To Our Valued Customers:
Latest – The WHO reported more than 2,249 people have died with the majority from mainland China. A total of 76,700 people infected worldwide as of Friday, February 21st. The virus has been confirmed now in 27. New cases have increased after a 3-day drop with 1,109 new cases reported today.
China’s industrial output – Carbon emissions have dropped by 100 million metric tonnes over the past two weeks which is a clear sign of the industrial impact the virus is having on production as this figure represented 6% of global emissions during the same period last year according to (CREA-Centre for Research on Energy & Clean Air). The Coronavirus has resulted in a reduction by as much as 40% in industrial sectors. That being said factories are coming back online throughout China and bookings have sharply increased this week with early to Mid-March departures.
South China Production Recovery– Factory’s coming back online increased dramatically this past week which is great news. Expectations are continued improvement however Fujian province expected a longer recovery process. Fujian province only expected to reach 40% by March 1st whereas other provinces expected to reach 60% - 70%.
South China Truck Capacity – Shortage continues to be a major problem with available trucking labor of only 25% to 30% as many drivers are non-local. We are seeing situations, where freight is now available to ship however due to truck capacity, we're missing vessel cut-offs. Dray costs have also sharply increased due to the capacity shortage and expectations are for the situation to only slowly improve by March 1st.
Central China Production Recovery– Factory output in Shanghai similar to the update with factories continuing to come back online. The best guidance is for recovery to 80% or above not until Mid-March. Ningbo production is in a worse situation as infection levels are higher in this region with expectations of only 50% by March 1st. Some surrounding cities such as Hangzhou & Taizhou have yet to resume manufacturing with expectations of production not until March 1st pending local government authorization.
Central China Truck Capacity – Truck capacity out of Ningbo and the surrounding area facing a difficult situation as the majority of drivers are non-local residents. Available truck capacity is less than 10% as many drivers remain under quarantine status, improving conditions expected in the short term however trucking shortages will remain through at least March.
North China Production Recovery – Factories were allowed to open between February 10th & 17th and expectations are for productivity levels of 80% or greater by March 1st. Dalian and Tianjin reporting factory output quickly recovering however truck capacity will limit efficiency.
North China Truck Capacity– As more driver quarantine restrictions expire the trucking situation will gradually improve which is currently around 25%-30%. Trucking costs continue to rise as local transportation routes face strict traffic control forcing higher-cost routes to be utilized through at least the remainder of February.
Air Freight – Most passenger flights remain canceled until April and there has not been any indication that they will resume service any sooner. Until these flights are reinstated, available airfreight capacity remains at 40-45% of the usual levels. However, despite the limited capacity, outbound space is not currently an issue as factories have not yet returned to full production.
Limitation of production is related to a mix of local restrictions, manpower shortage, and quarantine measures. As of the beginning of this week, it has been reported that an estimate of 50-60% of suppliers remained closed. This is expected to be the case for at least the next 1-2 weeks. In addition, local transportation also under pressure as trucking companies are finding it difficult to deal with limited staff, roadblocks, and quarantined zones.
Upon full restoration of production, we are expecting to see in an increasing switch from ocean to air. This will inevitably create, at the very least, a short-term peak period especially if the influx of airfreight volume comes before PAX flights are back in the rotation. It is also being speculated that the airfreight crunch could extend several months. Prices will increase naturally across all of mainland China as well as Hong Kong.