The Most Complete Update on Trade Impacts so far…
Further to last week’s update on the Novel Coronavirus, trade and freight movements continue to deteriorate. There are various reports from China on the evolving situation affecting China’s factories and freight logistics movements.
Factories are unable to resume full production, mainly for lack of workers, The reopening of businesses means trying to bring together again much of China’s 700 million-strong labour force after what had become a nearly three-week national holiday. China’s containment efforts have effectively carved up the country. At least 760 million people — slightly over half the country’s population — are under various kinds of lockdown.
Following is an edited version of an update today with thanks to AFIF members.
CORONAVIRUS DISEASE 2019 (COVID-19) UPDATE
February 21, 2020
EVOLVING SITUATION IN CHINA
China companies and factories are gradually resuming work, but it varies across provinces. Hubei province remained locked down. Based on our initial assessment, organisations that have received approval from local authorities to reopen are currently operating at approximately 10–50% of their normal working capacity. The reduced staff strength is driven mainly by:
(i) the 14-day quarantine period imposed on all travellers returning from other provinces and
(ii) workers still unable to return from other provinces.
This resulted in an impact on both the trucking and factory labour force. Production levels may only stabilise by the end of February or early March.
As such, we see the soft demand currently with no considerable impact on daily port operations (sea and air) in China. At this moment, we are unable to predict how the situation at the ports will evolve as factory production levels pick up and swing into full capacity.
Trucking services across all cities remain limited because of the closure of selected highways and shortage of drivers – causing cargo deliveries to be under tight delivery constraints. We do expect to see a gradual improvement over the next few weeks.
ASIA PACIFIC SEA LOGISTICS
All key Chinese ports are operating, albeit with lower efficiency due to limited workforce. The ports of Shanghai, Tianjin and Ningbo remain congested due to yard density at critical levels and ongoing shortage of reefer plugs at the terminals of these ports. Loading and discharging operations slowed down due to lack of stevedores. Wuhan port remains closed until further notice.
Ocean carriers reacted to the situation with an additional 32 void sailings on top of the Lunar New Year blank sailings – removing a total capacity of 350,000 TEU per week. Coupled with the expected cargo rush once factories resume operations, shipping capacity will be at a severe shortage. This rapid mass cancellation of sailings from China will cause capacity shortage to backhaul shippers in the next 3-6 weeks depending on geography. As a result, freight rates are also expected to spike in response to the space shortages on both headhaul and backhaul voyages. The prolonged container turnaround time resulting from bottlenecks at main Chinese ports will adversely impact the availability of equipment within the network.
Ocean carriers are taking measures by announcing a Congestion Surcharge or Cost Recovery surcharges with immediate effect to cope with the current situation.
ASIA PACIFIC AIR LOGISTICS
All airports in China Mainland and Hong Kong (SAR, China) are operational except for Wuhan airport, which is closed to passenger flights and receives only relief missions.
The given situation of extreme capacity tension will impact lead times and applicable rates.
ASIA PACIFIC ROAD LOGISTICS
The operation for cross-border trucking to/from Hong Kong (SAR, China) remains normal. Where there is direct shipment to China challenges, customers may consider sea/air mode to Hong Kong, followed by trucking services to inland destinations.
For cross-border trucking to ASEAN countries, China/Vietnam Border (Pingxiang border) had resumed operation from Feb 17, 2020. Restrictions on the number of truck entry/exit are also removed. Truck companies and drivers must continue to comply with local epidemic prevention and control requirements.
For cross-border trucking to Central Asia countries, the China/Kazakhstan border (Horgos border) remains closed until the end of February. For trucking to Europe, the route via China/Russia (Manchuria border) is feasible now.
China – Australia Trade Impacts
Aviation and tourism industries are most impacted.
Border and biosecurity restrictions have not been applied on imported cargo at the Australian border.
China Ports and Airports Impacts
- Shipping ports are still operating. Restrictions apply at Wuhan port.
- The loading/discharging operation at ports has slowed down due to a lack of stevedores labour
- The land transportation of cargo into the port or from the port is insufficient since trucks without a local license are restricted to enter into the port area
- Carriers are publishing more blank sailings in line with reduced container volumes being shipped at Chinese ports
- Airports are operating but the collapse in demand for air travel and subsequent flight cancellations has affected belly hold space on passenger aircraft
- Freighter aircraft are continuing to fly to and from China
- The shortage of space availability and the likely surge in demand when factories re-open will lead to pressure on rates
Refer to ABF Notice above regarding the 14 days rule on Restrictions on entry to Australia relating to Novel Coronavirus for Commercial Vessels.
Some shipping lines are changing the order of port rotation to first port of call Melbourne, then Sydney, then Brisbane, to enable compliance with the 14 days rule, or, employing slow sailing.
Local stevedores operations continue as usual
Airlines Flight Cancellations
The Australian Government has issued a travel block on non-Australians citizens travelling from mainland China to Australia and blocked the return of 100,000 Chinese students due to resume studies at Australian Universities. For now, flight cancellations and further schedule adjustments have occurred.
Significant reduction in direct flights from China to Australia in the past 2 weeks. Below is a summary:
- Air China has cancelled services to Beijing until Feb 29 and to Chengdu until 28 March.
- Qantas cancelled passenger services to Shanghai and Beijing from 9 Feb-29 March. Qantas freighter services to China continue
- Beijing Capital, Hainan, Sichuan, Tianjin Airlines, Xiamen Air have cancelled services until the end of March 2020
- China Eastern and China Southern have consolidated daily flights to 3 or 4 flights per week for the present time
- Cathay Pacific:
- 30% global passenger flight capacity cut
- 90% of China passenger flights cut
- capacity trimming in all regions – South West Pacific passenger flights will be cut by 20% in March.
- Global Freighter Network in-tact and where possible will be ramped up to fill any gaps.
- Virgin Australia
- Melbourne to Hong Kong flights cease from 11 February
- Sydney to Hong Kong flights cease from 2 March
There are indirect carriers serving China that have announced flight cancellations for a period of time. A softening in tourist and business travel overseas is impacting flight schedules in Asia.
Please check with the carrier for further information.
CTOs report they are adjusting operations in response to the reduced number of flights being processed
Impact at the Australian Border
AFIF has been in contact with ABF and DAWE Senior Management and we are advised there is no border and biosecurity restrictions on imported cargo at the Australian border.
Exports continue, although members should first confirm with their customer and their overseas offices and agents the goods are ‘OK to Send’.
As the situation is very fluid and supply chain disruptions are ongoing, AFIF recommends members to keep in close contact with customers, overseas offices and agents and monitor government updates to work through commercial solutions. AFIF will keep members informed of developments.
More information about the coronavirus can be found on the following websites.
Australian Department of Health – Novel coronavirus information
World Health Organisation – https://www.who.int/
TT Club has published useful guidance for freight forwarders – The Coronavirus and Freight Forwarding – how managing the spread of coronavirus is impacting freight forwarders and logistics operators https://www.ttclub.com/resources/coronavirus-guidance/