China Covid Outbreak Planning
5th January, 2023
After originally following policies to wholly eliminate coronavirus, on Dec 7th the Chinese Government changed its course to one with far less restrictions. The country is now in the midst of its worst outbreak ever with estimations of over 1 million cases per day.
While many countries introduce testing measures for inbound passengers, there is growing concern that this outbreak will cause massive supply chain issues due to reduced staffing numbers.
With Chinese New Year imminent some factories have already closed due to illness, similarly, transport and portside operators are facing a reduced workforce which will impact the movement of goods in the lead up to CNY. There is also concern that travel within China over the next month will further exasperate the covid breakout.
Briefly
- Many factories closing early this CNY
- Some orders will not move until post CNY
- Volumes are down on previous years
- Blank sailings continue because of the reducing volume
- Rates remain low and are expected to post CNY
Planning
With the impact of this covid outbreak yet to fully play out, your planning for freight ex China over the next 3-6 months needs to consider what might be the worse implications and plan for them. Lessons from the disruptions over the last few years are important to acknowledge and maintain.
- Check in on your forecasting team for 2023
- What is your buffer stock needs? Do not consider reverting back to JIT (Just in Time) management this year
- Do you have the warehouse capacity and finance to hold additional stock?
- Earlier engagement with all suppliers, we are aware that many Chinese suppliers have their own supply issues with components, we have previously mentioned checking in with each supplier and the respective bill of materials to identify what if any components may be delayed that make up your finished goods
- Earlier engagement with your freight forwarder, the sooner in the chain we are liaising with your suppliers the better we can manage orders and communicate the timeliness of them
- Have you considered a China plus 1 manufacturing strategy, refer to our previous bulletins on manufacturing opportunities in Vietnam and India for example.
Air Freight: Bookings and uplift are working OK, Chinese passengers are still OK to travel to AU, the AU Government will however require a negative covid test for anyone travelling to AU from January 5th.
Sea Freight: Bookings for LCL and FCL are good with minimal delays being experienced at the moment, blank sailings are expected to increase and with volumes anticipated to remain low, we do expect rates to stay at a low level in the short term. For interest companies with larger volumes at +1000 TEU per annum it is worthwhile to consider locking down rates for the next 6-12 months. We are currently securing these rates for some customers, if you are interested in the fixed rates, please contact us at sales@sccargo.com.au.
Trucking: illness from Covid is causing delays with the workforce reduced.
Freight Forwarders: all our China partners staff are working and continue to do a fantastic job for all of us.
Nobody can detail what the impact will be of China abandoning its covid zero policy and importantly for all reading here what impact it might have on the supply chain. We will be checking in regularly as this plays out and work with all of our customers with the strength from learnings, we have had together over the last few years. We thank you very much for your continued support and your trust in allowing SCC to manage your import cargo.
