18 Feb Impact of Corona Virus on World Logistics
Since the beginning of 2020, Corona Virus outbreak in China became the talking point worldwide. Nearly 900 people are said to be dead and over 14,000 were reportedly infected in China. What is more disturbing is, this is fast spreading to other nations too and roughly 25 countries are infected due to this. China is the largest manufacturing nation in the world and all the global players such as Apple, Hyundai, Samsung, Toyota to name a few source raw materials from China.
Also, several of them have their facilities too here. This is the reason why worldwide, people fear this will become a global outbreak. Yes, logistics has a key role to play here. Anyhow, this fear among the people could impact the functioning of Logistics industry worldwide. Here are some of those impacts Corona Virus could have on the World of Logistics.
Cut in Air Freight Capacity
China has been the go-to place for businesses across the globe when it comes to raw material procurement and still it ought to be the same. But post the outbreak, manufacturers from different parts are stepping back and thinking twice whether to go ahead or not. While several airlines have already stopped operating flights to China from different parts of the world, the exact number of halts are not yet known. But the numbers are expected to surge, and air freight movement might get disrupted more than what is currently happening.
Disruption in Exports & Imports
When the SARS Epidemic hit China a few years ago, export-import ratio took a backseat. Now, experts predict the disruption in exports and imports will be way beyond what it was during SARS. China accounted for nearly 11% of the global imports and 13% of global exports in 2018. It also serves as an import supplier of various raw materials and intermediate goods. Thus, the supply chains for various global industries are linked to China. In a situation wherein the outbreak continues for over two quarters, the impact on China’s industrial activity could be substantial – both due to a fall in labour availability and consumption demand.
China serves not only as one of the largest importers for many commodities, but also as a transit hub for various supply chains in South and East Asia. Research agencies believe if the outbreak continues to spread unabated, these supply chains could temporarily be decapitated, although major trading hubs and ports outside Hubei province are yet to be locked down. The agencies expects a severe impact on global trade volumes – which are already under pressure amid mounting uncertainties emanating from geo-political tensions, trade protectionism and Brexit.
Shortage of Resources
Car plants across China have been ordered to remain closed following the Lunar New Year holiday, preventing global automakers Volkswagen, Toyota, Daimler, General Motors, Renault, Honda and Hyundai from resuming operations in the world’s largest car market. The outbreak will force carmakers in China to slash production by about 15% in the first quarter. This is applicable to several other industries too. Therefore, shortage of resources worldwide might be in line if this outbreak is not controlled.
Alibaba is the e-commerce giant in the world that is connecting suppliers around the world in one frame. There were reports that Alibaba could suffer due to Corona Outbreak. In the recently ended quarter, Alibaba reported revenue growth of 38% and a surging profit of 58%. But the outlook for the coming quarter and the year seems gloomy. But despite all these, Alibaba has announced plans to support SMEs in China affected due to the outbreak with loans worth US$2.86 billion. Moreover, it is now facilitating medical aid to areas affected due to Corona Virus.
Disease outbreaks are not new in the world. We have seen some which affected a large population and some which went away with less impact. Now the further developments in this space will depend upon how the situation is handled worldwide. As several countries are now thinking twice from sourcing products from China, we have to wait and watch how this is going to impact global trade in the coming days.
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