How Coronavirus 2020 Impacted Logistics & Trading Industry

Feb 25, 2020 Lilia Khovrak Lilia Khovrak

Cancellation of flights, suspension of production, violation of logistics, non-participation in fairs, growth of cryptocurrency. The epidemic from China is forcing more and more large companies to change plans and improvise.

The spread of the new coronavirus in China has already seriously affected the financial and commodity world markets. Market participants fear that the growth of the economy of the Middle Kingdom and the countries of the Asian region will decline, in particular, China may lose up to 1% of GDP growth.




SeaRates prepared a list of important events which may occur in the logistics and trading industry in 2020 due to the coronavirus.

Refusal of cargo and termination of flights to China

The world reacted sharply to the news of the coronavirus. It is forbidden to import from other countries based on Chinese raw materials and exports from China.

Great Britain decided to introduce a restriction on the transportation of passengers and goods from China. According to the Air Force News Service, British airline British Airways has indefinitely suspended all flights to and from China. Other airlines are also gradually starting to reduce the number of flights to China.

Many countries are introducing additional measures to inspect crews and cargo in ports to prevent the spread of the virus. Thus, the Singapore Maritime and Port Authority (MPA) introduces mandatory checks at all maritime checkpoints, including PSA container terminals and the port of Jurong.

Armenia and Kyrgyzstan completely banned not only the import of products and raw materials from China, but also import of products from other countries based on Chinese raw materials. 

Kyrgyzstan and Mongolia officially closed land borders with China. Uzbekistan, Kazakhstan, Turkmenistan, and Russia have not yet followed suit, but have strengthened control over visitors from China. 

Every day the virus spreads outside the PRC and some countries prohibit flights to China. At the same time, the Italian Minister of Health emphasized that Italy is only one in Europe where flights to China, Hong Kong and several other countries are banned as part of security.

Manufacturing and transportation industry lead to Wuhan




Wuhan, where the outbreak of coronavirus occurred, is one of the largest cities in China, the capital of the central province of Hubei and an important manufacturing and transportation hub of global importance. According to Bloomberg, there are about 500 enterprises in the city, many of which work in the automotive and transportation industries.

According to The Loadstar, all passenger and cargo flights outside the city were canceled, only incoming flights with medications are allowed. All operations in the Yangtze River Port, which processed about 1.5 million TEUs last year, were also suspended.

Experts do not yet agree on the effects of the epidemic on China's economy and logistics. On the one hand, the outbreak of the virus occurred during the celebration of Chinese New Year, to which the supply chain was prepared in advance. But if the virus continues to spread, the economic impact on China, and potentially on other countries, will be significant.

World enterprises 

Hong Kong-based airline Cathay Pacific forced employees to take unpaid leave. This measure is designed to reduce losses caused by the forced cancellation of numerous flights to mainland China and abroad.

However, the sharp reduction in air traffic with China around the world not only reduces the revenues of airlines and airports, losing passengers and traffic, but also creates more and more serious problems for firms from various industries. Now, companies have to quickly adapt their supply chains to new conditions.

Most European airlines, including the Spanish Iberia, canceled regular flights to cities of mainland China for several weeks at the end of January. True, Guangdong, where Shenzhen is located, borders with Hong Kong, and a number of air carriers still fly there.

But while United Airlines and American Airlines temporarily refused to fly to Hong Kong. Failures are caused not only and not so much by medical, preventive reasons as by a drop in demand.

Chinese Airbus plant halts production indefinitely. Usually this plant produces four liners per month. This is approximately 7% of monthly production in this segment at all plants of the concern.

South Korea’s automotive industry has been confronted with the most acute logistical challenges. Coronavirus disrupted the uninterrupted delivery of components from Chinese suppliers and the production of Hyundai cars, except for buses, will practically stop.

At the same time, Kia, while continuing to work, but reduced production volumes. Now Hyundai’s leadership is trying to find suppliers in South Korea and in general in Southeast Asia at an accelerated pace. So, temporary logistical problems caused by the coronavirus can potentially lead to a decrease in the share of Chinese suppliers in the South Korean automotive components market.

Meanwhile, in China, Japanese automaker Honda, while stopped work for an indefinite time.

World economy

The outbreak has already affected container shipping. Container shipments from China during Lunar New Year celebrations were on the decline, but if quarantine and blocking are introduced in Beijing, Shenzhen and Ningbo, the volumes of outgoing containers will decrease significantly.

And if at the same time production volumes are reduced due to quarantine and shipments from China by both sea and land transport, this will significantly affect the volume of cargo transportation in all countries of the world.

The immediate result of quarantine and other control measures is a decrease in gas demand, diesel, jet fuel and crude oil due to restrictions on road and air transportation.

The global economy is falling and losing finances due to a decline in trade with China due to the coronavirus epidemic. The epidemic may have a negative impact on the economy, but by no means decisive.

Gold and cryptocurrency




Since the beginning of 2020, the price of gold has peaked over the past 7 years. It is reported by the international news agency Bloomberg. According to the agency, the price of gold at auction in London rose by 2.3% and reached $ 1588.13 per ounce, which was the highest since April 2013.

Analysts say the outbreak of Chinese coronavirus is causing investor uncertainty and concern. They are looking for "safe havens" - assets that can maintain their value even in the event of serious economic turmoil in the world.

Bitcoin is growing, as is gold. Ethereum and all the top altcoins, too.

Cryptocurrency market is now showing growth due to the instability of the glolbal economy, and also because of the pace of the spread of the coronavirus epidemic in China.

Termination of flights, the reduction in the supply of goods from China, the fall of the Chinese stock market - all this was a signal for Bitcoin to grow.

In times of crisis, investor interest in cryptocurrencies grows, which becomes an incentive to attract new players to the market. And Bitcoin is also starting to grow due to the growing interest in the digital currency market as a whole. That is, amid instability, digital currencies are becoming an attractive asset for investors. This fact will give a chance to the cryptocurrency market and Bitcoin to break records for many previous years.

Conclusion

Due to outbreaks of coronavirus in China, World Health Organization not yet introduced any prohibitions on international trade and the movement of goods across borders. No evidence of a risk of coronavirus spreading through goods and no cases had been recorded to date.

It is difficult to imagine that such and similar corporate news from the field of big business will remain without macroeconomic consequences, will not lead to a slowdown in economic development in China and other countries. However, while opinions about how serious the inhibition of the global economy caused by coronavirus will diverge. Perhaps unsurprisingly: epidemic has not even reached its peak.


Lilia Khovrak is a professional content manager from Odessa, Ukraine. Loves life by the sea.  Dreams to see Paris and eat a croissant on the thresholds of Notre Dame de Paris. Hates to read meaningless (pablum) articles.


bell I want know more !