Coronavirus crisis leaving global supply chain in limbo

An updated “return to work” date was implemented on Monday February 24 in China but normality hasn’t returned to operations.

John Park, Head of Business Operations Freight and Trade Alliance (FTA) said February 24th came and went and still we are none the wiser as to when we will see an end to disruption of supply chains both in China and the rest of the world.

Coronavirus Disease 2019 (Covid-19) is declared as a public health emergency of international concern by the World Health Organisation. Outbreaks are now surfacing in Northern Italy and South Korea, putting more pressure on the international trading community.

Local importers have advised John that they have for some weeks now been looking to source stock from other countries.

“Businesses in other parts of the world are also looking for alternate supply sources and there are simply not enough sources to fully supply the orders,” he said.

“Lack of container movements will create surpluses and shortages. If full containers are not moving into countries then those countries have no empty containers to export their goods back to their offshore clients.”

Increased prices for sea and air freight will be an issue in the coming months until normality returns to the economy. John said some people in the industry predict normality won’t return until September. 

“This has the potential to increase costs due to the expense in relocating empties and higher prices due to minimal stocks,” John said.

He said there is concern with staffing issues, especially in China.

“The main issues continue to be a shortage of staff in the transport arena driven by both the inability of workers to get back to their home provincies due to internal travel restrictions aligned with the personal concerns of returning face to face environments,” John said. 

“There is already concern amongst many in the industry as to what they can do if they have minimal work for their employees due to these lower volumes.” 

The CEO of Victorian Transport Association (VTA) said we should all get used to waiting longer for manufactured goods or seek alternatives in the short term.

Peter Anderson said exports from Australia are also being impacted because Chinese factories and industry not operating at full capacity have limited need for raw materials from Australia they may have once needed. 

“This is creating insecurity among Australian exporters who can no longer be certain about their trade volumes with China,” he said.

Imports are in decline due to a lack of supply from China and this is starting to be felt by consumers. Goods they have grown accustomed to purchasing are not readily available and backlogs are starting to appear on goods.

“A car that would typically take six weeks to receive is now estimated for extended delay. There is also a ripple effect to note on manufactured consumer goods. Even though a product might not be manufactured or assembled in China, delays are being caused by components made in China not being as readily available,” Peter said.

However, John said there is no need for freight forwarders to panic.

“Australian businesses are aware of trade delays and monitoring flows across the transport sector, freight forwarders aren’t in full panic mode because they’re managing those issues,” he said.

“It’s time to be proactive with suppliers to cope with the pressure and global concern.”

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