Time for coronavirus contingency plan in container shipping
Health crisis cannot be ignored by shippers.
Exporters and importers have to deal with issues in the real world and need to activate some contingency plans as the coronavirus effects spread.
The changes caused by the health crisis cover critical areas of supply chains, inventory, transport and costs. Given China’s dominant role in global manufacturing and supply chains, these changes will affect a very high number of companies involved in international commerce.
Here is Drewry’s current take on the changes, events and risks that every shipper should take into account:
Most large companies have contingency plans to respond to potential disruptions in their supply chains. US West Coast ports have been shut down for more than a week in the past, so there is some experience of this type of logistics gridlock. Current thinking in China is that Chinese factories will not resume full production for another 3-4 weeks which, if confirmed, will have a major impact. It seems that these large companies are going to have to decide soon whether to activate these contingency plans if they do not want to run out of parts for production or retail inventory for sales.
Shippers should watch very closely how long the current freeze of the Chinese transport system continues and should work with their carriers and providers to identify remedial measures. There is a role for proactive forwarders and 3PLs here. Carriers have increased the number of sailings cancelled in February. On the Asia-North Europe route, there will be 19 cancelled sailings this February, up from 12 last February, according to the Drewry Container Forecaster. Expect the ocean carriers to run “extra sailings” to cope with the upwards swings in volumes, once the pipelines reopen.
With luck, the spread of the virus will stop and the quarantine measures in China will be ended in the next few weeks or months.
But what measures can shippers take in the meantime, given the uncertainty?
There is an immediate issue concerning the annual tenders for 2020/21 transpacific contracts. Many US shippers have just launched their tenders and we know that some providers’ tender quotation staff in China are unable to respond to requests for some tenders in time due to the health crisis.
Will face-to-face negotiation meetings even be possible in March, if the virus continues and new travel restrictions from China are introduced?
Drewry does the bid administration for a number of BCOs and, in our opinion, there is a high risk that transpacific contract bids will be delayed by carrier office closures and possibly travel restrictions.
The contingency plan for this? Ask your carriers to extend your rates under your current contract by a month and send a revised bid schedule.
© 2019 Worldfreightrates News