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Global Supply Chain News: Coronavirus Playing Havoc on Global Shipping


After Tariffs, another Reason to Rethink Over Reliance on China for Sourcing?

Feb. 17, 2020
SCDigest Editorial Staff

With mixed news on whether the coronavirus crisis has peaked or not, it is clearly having a huge impact on global freight shipping into and out of China.

The Wall Street Journal reported last week that Lars Jensen, head of Denmark-based maritime research group Sea-Intelligence, said that there were 30 cargo ship sailings canceled last week, 23 across the Pacific and the rest to Europe.

Supply Chain Digest Says...

The Financial Times says that ship crews have been stuck on board ships at Chinese shipyards or ports such as Singapore, which is enforcing strict quarantine rules on vessels coming from China.

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That makes more than 50 void sailings since late January, when the scope of the outbreak became known.

And of course those cancelled sailings means inventories and components will not make their way to US and European retailers and manufacturers as expected.

In other cases, ships that have set sail from China are being turned away from ports over concerns about the virus.

And all that is driving rates for moving shipping containers and bulk cargo to record lows, in yet another blow to financially beleaguered carriers.

Getting ships and freight into China is also a real challenge. Only a fraction of workers are back at work to handle arriving goods, causing major back-ups at large gateway ports. Some carriers are diverting ships schedule to dock in China to the port of Hong Kong, then trucking the goods into China.

The Baltic Index, which tracks rates for shipping commodities such as grains, iron ore, coal and other agricultural products, fell into negative territory last week for the first time since its creation in 1999.



Baltic Index has Fallen from More than 4000 not Long Ago to Negative Territory



Source: Financial Times

That almost certainly means bulk carriers are losing money on some if not most lanes.

(See More Below)





The UK's Financial Times reports that capacity utilization at major Chinese ports has been 20 to 50% below normal. Meanwhile, more than a third of ports said storage facilities were beyond 90% full, according to a survey conducted last week by the Shanghai International Shipping Institute, a Beijing-backed think-tank.

One Shanghai freight broker told the Wall Street Journal that at least one container ship that can move more than 20,000 containers left Shanghai for Northern Europe with only 2,000 full containers.

That same broker said that while the ship would pick up more containers on thw way, it will reach Europe around only about 35% full.

"That's unprecedented, and a lot of money is being lost because it doesn't even cover the fuel cost," the broker noted.

In some cases, the Financial Times says that ship crews have been stuck on board ships at Chinese shipyards or ports such as Singapore, which is enforcing strict quarantine rules on vessels coming from China.

In some cases, it reports, some of the anchored ships were running out of food.

And this after the tariffs on Chinese imports into the US had already caused many companies to rethink their heavy reliance on China for sourcing.

It is likely coming out of the coronavirus crisis many more are likely to rethink sourcing strategies as well.


Do you think this crisis will cause more companies to rethink their China sourcing strategies? Let us know your thoughts at the Feedback section below.


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