On February 25th, the World Health Organization announced that every country must prepare for the possibility of a Coronavirus pandemic. In response, stock markets plummeted between 3 and 7 percent. The disease is first and foremost a public health concern, but it also impacts our transportation industry.
The transportation industry depends on people. Without workers in factories, drivers in trucks, and pilots in planes, our way of life could quickly change. In the United States, we’re seeing the effects of the virus on our port deliveries, and it’s causing ripple effects throughout our domestic supply chain. If you’re a driver or you work for a carrier company, here are a few things to keep in mind as we face the possibility of a pandemic.
Public safety is paramount in the face of the Coronavirus
China’s reaction to the rapidly spreading Coronavirus is both drastic and necessary. They have shuttered factories, imposed mandatory quarantines, and closed public spaces almost entirely. They’ve also initiated city-wide decontamination measures, and they’re even cleaning their money.
With between a one and two percent mortality rate, and higher rates among the elderly, very young, and immunocompromised, the Coronavirus is very similar to the flu. However, this particular virus strain is new to the global health community. There are many unknowns about its spread and potential treatments. As such, containment and prevention of the spread is a mounting global priority. As of this week, all eyes are on our global leadership in the hopes that we can avoid a pandemic event.
Transportation and manufacturing in China are at a near stand-still
Many US industries, including pharmaceuticals, manufacturing, food, textiles and more depend wholly or in part on just-in-time supply chain networks coming from China. For example, 97% of all antibiotics used in the United States originate in China, and we count on a continual supply to keep our shelves stocked. Meanwhile, Mexican auto manufacturers have slowed production due to a decline in available parts.
Our supply chain networks rely on people and transportation to keep parts and goods moving. Currently, China’s manufacturing industry is working at about 50% capacity. Additionally, their transportation network is at a stand-still in the most affected areas. As a result, US-based ports have experienced a sharp decline in imports. That means our US-based trucks are sitting idle, waiting on the next port shipments to come through, whenever that might be.
What the Coronavirus means for US-based carriers
Carrier companies are going to continue to see a decline in port shipments until China can clear their mandatory quarantines. West coast carriers, in particular, may see sharp losses over the next few weeks or months, depending on how long the spread lasts. The lack of Chinese imports has a compounding effect, as US-based manufacturers and distributors go without shipments. These shortages could cause issues across the supply chain and impact carriers across every state.
The good news is that, despite global concerns, more factories are opening back up in China. Maersk CEO Soren Skou estimates that China’s manufacturing industry will be running at about 90% of capacity by the first week of March. However, that estimate depends heavily upon the avoidance of new, large outbreaks, both in China and abroad.
No one likes uncertainty, especially when your business depends on the steady flow of goods that may or may not come. However, for now, the US transportation industry just needs to sit tight. If the virus continues to spread worldwide, additional import/export markets could suffer, which would further compound the issue. However, only time will tell whether that will happen.
What happens when it’s all over?
As the adage goes, this too shall pass. Our world has overcome large pandemic events with fewer resources at our disposal. Our modern virologists and epidemiologists are working hard to stop the spread, hopefully before it reaches pandemic levels. Once the virus is under control, we’re going to see a sharp demand for trucks to get the supply chain moving again.
So our advice is to sit tight, don’t panic, and keep an eye on the WHO and CDC. Barring a significant worldwide spread, we should see a late-spring revival of our global supply chain industry. In the meantime, don’t forget to cover your cough, call out from work when you’re sick, and remember to wash your hands.