Overnight, news broke from Hubei province that the number of reported cases of the novel Coronavirus spiked sharply – sufficient enough it cost two Chinese politicians their jobs. Reporting in the South China Morning Post states two Communist Party officials were replaced as the number of reported cases spiked ten fold, adding 14,840 new cases to the tally, bringing the total now to 48,206 with 242 new deaths.
The New York Times reports the sharp rise in reported cases illustrates how hard it has been for scientists to grasp the extent and severity of the coronavirus outbreak in China, particularly inside the epicenter, where thousands of sick people remain untested for the illness.
Confronted by so many people with symptoms and no easy way to test them, authorities appear to have changed the way the illness is identified.
As far as manufacturing is concerned, worker shortages, transport disruption, a lack of medical supplies and heavy-handed local officials are all making life difficult for factories – some workers are coming from Hubei, Hunan, Jiangsu and Zheijiang and are being quarantined for two weeks.
According to Reuters, Apple contract manufacturer Foxconn only had 16,000 employees return – a tenth of their total workforce – and have taken to manufacturing two million surgical masks per day for their employees.
Transit times are affected, and for those factories who have been able to resume production, the few number of air and sea carriers operating in and through mainland China portends higher freight rates in the near term. Shortages of specialty equipment such as reefer containers are to be certain in the short term because of the lack of free movement throughout China.
We’re still seeing issues with local truckers that are not allowed to enter other localities. For example in The Beilun District Government of Ningbo, health check authorization has not been granted. Local authorities require enterprises to submit applications for approval to resume work thereby demonstrating their capability in ensuring strict safety processes and maintaining adequate hygiene.
For pickups within Shanghai there is no problem. However, cross province pickups from Jiangsu Province or Zhejiang Province can be problematic as these provinces have restricted road access to local registered trucks only. As we have done in the past week, we are doing our best to work with our trucking companies in these provinces or utilize suppliers’ referred trucking company or suppliers’ own trucks to deliver to Shanghai. Higher charges may apply in these cases as capacity is very tight with production ramping back up.
As we continue to monitor and receive information from our partners and vendors in China, note the following news that has been updated today.
We have been advised that road closures not only between cities but within cities are becoming more prevalent. See the two pictures below that show roads being blocked by the authorities.
The barricades are not only to prevent the movement of commercial vehicles such as trucks, but are increasingly encompassing pickup trucks and other passenger vehicles as well. This is not just a case of “trucks can’t move”, increasingly it’s a case of “vehicles can’t move.”
Maersk has announced that their offices in China will be closed through the end of February with employees being allowed to work from home.
Hamburg Süd’s offices are closed through February 17th.
Access to container yards is growing more difficult between blockades and factory closures.
With regards to the availability of air freight, the significant reduction in passenger services to and from mainland China to either the US or other transshipment airports has reduced available lift. It is believed that when factories reopen, the only air cargo options that will be available will be with cargo aircraft until passenger services are restarted.
Transparently, we anticipate that the resumption of business in China and the limited options available for departing cargo will create severe pressure on pricing in a more acute than usual supply and demand environment.
We continue to encourage importers and planners to speak with their contacts in China who are being advised by the local and national governments what the policies will be for re-opening and who know the location and availability of their workers.
In our last advisory, we detailed how Beijing has made the determination to officially extend the Lunar New Year through February 2nd while allowing individual provinces to determine whether or not to extend it further or take additional measures. Shanghai, for instance, extended the holiday closures through February 9th and are checking and recording the temperatures of drivers and passengers of arriving vehicles.
As of Wednesday, January 29th, we have learned that Tianjin, Dalian, Qingdao, Xiamen will resume work on February 3rd and Suzhou, Nanjing, Chongqing, Wuhan, Ningbo, Guangzhou and Shenzhen offices will resume work on February 10th
Over the past several days, the measures being taken both within China and by external countries and companies are demonstrating the steps that are being taken to prevent a further spread of the coronavirus.
We must strongly counsel our clients that the information we are receiving is fluid and changing in response to global monitoring of the potential spread and exposure to Chinese and foreign nationals who are within China or have traveled beyond its borders.
As far as ocean carriers go, Danish carrier Maersk has a page on their site which they recommend bookmarking that on January 29th advised the following:
“All Maersk operations including Terminal, Warehousing, Depots, Offices and other facilities except Wuhan continue to operate uninterrupted as per usual. Load/Discharge moves at Wuhan port have been suspended until further notice and our customer service teams are currently following up on shipment status with respective customers and discussing alternative transport plans.”
Port, airports, rail and China customs are still operating as per normal in this holiday period , except Wuhan which remains largely locked down. Congestion is expected due to the limited number of trailers available.
TOC Logistics continues to strongly encourage companies to communicate with their suppliers who will have the most current information on working hours and travel restrictions, if any. The significant decrease in flights coupled with the ongoing monitoring for the spread of the virus could potentially impact hand-carry services when factories re-open based on their province of origin.
We will continue to update via market advisories as new information is received, assessed and the impact on supply chains is clearly articulated.
The Chinese government announced today that nationwide the Lunar New Year Holiday has been extended until February 2nd making the first available working day February 3rd.
While this is an announcement from the Beijing leadership, they gave provincial (state) governments the discretion to extend and modify the proclamation, as needed.
Shanghai province, for instance, today announced an extension of the holiday until February 9th. Per a Reuters article shared with us by our Hong Kong partner but not available in English, the primary focus of the Chinese government’s efforts are on ensuring the availability of utilities, medical supplies and the operation of health care services.
For cargo, vehicle movements are being impacted as all conveyances traveling on intercity highways and roadways into Shanghai must stop for inspection and a health check of the driver and any passengers until further notice. The information is also being recorded and body temperatures of vehicle occupants measured.
As this announcement was just made today, it is too early to determine what the planned impact will be on customs, airlines, carriers, port operations and everyone involved in the supply chain for both air and sea cargo. What we do know is that given Shanghai’s status as an arrival and departure gateway for so much air and sea cargo, there will inevitably be delays as factories re-open following holiday closures.
China recognizes how highly contagious and dangerous this virus is. The goal of the government during this health emergency is to keep the virus from spreading, which means reducing large gatherings of people where transmission from human to human is a risk. Understandably, factories that employ hundreds or thousands of people in close quarters is one vector the government is trying to close off to prevent transmission.
We strongly encourage our customers to speak with their factories directly because they will have access to the most current information impacting their workforces.
TOC will continue to monitor news country-wide in China as well as whatever provincial or local steps are taken that would impact manufacturing and shipping. Please continue to reach out to your primary TOC points of contact as we will be communicating information throughout all levels of the company.