On Thursday, January 30th, the World Health Organization (WHO) declared coronavirus a Public Health Emergency of International Concern. However, WHO did not impose any restrictions on the movement of people or goods, indicating that it may make conditions worse.
With the continued worldwide spread of Wuhan coronavirus, the Chinese government took some precautions to keep local and international populations safe. Transportation is shut down in and out of Wuhan and Hubei Province, and several other surrounding cities are under lockdown.
A prolonged coronavirus outbreak in the area can prevent workers from getting back to work, and even cause temporary factory closures.
China is an integral part of the global supply chain and a reduction in their production capacity has the potential to disrupt U.S. production, along with many other global economies.
From a supply chain and transportation standpoint, all terminals at the Port of Wuhan already stopped further operations as the result of the quarantine the Chinese government has instated on the region. Carriers have canceled their service to the Port of Wuhan, and other ports along the Yangtze River have experienced congestion as the quarantine impacts barge traffic. The pause in operations has resulted in empty containers piling up in China, according to data from several empty container repositioning companies. For shipping lines, these events lower utilization rates and cause higher costs.
We are also seeing a reduction in airfreight capacity as some of the major passenger and cargo airlines for the region have already cut their capacity “50% or more” starting January 30th until the end of March 2020. This will further be followed with more flight cancellations, border closures, production delays, and self-imposed travel bans from companies preventing their employees from flying to China.
Companies that rely on manufacturing from facilities in Wuhan and surrounding cities in China, are considering alternative suppliers as facilities in the region face closure or slowdown. Some international manufacturers based in Wuhan announced they would be shifting some production from China to surrounding countries to avoid disruption from the coronavirus.
What can shippers do during the coronavirus outbreak?
1. We recommend you prepare for further delays and take congestion into account. It is a good idea to check with your supplier but assume that your items will not be shipped promptly.
2. It’s also worth noting that with Chinese New Year holiday extended to February 10th in some regions, and celebrations currently underway, many suppliers and manufacturers will already be on holiday. Check with your supplier immediately to learn their schedule and expected time of return.
3. If you have current orders that you are concerned will not be fulfilled, we strongly recommend you contact the buyers and inform them of the situation. You may need to prepare them for delays and make adjustments to your advertisement, marketing, and sales strategies.
4. If you haven’t already started working on an alternate sourcing and manufacturing strategy that excludes China, you should start immediately. Due to the Trump Administration’s trade wars, many companies have already left China for other Asian manufacturing locations. While natural disasters and events such as the coronavirus cannot be predicted in advance, as a shipper you can develop alternate manufacturing and shipping options in case they do happen. You should develop Plans B, C, and D.
As MTS Logistics, we monitor global market conditions very closely, and guide our clients and partners as they navigate through their transportation challenges.
We will inform you of any further changes or developments as coronavirus continues to affect Wuhan and all of mainland China.