Category: Breaking News

* World depends on container trade for consumer goods

* Some ships being re-routed to South Korean ports

* Some analysts say disruptions could continue into March

By Jonathan Saul and Lisa Baertlein

LONDON/LOS ANGELES, Feb 6 (Reuters) – China’s fast-spreading coronavirus is throwing the global container shipping trade out of sync, with lines re-routing cargoes and reducing calls to Chinese ports, setting the scene for months of delivery delays ahead, industry sources said. The spread of the deadly virus has shut down cities and factories in China and disrupted global air travel. China’s decision to extend its Lunar New Year holiday period until Feb. 10 has compounded logistical complications, despite its ports staying open. China is a vital link to the container sector, transporting everything from fresh food to phones and designer clothes as well as industrial parts. The world’s top container lines Maersk, MSC and CMA CGM have all reduced calls to China, known as blank sailings, the companies said in recent days. Exports of goods from China have already been hit, with broader repercussions. Hyundai Motor has said it will suspend production in South Korea, its biggest manufacturing base, because of a lack of spare parts. Disruptions to sea cargo flows have compounded an already pressured situation for shipping lines as they struggle with weaker markets and higher costs from new International Maritime Organization (IMO) regulations on low sulphur fuel. Shipping and trade sources say regular schedules are also being affected by truck and port workers in China stuck at home or away from their places of work. In addition, warehouses around dock areas in China are not fully working. This has led to ships being diverted from China to ports in South Korea. South Korea’s Busan port, one of the world’s major container terminals, has already seen a spillover with container capacity at 78% and could rise further from its usual level of 70%, a Busan port official said. “Shippers are parking cargo at our ports, so later, perhaps when the coronavirus dies down and the level of cargo (backlogged in China ports) decreases, they can deploy a small ship to carry these cargo to their destination in Chinese ports,” the official said If container levels increased to over 80% it would be difficult to run the port efficiently, the official said. While China’s Lunar New Year period usually leads to a slowdown, the virus is expected to further reduce cargo volumes. Lasse Kristoffersen, chief executive of Norwegian shipping group Torvald Klaveness, told Reuters that 25% of its container fleet was affected as sailings were cancelled. “This is largely due to lower volumes on China. This is normal during Lunar New Year, but it seems to us that the volumes are lower than normal for this period – likely impacted by the coronavirus,” he told Reuters. U.S.-based shipping industry consultant Jon Monroe, whose company is active in China, said that blank sailings in February were higher than usual. Even when the impact of the virus dies down there will be a rush to ship goods in and out of China, creating more logistical problems. “Everybody will be making up for lost time. This is really the perfect storm,” he said. Shipping consultancy Alphaliner said extended holidays and emergency measures to tackle the virus were estimated to reduce cargo volumes at Chinese ports including Hong Kong by over 6 million TEUs (20 foot equivalent units) in the first quarter of 2020 and forecast global container throughput growth would fall by at least 0.7% in 2020. China’s container throughput rose last year by over 4% to 261.25 million TEU. “Since these extended void sailing programmes on long-haul services (by container lines) are slated to continue until mid-March, any cargo volume recovery could be negatively affected, even after the end of the holidays,” Alphaliner said. Executives at seaports on the U.S. West Coast, which handle the majority of Chinese imports into the United States, are preparing for expected disruptions. “You’ll see soft levels of imports go into the month of March,” Port of Los Angeles executive director Gene Seroka told Reuters. (Additional reporting by Roslan Khasawneh in Singapore, Hyunjoo Jin and Joyce Lee in Seoul and Gus Trompiz in Paris, Editing by Veronica Brown and Susan Fenton)

