Coronavirus: Does China, the world’s factory, paralyze the global supply chain?

Barcelona, March 5, 2020.– Breaks of stock of certain merchandise are already being registered in some western countries. The vast majority of Chinese transport modes are closed, so there is damage to the global supply chain, due to the expansion of the Coronavirus, originating in China, considered the world’s factory. In fact, the OECD has forecast declines in GDP growth in several countries in the coming months, and the first losses are estimated at $ 200 billion. In this sense, we highlight an analysis of the Logistics Management magazine with a very early approach to the effect on the logistics sector:

When a major, global pandemic like the Wuhan, China coronavirus takes hold, it is, at once, alarming, scary, uncertain, and a whole host of other things, to be sure.

And that is being made more and more clear as the days goes on and the number of those impacted, or, tragically dying, continues to head up, coupled with reports of coronavirus spreading to different parts of the world truly makes things even worse.

From a logistics and supply chain perspective, while things are still very early, it stands to reason that the impact on all things trade, shipping, and moving freight is already quite significant. That was beyond clear in a Wall Street Journal article, entitled: “Coronavirus Closes China to the World, Straining Global Economy.”

This article and others like it drove home how cornonavirus is impacting myriad aspects of trade and commerce, including: a travel ban into and out of China; shuttered factories; a reduction in global oil prices; and a decrease in China-bound imports, among others.

There is also, of course, a high level of uncertainty that comes with a pandemic such as this one, in the form of how long it may last for, what should or could businesses be doing to get through this period, and what happens now or next? And what they all have in common is that they are all valid questions that come with a shortage of valid answers, at least so far, for the most part.

In this space last week, we re-posted an excellent piece by SCMR Contributor Rosemary Coates, in which she provided an excellent analysis of what was happening and what businesses need to do to brace themselves for the unexpected. In short, the recurring point she made was that you can never have enough backup plans period.

Chris Rogers, research director for global trade intelligence firm Panjiva, wrote in a research note focused on cornonavirus that “The impact on supply chains more broadly will be a function of (a) how long businesses remain closed (b) the extent to which there’s an impact on downstream supply chains and (c) the extent to which precautionary measures are taken by corporations including logistics firms.”

And Rogers also cited an S&P Global Ratings report, which observed that the primary impact will likely be felt by consumer demand, including via travel and that logistics may be exposed via a restriction on shipping through the region surrounding Wuhan – though that may relate more to delays for inspections than outright bans – while the automotive industry may be particularly exposed due to a concentration of activity in the region.

As we look ahead, more information about coronavirus will be learned about, to be sure, but things understandably are moving slowly. Freight transportation activity, processes and volumes are likely to be impacted to varying degrees, of course. So, for now, we assess and move forward as best as possible. Events like this on a global level can make for trying and difficult times, but, as has been the case before, one can expect supply chain networks to adapt and adjust and do what needs to be done to keep economies and freight flows moving forward.

Source: Logistics Management