Coronavirus: Will it Impact the Supply Chain?

A report from global shipping company DHL cites that severe disruptions to inbound and outbound air cargo shipments, trucking and rail cargo services have already occurred near the Wuhan region, along with heavy port congestion for vessels. Furthermore, according to the report, should lockdowns continue beyond the Lunar New Year holidays (Jan. 24-Feb. 2), the potential exists for major impact on supply chain operations and industrial production throughout China.

The authors of the report say that as supply chain managers assess the potential impacts that the coronavirus outbreak will have on supply chains, they will need to ‘cope with the propagation of new or the extension of existing city lockdowns and the delayed restart of manufacturing activities in the affected areas and beyond.’

Just how big of an impact could this have on the steel industry? Let’s look at the volume of product being produced and transported to and from this region on an annual basis.

According to the World Steel in Figures 2019, published by The World Steel Association, four of the top-10 steel-producing nations are located in Asia (China, India, Japan, and South Korea), accounting for more than 1,211.6 million tonnes of crude steel production in 2018. These same four nations export roughly 145.8 million tonnes of steel annually, while importing roughly 38.3 million tonnes (Japan excluded in import data).

Now factor in the large volume of shipments that simply pass through Asian ports worldwide on their way to their final destination, and you begin to realize the impact that port shutdowns could have on the end products you consume.

While it is too early to assess the impact that coronavirus could have on the supply chain, other recent global health outbreaks like SARS (2002-2003) provide some figures to consider. According to the DHL report, China and Hong Kong suffered an estimated 1.1% and 2.6% drop in their respective GDP, with economic losses of $30-100 billion as a result of SARS.

Overall, global events such as this continue to bring to light the importance of a solid supply chain strategy. This includes being mindful of potential disruptions to your supply chain and to assess alternative strategies for souring material. Working with partners that have global supply chain connections, along with the ability to source metal from almost any producer on a global basis, process it, and turnaround a finished product in short order, ensuring you can get the product you need, when you need it.