COVID-19: Supply Chain Disruption in the Shipping Industry

Popular monthly maritime magazine, Sea and Coast's Editor-in-Chief, Amit Kumar shares his analysis on the effect of the COVID-19 outbreak on the global shipping industry.


3 min read

COVID-19: Supply Chain Disruption in the Shipping Industry

A new novel Coronavirus, a severe infection with no known cure, is rapidly spread in various cities across the planet. An initial outbreak, found within the now-quarantined epicenter of Wuhan in China, isn't only disrupted the health security of millions but also negatively impacted travel and business.

Wuhan is additionally an awfully important hub for global companies within the province of Hubei which holds an entire of 1,016 in Bloomberg’s supply chain database. Many plants are within the auto and transportation industries, including PepsiCo Inc. and Siemens AG. However, companies are now scaling back their operations in China and other Asian countries like land.

At the identical time, airlines halt flights and a near-total travel ban to China imposed by large-scale trading partners slightly like the us and Australia takes effect. As the price rises from the illness and cases are reported in over across the planet, the economic impact of the coronavirus is wide-ranging, especially on supply chain and also the freight transportation industry.

Slower Production & Fewer Transportation Options

The impact of the coronavirus on supply chain is already felt across the planet. due to the Lunar year season, the ocean shipping industry is already slow as factories close for up to four weeks and workers travel home to trip their families. Now that the coronavirus has emerged at one in every of the foremost effective travel periods within the year, factories have extended the quantity due to travel restrictions, affecting production.

Companies like Apple, who have suppliers within the Wuhan region, are making alternative plans to mitigate any loss in production. While the impact of the virus may be a smaller amount clear on supply sources outside of Wuhan, shipping professionals looking to maneuver goods out of PRC will see a reduction in air freight capacity. as an example, Cathay Pacific, a large-scale passenger and cargo airline, cut their capacity by a minimum of half through March. It’s expected that the pc, electrical equipment and also the machinery industries will take the foremost important hits in business.

With alternative and fewer transportation options available during the travel ban, manufacturing delays, increased blank sailings and fair cancellation or postponements will plague the freight transportation industry within the short-term. If matters worsen, factories will should delay production even further and miss delivery dates for several importers. The Chinese year has already extended its holiday until February 10th in Shanghai, Jiangsu, Zhejiang and also the Guangdong provinces.

Precautions in Maritime Shipping

The other week, the us Coast Guard released a bulletin explaining that vessel owners, operators and native stakeholders are to review all arrivals with current policies and report on the sick/deceased crew or passengers on their vessels.Some shipping lines are announcing blank sailings for week seven and week eight due to anticipated delays in production. If matters continues, it'll end in fewer service openings. Some lines are creating continuity plans, so workers have remote access to work.

Of course, precautions are slowing port operations. Ports in China and throughout Asia did remain open during the SARS outbreak, but priority are visiting run to vessels that carry aid supplies for the coronavirus outbreak. Shipments that were returned to terminals before the Chinese yr holiday with planned sailings are continuing to be loaded.

However, if matters escalates, port operations could even be disrupted as they implement further safety precautions. Already, some vessels and barge operators are stopped at the Yangtze to forestall entry into Wuhan. A risk of quarantines at ports could happen in extreme cases, but which could stop port operations altogether.

The Long-Term Effects of the Coronavirus on Freight Transportation

If the coronavirus isn’t contained within the subsequent two months, it'll negatively impact the contract season. Longer manufacturing closures indicate weakened demand, which is ready to cause a weak rate market. Carriers who normally negotiate for higher rate contracts within the approaching season will have difficulty if the outbreak continues.

Not to mention, we'd see major revenue losses. A plummeting transpacific container volumes during the  year’s could extend into quarter two. Steamship lines will confront major challenges since they’ve already been struggling to die additional costs that occurred with the IMO 2020 regulation. For some, higher operation costs may come from a push for sailings without full space utilization since the downturn will affect carriers’ revenues.

Be sure to head to: http://www.seaandcoast.in for more news on the Maritime industry

The views presented are the authors own and do not necessarily reflect the editorial policy of 'The Watchdog News'

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