https://youtu.be/w7rsyRx-700

PARIS (Reuters) – Airbus has prolonged a planned closure of its final assembly plant in Tianjin, China, as a result of the coronavirus emergency, the planemaker said on Wednesday, adding it was monitoring for any signs of impact on deliveries. It appears to be the first significant impact on aerospace production since the coronavirus outbreak, whose death toll has risen to nearly 500. Airbus has said it is planning to raise output from the plant to six A320-family aircraft a month, just over 10% of Airbus narrowbody production, in early 2020 from a previous rate of four. “The Tianjin final assembly line facility is currently closed,” Airbus said in a statement. “Airbus is constantly evaluating the situation and monitoring any potential knock-on effects to production and deliveries and will try to mitigate via alternative plans where necessary.. Industry sources said the Tianjin plant had been closed along with many businesses over the Chinese New Year but was due to reopen at the end of January. The reopening has been suspended due to the virus outbreak hitting the logistics involved in keeping the line open. Tianjin is one of two Airbus aircraft final assembly lines outside Europe, alongside a sister plant in Mobile, Alabama.

BERLIN (Reuters) – German sportswear company Adidas (ADSGn.DE) on Wednesday said it was temporarily shutting a “considerable” number of its stores in China due to the coronavirus outbreak. The company said the fast-spreading virus was having a negative impact on its business but added that it could not yet assess to what extent. Adidas has about 12,000 outlets in China, including franchise stores. Adidas saw sales growth slow to 11% in China in the July-September period from 14% in the second quarter. Several retailers have warned that coronavirus is taking its toll, including Nike Inc (NKE.N) and Hugo Boss (BOSSn.DE), which have both closed some stores in China. Adidas’s German rival Puma (PUMG.DE) said that factories will remain closed until Feb. 10. “We have so far not been informed of any production or shipment delays. A number of stores – both owned and operated and partner stores – remain closed for the time being due to local regulations”, a Puma spokesman said. “It is too early to comment on the effects of these closures”, he added. The group cancelled or postponed all Puma events in China in February including training and marketing meetings and put travel restrictions in place. Its Shanghai office remains closed until February 9.

MADRID/SEOUL (Reuters) – The air transport sector, already reeling from China passenger flight cancellations designed to slow the spread of coronavirus, now faces mounting freight and logistics disruption with broader repercussions at stake, economists warn. The thousands of dropped flights have already slashed “belly cargo” capacity in airliner holds, with operators like Lufthansa (LHAG.DE) also scaling back freighter services in response to crew health concerns and uncertain demand. The crisis has dimmed hopes of a rebound for air cargo after its worst year in the decade since the financial crisis, the International Air Transport Association, a group of 280 global airlines, said on Wednesday. Air cargo is widely seen as an early warning system for blips in global trade and business confidence that would not otherwise be easily visible for weeks or months. “We are in unknown territory with respect to the eventual impact of the coronavirus on the global economy,” IATA said. “With all the restrictions being put in place, it will certainly be a drag on economic growth.” Early victims of supply-chain breakdowns include Hyundai Motor Co. (005380.KS), forced to halt South Korean car production as flows of Chinese components dried up. But with manufacturing paused for the Chinese New Year – and planned stoppages at Airbus AIR.FR and elsewhere now being extended – it may be weeks before economies feel the full brunt of the freight upheaval currently playing out. As things stand, “many supply chains are essentially halted, so there’s nothing to transport,” Bernstein analyst Daniel Roeska said. “If you’re ordering people to stay in their houses it’s difficult to keep factories running.” Yet when output and freight demand pick up, operators once blighted by excess capacity may have the opposite problem, with sudden bottlenecks threatening customers and the wider economy. This week will see 25,000 fewer flights operated to, from and within China than a fortnight ago, aviation data firm OAG said, with services suspended by 30 airlines.

Some firms seeking to fly goods out of China are already finding prices prohibitive. One Shanghai-based e-commerce consultant told Reuters certain clients had delayed shipments after quoted cargo rates rose fivefold.

