A surge in the number of COVID-19 cases in China is taking its toll on the nation's manufacturing output, crippling factories from completing orders.

This is occurring even after it was widely reported last month that U.S. manufacturing orders from China were down 40%, leading Chinese factories to shut down two weeks earlier than usual for the Chinese Lunar New Year on Jan. 22.

Asian-based shipping company HLS wrote to its clients that with about half or three-quarters of China's labor force being infected with the coronavirus and not able to work, the output of many manufacturers is less than optimal, CNBC reported.

"All indications that the Chinese cities are experiencing infection peaks is based on the surge of infected family members, friends, and colleagues, the long lines at the fever clinics at hospitals across the country," the company wrote, according to CNBC.

China has seen a severe spike in infections once it ended its harsh zero-COVID restrictions. The Wall Street Journal reported Wednesday that nearly 250 million people in China have been infected with coronavirus between Dec. 1 and Dec. 20, and that half of Beijing's 22 million residents had been infected.

The outbreak is also hurting supplies of rare earth metals, considered essential for high-tech devices. China accounts for 63% of the world's rare earth elements, and MetalMiner, a metal commodities firm, reported prices jumped 4.45% from December to January following China's surge in COVID-19 cases.

"Until the spike in COVID cases slows down, production and mining of rare earths could continue to struggle," MetalMiner reported. "Therefore, we advise buyers and investors to continue searching outside China for rare earth sources."

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