Coronavirus Update

As the stories in the news turn from the impact on supply chains to the spread of the virus to multiple countries around the world, we wanted to keep the focus on the situation in China for manufacturing and shipping and provide an update from our partners in country.

We received the following update today:

“HUBEI Province is in lock down mode, where coronavirus outbreak is most severe in China. As Jingzhou City is located in HUBEI Province. Suppliers in Jingzhou City must be closed. Under traffic control, only government vehicles and vehicles carrying necessities and medical suppliers & equipment may pass through.

As majority of factory workers are from HUBEI and they are not allowed to leave HUBEI Province, all reopened factories in other parts of China are under-staffed.”

The figures below were collected across all of China’s provinces and reflect the percentage of companies reopened.

In Hubei province, the government has decreed that all companies with the exception to health and medical industry and necessary products and service suppliers must remain closed until the end of the day on March 10, 2020. The Hubei provincial government has also forbidden non-crisis management vehicles and private cars on roads.

In the United States, we have seen the flight suspensions by carriers such as American, United and Delta. There is a story that Spring Airlines in China is offering flights between Shanghai and Chongqing – three hours apart – for a little over $4.00. An estimated 10,000 daily flights have been cancelled in February.

For ocean shippers:

Carriers have continued to blank sailings into March and the lack of sailings will mean that when factories reopen, the concern over the number of available empty containers for eastbound loading will be a factor as well.

The inability to move cargo in and out of China is leading to global container imbalances – boxes in the wrong places for imports and exports to countries or regions. This situation will likely take several months to resolve once vessels and freight begin moving again in earnest.

For air shippers:

We are fully anticipating that when production resumes in China, there will be a significant queue to quickly get cargo where it needs to be. To this end, it will likely be freighter capacity first and passenger service restored second. Airlines we have spoken with have been giving guidance that the most important thing to do right now is secure space and when the departure time approaches we will be advised of the rate based on market conditions.

TOC takes no pleasure in sharing this information because we understand that companies have already sustained losses with the prolonged closures. But we also have enough experience that protecting space is paramount to negotiating or haggling because we don’t believe shippers will be in a position to do either when manufacturing resumes in earnest.

Next week, TOC Logistics representatives will be in attendance at the annual Transpacific Maritime Conference sponsored by the Journal of Commerce. We will be listening very closely to carrier representatives and economists on what they forecast will happen in the coming weeks ahead.