Image of Coronovirus

The Coronavirus is continuing to be the number one topic and how it is continuing to spread around the world,with country after country reporting new cases. In several countries panic buying has occurred resulting in supermarkets and wholesalers struggling to be able to restock shelves. This is despite there is currently no issue of food shortages in any developed country. It is the actual panic buying which is the cause of empty shelves in supermarkets. The financial stock markets are taking a considerable battering with all markets across the world overall down this week. The Dow Jones in New York has been experiencing the biggest point swings in its history. This is likely to continue for at least the next few weeks as investors continue to asses the fallout from the virus and how much of a slowdown it is going to cause to the world economy. In the UK Flybe is the first airline to go bust due to the Coronavirus. The airline was already facing serious financial issues and the sudden down turn in passengers was enough to push it into administration. Unfortunately as the virus continues to effect country after country, it will probably not be the last airline to fail.

Within the logistics industry things are beginning to very slowly return to normal in China. A lot of Chinese logistics offices are now fully staffed and able to process bookings. However container yards in most of the major ports are very full with both full containers and empty containers as there continue to be a backlog. Better news is the ports though are now operating fairly normally. Shanghai has reduced the number of health checks for lorries coming in and out of the city.  It though looking that shipping lines will have  cancelled around 25% of all Chinese sailings by the end of March. Most lines saying that even if the demand fully rebounds they will not be restoring the cancelled shipments as the vessels will be out of position.

As China at the moment slowly begins to return to normal, attention moves to the knock on effects on other ports around the world. Several of the major USA ports on the west coast expect a reduction in the next few weeks to create the worst quarterly drop in container through put since the 2007 financial crisis. Currently apart from Italy there are no movement restrictions on freight in the EU so vessels which arrive at a port are getting discharged without any issues and containers which are at the port for export are being loaded. While the virus is being contained and only a limited number of people are infected this situation is unlikely to change but is very fluid.

The one logistics sector which is still being hit hard is airfreight. With a lot of airlines cutting flights not just to China, but to other countries it is becoming a struggle for forwarders to locate an operational service and then once located actually be able to book space on it. A lot of supply chains are running short of components and while they may now finally have manufacturing restarted and containers moving to a sea port, for shipments to Europe there is still another 4-5weeks to get the goods finally delivered. All these buyers then are turning to airfreight, and if they cannot get the components shipped we are going to see a lot of USA and European manufactures are going to have to shutdown temporary which will have a further impact on the worlds economy.

The Coronavirus is continuing to cause issues to global supply chains with many of the large manufactures around the world issuing warnings of potential hit to full year profits.  This has highlighted how important China is in supply chains across the planet today. Many companies have urgently started to try and move manufacturing to other countries including  Vietnam and India. Few of these countries have the capacity to available to meet the sudden demand, and even ones which can it is going to be many weeks before these products are able to get the end consumer.

In the UK one online furniture supplier warns that while they have sufficient stock due to the delays in factories restarting up they are facing the a break in their supply chain. They rely on a constant supply of containers from China manufacturers. They have additionally stock to cover the Chinese new year shutdown, however they expect to run out of the most popular items within the next few weeks. If they have to stop selling certain items not only does it mean a loss of sales, but also a drop off in Amazon, Ebay and Google rankings. As a result once the supply chain out of China is reestablished, it will take time to get sales back to previous levels. The owner does not expect to have to lay off any staff at the moment this may become required if the crisis continues.

Transport operators are not fairing much better. Both shipping lines and airlines (cargo and passenger) have lost large amounts of money over the past few weeks. Many shipping lines have added blank sailings into their schedules to prevent their vessels getting delay at Chinese ports. Airlines have cancelled virtually all services and are not accepting bookings till the end of March for many Chinese destinations. Additionally with the virus spreading to other countries many Airlines are reducing their services to these areas. Easyjet which is low cost operator in the UK, is taking drastic action to reduce it costs in the face of falling passenger numbers, these include pay freezes, reduction of administration costs and offering staff unpaid leave.

Despite all the bad news, for China the official line is amount of new cases being reported is dropping and if news reports are accurate then virus now seems to be effecting more people outside of China. This is reflected in the current port operations in the Port of Ningbo, China. This port has over 24000 registered truck drivers, at the height of the crisis it had less than a thousand actually working. This figure has now reason to over 7000 by the end of last weekend. This means container through put has gone from virtually nothing to 13000 twenty foot equivalent (TEU) units being moved per day at the start of the week. Other Chinese ports are beginning to clear through their container backlogs.

