Major Shanghai shipyards have been ordered into lockdown following a spike in coronavirus cases in the Chinese city.
According to TradeWinds sources, Hudong-Zhonghua Shipbuilding, Jiangnan Shipyard and Shanghai Waigaoqiao Shipbuilding were told to halt operations by Chinese authorities three weeks ago after an outbreak.
The yards have now declared force majeure on pending deliveries.
This week, China expanded the lockdown of Shanghai from the eastern and western districts to cover the whole city and its 25m inhabitants as infections soared to 13,000 a day.
While infection levels are low by international standards, China’s zero-Covid policy has confined millions of residents to their homes.
One shipyard executive confirmed that his company halted operations on 20 March because of the measures.
Shipowners have been warned that there will be delays to newbuilding deliveries due to the lockdown.
Covid-19 restrictions are also creating serious crewing issues when vessels are ready to be handed over.
“Even if the vessel is ready for delivery, shipowners will not be able to arrange for a crew to take over the ship since travelling is not allowed. The supply of fuel and spare parts for the ship is also an issue,” said the shipyard source.
Shipowners are unlikely to walk away from delayed deliveries as the vessels were ordered two years ago, when prices were significantly lower, and they will have benefited from an upturn in asset values.
Shanghai’s lockdown is also said to have hit ship-repair yards in the area.
Shipbuilding sources said vessels calling at repair yards have not been allowed to enter ports. As a result, some companies are directing their ships to yards in Singapore and the Philippines.
Others, one source said, have chosen to “delay dry-docking and retrofitting their vessels”.
The outbreak of Covid-19 is also hitting yards in other provinces such as Zhejiang and Jiangsu.
TradeWinds has learned that some Jiangsu yards are operating at a reduced capacity in a bid to contain the virus.
Sources added that shipping companies planning to take delivery of newbuildings from yards in Jiangsu and Zhejiang provinces will also face obstacles due to travel restrictions.
One Chinese company which took delivery of a kamsarmax bulk carrier at the end of March told TradeWinds that it was an uphill battle and took a “lot of resources” to support its delivery.
Shipbuilding sources said they have no idea when the lockdown will be called off.
“As long as China continues to have zero-tolerance for Covid-19 and continues with on-off lockdowns across the country, it will damage the whole economy, and therefore not just containers but all sectors," said Ralph Leszczynski, head of research for Banchero Costa.
Shanghai International Port group moved to quash claims that its operations had been severely disrupted, saying that the port is operating normally.
Doubts have been cast on the claim because of the disruption to pilotage, warehouse and trucking services to the port caused by the lockdown.