Freight forwarders are warning of “increased rate volatility for air freight, due to reduced belly cargo capacity,” according to Panjiva, the supply-chain research unit of S&P Global Market Intelligence. Air cargo represents less than 1% of global trade by tonnage but 35% by value, or about $6 trillion a year, Boeing says. In normal times about half that volume is carried in passenger jet holds, leaving China more dependent on freighter operations in the wake of the flight suspensions. Major air cargo carriers said they had no immediate plans to add China freighter services to replace the lost capacity. Korean Air Lines Co Ltd (003490.KS) and Japan’s ANA Holdings Inc (9202.T) both said higher China-bound shipments of medical supplies including masks had partially offset a decline in fresh food such as lobster and salmon and other goods. Germany’s Lufthansa said it had cut its freighter schedule to allow pilots to spend the night in Russia rather than China. The reduction also reflects lower demand, a spokesman said. Repercussions could be worsened by marine shipping cuts, S&P said – with Maersk, CMA-CGM and ONE among container lines that have discussed reducing Asia-Europe capacity. Delays to surface shipping may cause pockets of air freight demand as suppliers re-route goods to avoid delay penalties. “One of our customers is moving a shipment to air freight because they do need goods before the intended arrival date,” said Ben Bradley, a rail operator at Davies Turner in Britain.He was referring to the cancellation of a Feb. 15 rail shipment to London from Wuhan, the city at the center of the outbreak. Once Chinese production recovers, dedicated cargo carriers like United Parcel Service Inc (UPS.N), FedEx Corp (FDX.N) and DHL stand to benefit most, said Cowen analyst Helane Becker.

A worker at a funeral home in Wuhan has reportedly made the disturbing claims – as Chinese authorities have insisted the official death toll remains at just under 500. Chinese crematoriums are working “24/7” as they burn bodies of people killed by the coronavirus in Wuhan, it has been claimed. Workers are reportedly working flat out and without break as they are constantly sent the bodies of victims – it is claimed they have been burning 100 bodies every day since January 28. One insider, who is said to work at a funeral home in Wuhan, has reportedly revealed the long working hours to deal with the surge of coronavirus deaths.Crematorium workers are reportedly working in makeshift protective suits and masks as they handle the bodies. It comes after Chinese-state media issued a decree banning funerals and demanding near instant cremation for victims. Wuhan is epicentre of the outbreak, being the first city in China to be placed under full quarantine. Disturbing accounts and reports have been emerging from the city, leading to speculation that the death toll is being downplayed by the Communist Party. Fears thick ‘death’ smog over Wuhan confirms China is burning coronavirus bodies. The worker said staff are exhausted and are working without proper equipment. Identified only as Mr Yun, he said: “90 percent of our employees are working 24/7 … we couldn’t go back home.” Chillingly, he claimed: “All Wuhan cremation chambers are working 24 hours. He alleged “every day, we need at least 100 body bags” – which is much higher than the official death toll which is only now nearing 500. And the New York Times reports the residents in Wuhan now do not believe the Chinese government’s official death toll. It is claimed people with the symptoms are being turned away by overstretched hospitals. The health care system is reported to be completely overwhelmed, with doctors also having a shortage of testing kits. Chinese authorities are also now threatening to arrest people who spread “unofficial” information about the coronavirus. He said: “We can’t stop because we can’t leave the bodies outside for a long time. “For us who transfer the bodies, we don’t eat or drink for a long time in order to preserve the protective suit, because we need to take off the protective suit whenever we eat, drink, or go to the bathroom. “The protective suit can’t be worn again after being used. And another worker is reported to have said: “All male staff at our funeral home are picking up and moving bodies now, and female staff are answering the phones, disinfecting the funeral home, and so on.“We work 24 hours. We are very tired.” He claimed they do not have the proper equipment to disinfect the facility. They are having to wearing two layers of disposable gloves as they don’t have rubber gloves, and are having to wear swim goggles. He said: “We are on the verge of collapsing. We really need help.”