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Coronavirus Challenges in China

The novel coronavirus continues to impact global manufacturing and supply chains as factories seek to resume operations.  All Ligentia offices in China are now open and in daily contact with customers, and the rest of the global team to help minimise risk to current schedules.

Factory Production
Production has resumed for companies in most provinces across China as of February 10th following a government-mandated delay to restart normal business operations aimed at mitigating the virus outbreak. However, some jurisdictions, predominantly at the municipal and district level, have imposed different production schedules and requirements for resuming normal operations sometime between February 17th and March 1st.

Travel restrictions have been triggered as Chinese authorities seek to contain the outbreak with labour shortages causing backlogs to build up at many ports.

Cross-provincial trucking remains challenging throughout China as authorities require drivers to remain 14 days in self-quarantine depending on the license plate of the truck, and the registered province of the driver.

Overall trucking availability has been reduced to 40% within the Shanghai city area, while capacity has been down to 10% from Shanghai to other cities as drivers reject trips to inland provinces to maximise the number of runs.

With limited trucking capability available, congestion has started to build at air cargo terminals and warehouses. This is due to inbound shipments that have either not been cleared by customs brokers or which delivery and pick-up services could not be arranged. As a result, cargo operations have slowed down and shipment delays and demurrage costs are starting to materialise.

The large number of cancellations of both passenger and freighter flights, combined with factory and logistics operations restarting in the coming weeks, are expected to cause an air freight capacity shortage that could last until the end of April. In total, more than 25,000 flights have been cancelled per week so far, reducing air freight capability by approximately 50%. In addition, Emirates Airlines has reportedly cancelled freighters from Guangzhou to Dubai until March 27th, while Etihad has cancelled freighters from Shanghai to Mumbai and Chennai until March 30th.

Gateways such as Hong Kong have not reported congestion yet and could serve as an alternative entry point to southern and central provinces in China.

With the Lunar New Year period having been extended in most provinces until Feb 9th, shipping lines have announced extensive blank sailing programmes for their vessels. About 82 trans-Pacific sailings have been cancelled in March, taking around 198,500 TEU off the market, while carriers have blanked around 54 sailings in total for trade between Asia and Europe, according to Sea-Intelligence Martime Consulting.

In particular, yards at terminals in Ningbo, Shanghai and Tianjin have been congested, with very limited or no reefer plugs available.

Closed Borders
In Hong Kong, authorities have started to quarantine for 14 days all Chinese citizens coming into the territory as of February 8th in an effort to drastically reduce the number of travellers into Hong Kong. Cross-border truck drivers have so far remained exempted from the measure, and cross-border deliveries continue to be possible, albeit requiring advanced booking.

Since January 31st, Russia’s 16 border crossings with China along a 4,000 km border have been closed to prevent the spread of the coronavirus, likely affecting trade volumes. No reopening date has been announced yet, but Russian authorities indicated that the closure may be extended until March 1st.

We expect the crisis to disrupt global supply chains until April and potentially beyond. Proactive emergency planning in collaboration with the Ligentia Customer teams is imperative at this time to successfully keep your goods moving.

If you would like support moving your goods from China please contact our sales team

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