It has been two months since the first case of “coronavirus” was detected in the city of Wuhan in Hubei province of Mainland China. As the months, weeks and days have passed we have seen the growth of cases, unfortunately, deaths around the world. The health impact is a global community concern and many are contributing to both managing the current situation and finding an antidote for the virus.
There is a global supply chain / economic issue happening at the same time has been fueled by the fact that this outbreak came on top of the Chinese New Year (CNY) when many workers within China traveled domestically and internationally to visit relatives and friends, and now finding it hard to travel due to the restrictions.
The “official” return to work dates as we have seen are varying from city to city, province to province, and we even see workers unable or not wanting to return to work for fear of still contracting the virus. Factories that are staffed, in many cases do not have a full roll call and quite possibly do not have raw materials to commence manufacture. Transport companies are short of staff thereby creating lack of trucks to transport goods that are available. Ports are congested, reefer plugs in many ports are full and containers are being diverted to other ports to remain on power and surcharges have been applied by some shipping lines to cover these costs.
Companies globally are trying to source goods from other parts of the world and those suppliers will not be able to fully address all requests so shelf stocks will slowly start to reduce its volume.
Lars Jensen, from SeaIntelligence in Copenhagen, said the loss of traffic was running at 300,000 containers a week. This would cause a logistical crunch in Europe in early March even if the epidemic is brought under control quickly.
“The dominoes are toppling through the whole chain. When ships don’t leave port in China, they don’t stop to pick up cargo in Hong Kong, Saigon, or Singapore either. Freight rates are in free fall,” he said.
Refrigerated ships full of frozen food – known as “reefers” – are unable to enter Chinese ports because the berths are taken and they cannot tap into electricity charges. Meat supplies are spoiling at sea.
The US Agriculture Transportation Commission said the Pacific supply chain had been badly “compromised” and logistical headaches were building up at US ports. There will soon be an acute lack of containers in both American and Europe ports.
Mr. Jensen said European factories were already feeling the shock. “The first hit is the auto industry as it has a very tight supply chain. Companies are having to airlift in supplies from Asia, which is extraordinary expensice,” he said.
So as we head into weekend, and another week, we wait to see what changes will bring on the “return to work” horizon.
Industry must maintain close relations with their forwarders, agents, shipping lines, suppliers and clients in China to ensure that they have the latest information available.