the announcement of nationwide lockdowns, the supply chain must prepare for more turmoil in the coming months, impeding the flow of container movement as importers worldwide prepare for the peak season later this year.
At the port of Ningbo, average prices for a 40-foot high cube container fell by 10%, approximately from $5930 on February 14th to $5329 on February 27th. As of March 10, this price stood at $5248. Similarly, average prices fell by 10–15% at the ports of Shanghai, Qingdao, and Shenzhen till March 11. Shenzhen witnessed a drop of 8% in the past two weeks.
However, the lockdowns in Shenzhen, Zhejiang, Shanghai, Jilin, Suzhou, Guangzhou, and Beijing (19 provinces as of Sunday, probably more to come in a few days) imposed now will clearly heavily restrict container movement at these ports, which will, as we’ve seen in the past, prove to be further damaging to the global supply chain. Clearly, 2022 has not brought any cheer to the supply chain industry. On top of this, war will just prove to be another disruption amongst the other innumerable factors for China’s supply chain.
Freight rates and container prices were already at a record high even before the invasion started, and what happened immediately due to the war was that the Russian ports were not being called by the national shipping lines anymore, the Black Sea being somehow closed, and the Asia-European railway being quite hit by this. The immediate impact of this on the overall supply chain has not started to show. Not to mention that Russia’s importance in global trade is insufficient for containerized cargo to seriously disrupt supply chains. On the other hand, container prices are at record highs, containers are piling up and there is a massive shortage as well. This is a result of many more disruptions over the past two years since the pandemic started,” said Dr. Johannes Schlingmeier, co-founder and CEO, Container xChange. 
Lockdowns in China will further reduce capacity and cause a surge in already inflated shipping prices. The shockwaves will be felt across the US and America, and almost everywhere in the world,” Schlingmeier added.
So far, the impact of the war on container prices is limited. The average price of containers has declined by an average of 10%–15% since February for 20-foot dry containers. From January until the second week of March, the average prices for 40-foot high cube containers increased slightly at the port of Shanghai and declined at Ningbo and Qingdao. In the immediate future, the closure of the Asia-European railway (which only accounts for roughly 2.5% of Asia-European cargo) will cause the high-value cargo to be pushed to ocean freight, which is already low in capacity. This will put more pressure on the already struggling supply chain. Adding to this, China’s lockdowns will be nothing less than a major shockwave to an already crippled supply chain.
If industry reports are to be believed, China could emerge as a buyer of Russian crude, which could help alleviate some of the current global supply concerns as the EU could in turn buy more from the Middle East. With the COVID outbreaks and subsequent lockdowns, this expected surge in trade will slow down, at least for some weeks or months. 
Furthermore, there are midterm and long-term implications that analysts foresee, such as disruption in the trade of goods and increased U.S. efforts to insulate itself from geopolitical shocks to international supply chains fuelled by key sectors of the Chinese economy. Currently, China controls most of the global market for the processing and refining of rare earths and critical minerals.
The CAx (Container Availability Index) for two of China’s major ports (Shanghai and Ningbo) is expected to increase further at a rather fast pace from around the 0.6 mark in the second week of March, meaning more inbound containers than outbound. It is unusual for this Asian behemoth, which normally exports more than it imports, to show the persistent bottlenecks in its trade routes as well as the bottlenecks that will inevitably emerge as a result of these lockdowns.