Shippers need to be aware that as factories begin to return to full operation and there is a rush to get goods to the ports, space will become a premium on the vessels and as result rates will be expected to rise and containers will sit on the quay longer than normal while awaiting a vessel with space. Price issues and space availability is effecting airfreight imports and exports as there is considerable reduction on available flights currently. Booking space as early as possible is currently the best recommend action for shippers.

The Coronovirus is continuing to have an impact supply chains involving China. This is being particularly felt on reefer shipments. Many shipping lines  have issued warnings to shippers exporting to China that there is a severe lack of space for reefers in certain ports. The inability to be able to move containers off quay to distribution centres and factories  is causing a major headache for ocean freight forwarders and shippers of temperature controlled products.

Safmarine is the latest shipping line after CMA-CGM and the ONE Shipping Line who have now had to issue a notice that they need make a surcharge on reefers to ports of Shanghai, Xingang and Ningbo due to the complete. Safmarine are adding 1000USD per container to all bookings from 28th February. The issue is so critical now that the shipping line is offering to divert reefer boxes destined to these ports free of charge to other Chinese port, which is very rare for any shipping line to do. Shippers who are making new bookings for these ports need to be aware the shipping lines no longer guarantee the cargo routings,  nor will they accept any responsibility for the delivery time of the containers. Containers may be diverted to other ports at the discretion of the shipping line if there is no space available at the destination port.

There are some reports of shipping lines declaring general force majeure on all reefer traffic destined for these ports. They are going have them offloaded at other Chinese ports. It will be the responsible of the freight paying party to arrange them to be moved to the final destination. All shippers should be aware of the potential costs both in monetary and time future shipments may incur. It is recommend they constantly keep on top of this developing situation as it may continue to get worse, as the ports cargo is being diverted to begin to fill up.

Image of Coronovirus

The Coronavirus,now officially named COVID-19, is continuing to have impacts on global supply chains.  The logistics industry is very labour driven with limited automation in warehousing.  Due to the the travel restrictions in place, it is making it difficult for manufacturers to get employees back and bring production to pre Chinese new year levels. These travel restrictions are also effecting the trucks moving the goods and containers to port for export. Currently trucks are not permitted to cross from one province to another and cities are restricting which and when trucks can enter them. Complicating all of this is each city is creating its own set of rules to control entry and mange output. A truck operator may be able to collect goods from one city but unable to deliver them in another city. Ports such as Shanghai and Ningbo are particularly hard hit as the majority of shipments originate in a different province.

Several shipping lines have introduced additional blank sailings in the coming works. While shipping demand has dropped due to goods not getting to the ports, this will have the effect at the moment reducing capacity and keeping rates high. However if the COVID-19 gets worse and manufacturing continues to decline along with further movement restrictions within China then rates will begin to fall off. Currently the Dow Jones Transportation Average shows limited impact by the Coronavirus which means the markets are indicating that they feel the Coronavirus is under control and expect cases to begin to decline as the Authorities get control. However we at AJF are still very cautious about this and have first hand knowledge of the difficulties can shipments ready for export. It may be a few more weeks before the real effects of the manufacturing slowdown are fully felt.

We have been assisting some of our clients in sourcing new suppliers and manufactures from both Vietnam and India to help make their supply chains more resilient to the on going effects of the virus. Working with our agents in these countries we have found suppliers, arranged to inspect factories, ensure they comply with Western labour requirements and have the capacity to take on new clients. We have also arranged quality checks of the products to ensure they comply with the clients standards.

Shippers need to be aware that the Coronavirus is having an impact on shipping out of China. Due to the Chinese government putting travel restrictions in place and extending the Chinese New Year holiday, both manufacturers and logistics operators will have increased delays in arranging new shipments and dealing with existing bookings. Several Chinese areas have had extended their Lunar New Year Holiday to the 9th February. The regions currently included are:

Additionally Hubei province which includes Wuhan city has the holiday period extended until 13th Feb.

Currently Hong Kong is working normally but any communication required to a mainland office will be delayed.

A combination of Felixstowe Docks changes and high demand is resulting in a large haulage shortage for full container loads out of Felixstowe Docks. We are ideally requiring 9-10days notice to ensure that we can delivery the containers to clients needs. However for the remainder of September and currently October there will continue to be issues.

Arrival times to delivery of LCL cargo can now be up to 5-7days due to heavy congestion in the ERTS warehouses around Felixstowe. While all hauliers and warehouse operators are doing their best to handle destuffing of containers as quick as possible. The sheer volume is having an impact. This is currently expected to continue through September and October based on current levels.