11th February 2020
The 10th February was the official return to work day for suppliers in most China provinces. Shippers are required to submit applications to local governments to resume work, and permission is granted only if they can demonstrate that they have strict hygiene and safety measures in place. Many offices and factories have successfully re-opened, although most are not fully operational due to the low level of employee attendance. Most local authorities in China have imposed a mandatory 14-day quarantine period for workers returning from another province, and this has affected staffing. Our own back to work survey of our customers’ major suppliers still indicates that around 70% are returning to work this week, leaving a significant number that are not planning to re-open until the 17th February or later. There are also some exceptions to the 10th February start date; in Guangzhou, Foshan and Nanjing, export factories and suppliers of products that are not essential to Coronavirus epidemic control have been officially advised to consider extending the Chinese New Year holiday to February 17th. In Ningbo, Tianjin, Hangzhou and Chongqing the local government regulations have been stricter and some shippers here are struggling to get the permission to return to work granted. Whilst export production is resuming this week, labour shortages and the quarantine requirements will affect supplier production for at least another two weeks.
As advised, our China offices have been operational since the 3rd February. We are now fully re-opened in Chengdu, Foshan, Fuzhou and Hong Kong. We are working in compliance with local government regulations with a reduced number of colleagues on site in Dalian, Guangzhou, Nanjing, Qingdao, Shanghai, Shenzhen and Xiamen. Our offices in Ningbo, Tianjin, Hangzhou and Chongqing are awaiting local government final approval to re-open and are working to our Emergency BCP plan, with limited colleagues on site supported by those with remote access to systems. Except for Wuhan, we are fully operational and able to process shipments and documentation for shippers.
An increasing number of shipping lines are deferring their full return to work until the 17th February, allowing many staff to continue working from home this week. Cargo Bookings have been very low, and as a result, seven more Asia to North Europe sailings have been cancelled over the last week.
Impact of Cancelled Services
The vessel cancellations last week pushed up the cancelled capacity on Asia-North Europe to 65% in week 6. In week 7 this figure is currently around 57% (but subject to change). The impact is not being felt by China based customers due to the shortage of cargo, but it is beginning to affect business from South East Asia and the Indian sub-continent. These origins rely heavily on the China vessels picking up transhipment cargo at Singapore, Tanjung Pelepas and Colombo, and with a lack of vessels in transit through the transhipment hubs, there are now some space shortages appearing with the carriers. We are providing contingency plans for customers affected from these other origins.
Ports & Terminals
Except for Wuhan, ports and terminals in China continue to operate normally.
There is little change from the situation reported on 07/02/20. Volumes are expected to start picking up next week as manufacturing increases, but what that really looks like won’t be clear until the end of this week. There are no standard airfreight services available into HK / CN, and the few carriers that are offering a service are applying Express or Must Ride rates. Etihad (EY) and Cathay Pacific (CX) suspended additional routes on 07/02/20; EY pulled the freighter service and CX suspended 11 additional routes including LGW. As mentioned before, Virgin (VS) have suspended their PVG service until 29/03/20. We are looking at alternative uplift options, once manufacturing starts up again, but it is doubtful that passenger numbers will pick up as quickly and it is returning passengers that will drive the return to the carrier schedules. Initially we expect volume to outweigh capacity which will have a significant impact on freight rates.
Trucking in China
Most of our trucking suppliers have resumed operations, however they are facing the same issues as shippers about staffing. Many drivers are observing a 14-day isolation period at home, resulting in around only 50% of the labour supply being available. Our transporters must also follow the local government rules in obtaining permission to resume operations, and this is taking longer than anticipated in some origins. The control in the Ningbo area is very strict, with only a limited number of trucking companies up and running. Our China teams will work closely with shippers and will provide the best possible solutions for any shipper needing help with local transportation.