Shipping Counts Costs as Coronavirus Hits Supply Chains

By Jonathan Saul LONDON, Feb 20 (Reuters) – China is struggling to resume normal trade operations as fallout from the coronavirus outbreak hits container shipping lines and logistics chains, with goods stuck and costs mounting, industry officials say.

The epidemic has upended global supply chains and caused widespread disruption to businesses and factory activity in China, prompting authorities to deliver a steady stream of policy measures over recent weeks to cushion the blow to growth.

China is a vital player in the container sector, transporting everything from fresh food to phones and designer clothes as well as industrial parts.

The world’s biggest container line Maersk warned on Thursday that the coronavirus outbreak would weigh on earnings this year, adding to pressure on a sector already hit by trade wars and an economic slowdown.

“We are experiencing huge pressure at (Chinese) port terminals because there aren’t enough workers at the ports to move the containers around, not enough truck drivers to move the goods, and no one to receive them at the factories or warehouses,” Maersk’s chief executive Soren Skou told reporters on Thursday.

“We have lots of ships laying idle in Asia, because we have canceled many loadings out of China in the last two weeks.”

The world’s number two container line MSC said the discharge of refrigerated reefer containers was also affected due to problems with power sources.

“The blanked sailings and reefer congestion issue are likely to contribute to a shortage of containers in some regions,” an MSC spokesperson said, referring to canceled port calls.

The MSC spokesperson added that a surge in demand for containers was expected when production capacity in China returns to normal.

Shipping consultancy Alphaliner estimated that 46% of scheduled departures on the major Asia to north Europe route had been canceled in the past four weeks.

“We are beginning to see the impacts in terms of trade flows,” said Richard Ballantyne, chief executive of the British Ports Association trade body.

“This will mean higher costs for shipping and problems further down the supply chains such as increased costs and shortages of certain commodities.”

Anesco, the Spanish dockworkers’ employers association, said it estimated that container volume could decrease by up to 30% in coming months due to the impact of the virus, which would result in economic losses across Spain’s ports.

Rotterdam, one of Europe’s busiest ports, was already expecting a fall in volume in 2020 from throughput volume of 14.8 million TEU (20-foot equivalent units) in 2019.

“We expect a negative impact somewhat south of 1% container throughput per annum in 2020,” a port spokesman said.

“It is a common feature that – after such a production interval – there is a spike in production as well as cargo shipment afterwards to make up for lost time.” (Additional reporting by Emma Pinedo in Madrid, Jacob Gronholt-Pedersen in Copenhagen and Lisa Baertlein in Los Angeles; Editing by Kirsten Donovan)

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