With the daily, sometimes hourly, developments of the Coronavirus outbreak, we wanted to take the opportunity to share with you what we know at this time from an operational standpoint.
First and foremost, after making our employee health and safety a first priority and instituting the remote work protocol put in place by our China management team, we thankfully have no reported Coronavirus illness with our staff.
Overall Market and Supply Chain Updates
China authorities are taking the situation very seriously and exercising extreme precautions to avoid the continued spread of the virus. Shanghai and Beijing eventually joined the list to block the border this week.
The central government has asked mainly factories producing medical materials and emergency goods to reopen. Manufacturers are required to have inspections/permits completed before they are allowed to resume work. Once work resumes, if a worker is found infected with the virus, the whole factory will be shut down and isolated for 14 days.
Very few factories to-date have successfully obtained a permit to reopen. Those that have been able to resume work will only be shipping out products produced before Chinese New Year. Manufacturing levels are expected to get back to normal in March.
The travel ban was lifted for people to return to their work towns; however, transportation services are overwhelmed and transit is slow.
There has been a domino effect of the virus – some large manufacturers in other countries have stopped production due to material shortages sourced from the affected areas.
Hong Kong factories are reopening with anticipated freight moving later this week.
Ocean Freight Updates
Most steamship carrier offices are expected to reopen on February 17. Lines are sailing based on revised schedules which incorporate blank sailings. Wuhan port is still closed, and trucks are restricted in their movement between provinces without permits, health inspections, and medical protection, with a 14-day quarantine period for drivers traveling between cities. Driver shortages are also extending transit times.
Carriers are advising that production shifts are occurring away from China if customers have another supply source in a different country. When shipping does return to normal, carriers expect many customers to switch original East Coast cargo to the West Coast to expedite transit. Lastly, for services out of Ningbo and Shanghai, express ocean is an option as Matson will not blank sail. APL also has an express service (EXX service); however, this most likely will be a hit or miss alternative solution. Unlike Matson, the APL EXX service does have blank sailings. Both services come at a premium rate.
When vessels arrive into the USA, they are allowed to berth but the crew must remain on the vessel; however, if any crew member that has been to China shows signs of illness, they will not be allowed to berth until at least 15 days after arrival. If any other crew members show signs before the 15-day period has lapsed, they will restart the 15-day period from the time the next member shows signs of illness. In a worst-case scenario, if a crew member passes away that has been to China in transit, the vessel will be quarantined indefinitely.
Air Freight Updates A few airlines have stated they will resume flights on March 15. Freighter service is still moving albeit with tight space, extended advanced pre-bookings, and no guaranteed delivery dates offered.
Our staff is in close communication with customers, and especially those vendors/suppliers in China, to monitor the situation and find all possible solutions to minimize supply chain disruptions. As businesses reopen next week, we will have a better understanding of the timeline for production and shipping.
Thank you for your patience as we all continue to navigate this fluid situation. We will continue to keep you informed and updated as we receive new information.