Impact of Coronavirus

No Substitution for Experience

Faced with a different enemy in 2009, (the financial crisis), many of our clients were forced to adjust their shipping methodology to meet the needs of the time. The Carriers were also adapting to a quick-changing environment. Thomas Andersen and Kenneth Moyer, our two lead negotiators were there to meet the needs of our clients then, just as they are today. Rest assured, we have the background, know-how, and practical experience to meet your needs and navigate through these challenging times.

SHIPPING STATUS: CORONAVIRUS IS IN TRANSIT

The impact of coronavirus is making its way across industries, academia, public gatherings, financial markets, politics and the entire world. In fact, the effects of the coronavirus have outpaced the virus itself. Last month we saw that these effects were limited to China and its economic growth. That quickly changed, and the effects have now taken  a toll on the entire world economy, with the shipping industry being thrust right into it.

As much as we don’t know about the virus is as much as we won’t know about the ultimate short term and long term effects it will have on the parcel carriers and the industries that rely on them. But what we do know is that if so much merchandise, from clothes and electronics, to household items and industrial parts are not available from China, shipping carriers will be hard hit.

In 2019, Chinese exports of trade goods to the United States amounted to about 452.24 billion U.S. dollars and U.S. exports to China amounted to 106.63 billion U.S. dollars. The lockdown in China has upset supply chain production, ultimately trickling down to rattle the shipping industry in this country. Shipping carriers and retailers have not yet accounted for supply chain disruptions, but early signs indicate negative results.

FedEx and UPS cautioned that the coronavirus might affect the shipment of products and potentially impact their Q1 results. FedEx said it keeps running flights in and out of impacted countries, however, limitations on travel could hold up some shipments. And at a recent conference, UPS Chief Financial Officer Brian Newman stated “the business obviously slowed.” While he noted it was premature for the firm to measure the disruptions’ impact, they were seeing demand begin to bounce back.

With quarantine periods and travel restrictions easing in many overseas regions, manufacturing in China is beginning to recover. The majority of factories are now operating, with some functioning at up to 80% capacity. With the Chinese economy taking initial steps towards recovery, here are some freight updates:

Air

With the prospect of canceled flights, lost sales and substantial reductions in service for months to come, several carriers’ rates are expected to spike once production resumes and air carriers start flying again.

Ground

Travel within most Chinese provinces is back to normal, and interprovince trucking is now operating at about 80% capacity. Delays and increased rates for the near future are still likely.

Ocean

Due to low levels of manufacturing, carriers have been canceling scheduled sailings. However, ports are beginning to unclog as workers return. Though rates have decreased due to low demand, the expectation is that once production is back to near-normal levels, prices will spike to accommodate the backlog.

As retailers and shipping carriers move forward into this unchartered territory, there are a few simple cautionary steps you can take that include anticipating and preparing for delays, and checking directly with suppliers. This is also a good time to dust off business continuity plans and  substantiate they are still apropos  and feasible.

Lastly, stay current on the latest developments. To help keep their customers informed, FedEx is updating the FedEx Newsroom, and UPS is providing UPS Service Alerts on its home; with the most recent announcement  that they  resumed services in most areas of China Mainland.