Last updated: April 2, 2020 08:00 GMT
How coronavirus is impacting the economy and the global supply chain
The coronavirus outbreak continues to be profoundly disruptive to the global supply chain, especially as the US and many European countries are now battling to stop its spread.
Though Chinese manufacturing has reportedly rebounded in most of the country, COVID-19’s impact elsewhere across the globe has caused demand to plummet.
The anticipated early peak season in ocean freight is now reversing course – carriers are rapidly blanking sailings and shippers are scrambling to cancel orders, even leaving shipments at ports across the globe or choosing longer sailings to delay accepting goods.
There are reports of warehouse space getting tight and arriving containers piling up at US ports with the potential to cause bottlenecks.
Logistics continues to be exempt from travel restrictions applied to individuals, but the restrictions are growing: President Trump nearly placed New York, New Jersey and Connecticut under quarantine this week, and more and more states are requiring entrants to enter home quarantines. These developments have likewise further reduced domestic flights, and the air cargo capacity that travels with them.
But there are also steps being taken to try and expedite the supply chain: though Customs and Border Protection reversed its decision to defer certain duties, tariffs on certain critical items have been suspended, and the Federal Maritime Commission is set to announce its rules for demurrage fees aimed to protect shippers as container delays at ports are likely.
Ocean freight and coronavirus
Ocean rates have stayed steady, with China-US West Coast prices increasing by only 1% this week. But while cancelled ships during the Chinese shutdown prevented a collapse of ocean rates, similar cancellations now may not prevent a sharp price drop since demand for freight has decreased.
Air freight and coronavirus
The removal of passenger jet cargo capacity and the demand for essential goods mean air rates are remaining high. Additional passenger jets are being used as freighters to ease some of the capacity crunch, but rates continue to be both high and volatile.
China has limited the already reduced volume of passenger flights entering the country, further increasing prices. Some Freightos.com forwarders report rate increases of up to 30% out of China in the last two weeks, with a compound weekly growth of 13% over the last six weeks.
Amazon shippers and coronavirus
Amazon announced two weeks ago that in order to focus on delivering essentials, it would no longer be accepting shipments of non-essential goods to its warehouses from FBA sellers.
This pivot has been painful for FBAs – shipments booked by FBA sellers had rebounded from mid-February to early March as Chinese manufacturing recovered, but then began to sink after the change in Amazon’s policy.
For tips on managing FBA inventory during this time, check out this post.
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Preparing for shipping delays from China and elsewhere
The situation is unpredictable, of course, but there are a few steps you can take right now:
- Anticipate delays in getting goods to your destination. Unfortunately, this situation is subject to many rapidly-changing factors.
- Check directly with your suppliers to confirm the order ready dates.
- If possible, book any upcoming shipments with an available ready date to get your goods moving as quickly as possible.
- Consider shipping LCL instead of FCL in the short term to minimize your chances of getting rolled.
- Explore warehousing options to mitigate the effects of lowered demand in the US as well as new Amazon restrictions
- Book orders now on Freightos.com, as our sellers have resumed operations and right now delays getting to US destinations are minimal.
- Be sure to join Freightos.com Insiders, a community on Facebook, to connect with global importers of all sizes and share insights, tips and solutions during the spread of coronavirus.
As always, we at Freightos.com are here to help. Please reach out if you have any questions or concerns.