Coronavirus Impact on Trade and Transportation with China
Now that the World Health Organization has declared the outbreak of the coronavirus a global public health emergency, the impact on trade and transportation with China is starting to take shape.
A few days ago the Central Government of China, together with local provincial and city governments, ordered the official extension of the Chinese New Year (CNY), in an effort to help contain the spread of the virus that originated in Hubei Province, in the city of Wuhan, with 11 million inhabitants. The initial extension called for just three days after the official ending of the holiday week but it was quickly changed until February 9th. Public transportation has been suspended between certain provinces and people were advised to stay home (other than emergency personnel).
What does this mean for the supply chain? Workers normally travel to their home towns — sometimes hundreds of miles from their workplaces — to celebrate CNY with their families. While office workers may be able to work remotely, factory workers, drivers, warehouse staff, etc. may stay away for several weeks longer than planned as they have to wait for public train and bus service to be restored.
The international carrier community started to send out notices yesterday, in regards to their contingency plans. Airlines have started cancelling service in and out of China (both passenger and cargo) and we can expect steamship lines to make announcements about potential disruption in service. The biggest problem is the trucking service, or the lack of, between inland cities and ports, considering that drivers have been ordered to stay put until February 9th. Most trucks are sitting idle in parking lots or detained from returning to their origins. This could cause a shortage and imbalance in truck equipment for several days after work resumes.
Schreiber Foods International, Inc. imports canned fruits (mandarin oranges, peaches, apricots, pears, apples, fruit cocktail, lychees), tuna fish, vegetables (water chestnuts, bamboo shoots) and condiments (hoisin/oyster/plum sauce, rice vinegar) from China. We normally book our products during the production season in the summer and spread the shipments of all products throughout the year.
At this point we are in a good position as far as our inventory is concerned but we don’t know what kind of ripple effect these unexpected events are going to have on the supply chain. Our factories are all over China, mostly inland, and our containers need to be loaded on trucks and brought to ports. Even if these restrictions are lifted and people are ordered back to work, it may take several days, or weeks, for normalcy to return to trading activities with China.