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Customer Advisory: Corona Virus Update

The Coronavirus outbreak continues to disrupt shipping operations in China, as export volumes plummet and import operations come to a near-halt in all provinces. While most carriers and ports are open and functioning, tight restrictions are still in place on road transport.

Local governments are strictly limiting drivers allowed on the road. Very few trucking companies have been granted permission to return to work, especially in North China. Vehicles are not allowed to move to/from the Hubei province; other provinces have implemented road checkpoints to collect health information on drivers, causing further delay.

Due to this disconnect in supply chains, export volumes have dropped severely. Additionally, many factories struggle to return to pre-Chinese New Year (CNY) operating levels, and carriers have announced more blank sailings to compensate. One carrier reported a vessel with up to 20,000 container capacity sailing with only 2,000 containers aboard. Since the beginning of the Chinese New Year season, roughly 23% of sailings have been pulled by carriers- 16% due to CNY directly, and an additional 7% due to the subsequent virus outbreak.

Chinese imports are also suffering from the extreme trucking limitations. Congestion is building at Chinese ports as drivers are unable to move arriving containers onward to their destinations. This is creating an especially problematic situation for inbound refrigerated containers. “Reefer” container power outlets have become scarce, jeopardizing temperature-controlled cargo within. Insurers are bracing for a surge of claims due to spoiled meats, produce, and other perishable commodities. Some carriers are implementing reefer congestion surcharges amounting up to $1000 per container. Others are beginning to offload reefer containers at unplanned ports with available power capacity.

Airfreight service options are currently limited to freighter aircraft, which are more expensive than standard passenger services for cargo. Airlines have not announced when they expect to resume passenger services to & from China.

Looking ahead, air and ocean freight rates are expected to increase when production levels return to pre-CNY levels. This will likely be a slow process, around March or April before the effects are felt on the pricing side.

OTS will continue to monitor this situation and provide updates when necessary. If you have any questions, please do not hesitate to reach out to your OTS Sales representative.