The effects of Coronavirus on Shipping and the Global Supply Chain
I’m looking at a very current global issue regarding the 2019/20 outbreak of the Coronavirus (otherwise known as Covid-19) and the impact of this on shipping and the global supply chain – of course the spread of the virus is very much ongoing so I’m focused on the effects to date.
Originating in China, this virus has had a very significant impact on global trade which is problematic as we all share a very heavy reliance on Chinese manufacturing. This has led to many industry leaders trying to figure out how exactly trade products are still going to be reliably shipped to consumers, Coronavirus has caused the global shipping industry to veer off course!
Since the outbreak, it has been reported that transit rates have fallen to record lows as ships have been turned away from ports. A number of factories have shut down and restrictions have been put in place by the Chinese government to curtail the virus. It is expected to reduce global ocean container volumes by around 0.7% over the year (or about 6 million containers).
Unfortunately, it does mean that a substantial amount of Chinese made products are either stranded onboard ships, off-loaded in alternative locations or sitting in various ports creating further storage problems and additional charges for businesses. Most of the world’s goods are shipped by sea and countries are putting stringent measures in place against the coronavirus by looking at alternative routes, some containers have even been diverted to Busan in South Korea.
Not just Sea but Air!
Air carriers have also been affected some companies have suspended flights and certain borders have been closed to every other mode of transportation. I predict that we are due to see a further decline for the movement of goods which may ultimately descend to an all-time low.
Businesses would have made sure that their cargo left China long before the new year where it was possible. As normally, factories would shut down for the holidays meaning that a lot of cargo would have been sent ahead of schedule before the outbreak hit. In addition to this, China extended the new year break hoping to contain the spread of the virus.
According to BBC News and the UK Parliament websites, it appears that stock markets have been gradually reaching new lows as the weeks have passed since the Coronavirus reached global attention.
- On the first day, China’s stock dipped by 8%.
- Over the course of the year, growth predictions for China’s economy were at 6%, however, this has now fallen to 5.6%. This 0.4% difference may seem minor, but on country scale, this is an enormous sum of money.
What we can gather from these statistics is that there is a significant amount of money involved in trade between the UK and China. However comparative to the overall GDP of each country, Coronavirus disruption is relatively minor. Despite this, the cost would still be billions of pounds which is undeniably significant for all the businesses involved across the shipping and supply chain processes - large or small.
What happens next?
It’s likely that some of these companies would have already started working on an alternate sourcing and manufacturing strategy in addition to looking at other manufacturing locations in Asia or globally. Nevertheless, it’s important to bear in mind there aren’t any guarantees that the virus will not spread to these new locations. Larger companies may be able to absorb the costs required to limit the damages sustained during this outbreak. Lessons can be learned, with some organisations potentially restructuring their logistics to safeguard against future incidents of this type. However, this may not be the case for smaller companies unless adequately insured.
While the future route of the Coronavirus’ spread cannot be predicted, what is certain is that this virus has been a wakeup call for Supply Chain Leaders. To prepare for the future, Shipping will need to develop several alternate sourcing and manufacturing plans in different regions of the world. As the saying goes you shouldn’t put all your eggs in one basket! Supply Chain will need to put preventative measures in place to reduce shortages. Risk assessments going forward will need to consider the possibility of global pandemics, with the Coronavirus delivering a crash course on the topic.
Written by Danielle Williams - Client Solutions Executive - Shipping, Logistics and Supply Chain at Alchemy Global Talent
For an assessment on how the Covid-19 virus is impacting the Global Relocation sector follow this link: