Coronavirus: The Impact to Supply Chains
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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowThe headlines about coronavirus tell the macro-level business story. Apple is cautiously opening its plants in China to restart production. Shipping giant Maersk canceled 50 sailings last week. China’s Hubei province officials are asking firms to not resume work before March 11. The ripple effect of the coronavirus in China is sending waves through supply chains. Here’s micro-level impact in country.
Our team works with partners around the globe providing our United States clients import and export services for their businesses. We have been getting feedback from those most impacted—not just in China but in the United States, as well. Here are parts of conversations we’ve been having with our partners in China and our customers in the Midwest that provide context for Hoosier businesses working to keep supply chains moving.
A Partner Agent in Shanghai
Our partner in Shanghai told us that Shanghai, Dalian, Xiamen and Qingdao all opened for business last Monday, Feb. 17 and that the government lifted regulations that were imposed related to opening or going to work. Yantian, Shenzhen Ningbo and Tianjin/Beijing were scheduled to open Monday, Feb. 24. While offices were allowed to open, everyone who traveled inside China must be quarantined for 14 days, so plants and offices will not be fully staffed for some time. This regulation is having major effects on trucking and transportation with truckers unable to cross Provincial lines in China.
Our partner’s advice is to continue to expect blank sailings (think of this similar to an airline overbooking passengers) and other creative methods for steamship lines to find ways around the lack of business leaving China currently. Due to congestion there are imports but no exports. As a result of the disruption to shipping, containers in the Midwest for shipping will become scarce in the near future.
A Family Living in Beijing
As noted above, offices are opening but staff are slowly returning to work to comply with regulations. Here’s a story we’ve been told. An American family that lives and works in Beijing was vacationing in Bangkok during Chinese New Year and has now been allowed to travel back to Beijing starting this week. Per government regulation, they have been told they will be required to stay 14 days in their home without leaving once they arrive. So this person we work with has to plan another two weeks after arriving home before going back to work in their office.
Import Bookings from China
As of Monday, Feb. 24, bookings have begun to trickle in for containers departing China for the United States the first week of March. These containers are for orders that are effectively 20 to 30 (days) behind schedule. Rates are depressed because demand is low so customers can expect lower costs on the bookings currently. Expect that to change as manufacturing catches up and late orders are processed quickly. Air freight, typically not a company’s first option due to cost, will be required in the next few weeks and will stay strong for at least a month.
Export bookings to Asia
Because of all the vessels sitting idle due to blank sailings and no China exports, one of our Midwest based customers experienced a last-minute cancellation of a 12 container booking to Asia. The reason stated from the steamship line is that there is no room on the vessel departing the United States due to the corona virus disrupting the regular shipping lanes this carrier covers. We are will find an alternate option. Plan on this being the case for the next few weeks as carriers get back into a regular groove.
Import booking from Asia
This week we received notice that a booking scheduled to move from Thailand to Singapore to catch a vessel bound for the United States will be stranded in Singapore for three additional weeks. Apparently, there are no vessel options from Singapore due to the idle vessels/blank sailings resulting from the impact of the virus. Because vessels have not been departing China (idle/blank sailings), there are no sailings in the pipeline for this container. So while this booking is not from China, it will be delayed drastically due to the impact of coronavirus on the workforce and office operations.
Hoosier manufacturers and companies such as ours will continue to work through the impact of the coronavirus on China’s economic system and supply chains. While we know there will be daily challenges, we do expect the situation to right itself as offices continue to open and the workforce heads back to offices and docks to resume regular shipping routines.
Jefferson Clay is director of global sales for Cargo Services, an Indianapolis-based freight forwarding company founded in 1992.