According to several media outlets, local Chinese governments have implemented stringent lockdowns and mass testing of their population amid the country’s alarming Covid-19 cases, with the country reporting its first Covid-related deaths in six months last weekend.

Industry sources estimate ~20% of China’s GDP is impacted by the measures as of Monday, which compares to ~21.2% recorded in mid-April this year.

However, the number of cases has continued to climb with the National Health Commission reporting 31,444 new cases in the past 24 hours, which is the highest number of cases reported since the start of the pandemic.

The widespread lockdowns continue to indicate China’s commitment to its zero-Covid policy despite recent indication of easing policies and while being met with a deteriorating macroeconomic outlook for the country.

In our view, the recent development provides further uncertainty for the macroeconomic outlook and could continue to weigh on shipping demand and freight markets, especially for tankers and dry bulk, while postponing hopes for reopening further into 2023.