Idled Trucks Imperil Fuel Demand as China Widens Covid Battle

(Bloomberg) -- China’s trucking fleet has been caught up in the nation’s push for Covid Zero, further threatening oil demand as supply chains snarl.

Drivers are being held up in a web of quarantine controls that’s led to long queues and disruption to deliveries, with the volume of road freight hauled across provinces from Jiangsu to Guangdong declining in March from a year earlier. Trucks play an essential role in commercial transport and prolonged curbs will crimp diesel consumption and weigh on China’s oil demand.

China has implemented lockdowns across more cities as it battles its worst outbreak in the past two years, with around a quarter of the population under some form of movement restrictions. Investment bank China International Capital Corp. estimates fuel demand in April will fall by 2 million barrels a day from a year ago, with the biggest decline expected in diesel and gasoline.

Trucks haul about three-quarters of total freight in China, according to the Ministry of Transport. Data released this week by the ministry show the volume of road freight in Jiangsu fell by 19% in March from a year ago, while it was down in Guangdong, Shanxi and Shanghai by 11%, 7% and 6%, respectively. These are key manufacturing hubs from cars to coal.

Authorities are vowing to keep industrial and supply chains stable by removing obstacles in the logistics sector, Xinhua News reported this week, citing a government meeting attended by Vice Premier Liu He.

However, a chief representative at the Delegation of German Industry & Commerce in Shanghai said this week that even those companies in China whose factories are operating under so-called closed-loop systems may be forced to stop work due to parts shortages or logistical challenges that make moving people and goods around the country near impossible.

©2022 Bloomberg L.P.

With assistance from Bloomberg