As the COVID-19 / Coronavirus is growing worldwide and many countries are looking at creating stimulus as a temporary bridge through this difficult time, China is accumulating empty containers as they are getting ready to ramp up manufacturing. Airfreight rates are jumping at levels we have never seen in the 35 years of this business. According to the China news feeds the virus seem to mutate best at 47 degrees and mainland has 81,000 reported cases that are on the decline. President Xi has claimed victory over the virus. Totals coming out of China are 117K cases with 4,300 total deaths. The flu in 2019 caused 34K deaths as a comparison.
Covid-19 / Coronavirus & Chinese Manufacturing
Here is what we believe. We have reported China needs convertible currency (money) so manufacturing will pick up. China with 1.3 billion people seems to have only 81K cases? Italy is reporting 10,000 COVID-19 cases. Either China has the magic formula to minimize/control the virus or just maybe they are under reporting. Either way manufacturing will start to pick up as many other countries will report worsening conditions and the media will continue to make this the lead story for the next few weeks. Once manufacturing starts to increase, the steamship lines should reduce blank sailings, more cargo planes will come back into service and rates will stabilize. As of where will rates fall this year, we believe they will be similar to this year. If the steamship lines were not regulating supply, rates would be where they were about 15 years ago and rates were in the $1,000 range for movements. We will continue to keep our customer base informed as applicable.
Mechanical Power’s Industrial Component Inventory & Supply
Specific to Mechanical Power, 90% of our industrial component supply comes from 20 key manufacturing partners. All but 1 of them have been back and running at >80% of their capacity for weeks. Customer Account Managers have communicated any potential issues to their respective customers and at this time, there are no critical shortages or chronic issues. We have a short exception list and have been micro-managing these exception line items on a daily basis. Fortunately, Mechanical Power’s past and forgiving inventory policies have made this worldwide pandemic easier to manage than for most in our space. This is a part of our promise to simplify global sourcing for our valued customers. We will get through this together!
For further questions or inquiries, contact Mechanical Power today.
Your Friends at Mechanical Power
Brent has spent considerable time in global supply chain operations in both manufacturing and distribution environments with a strong background in global sourcing & procurement. He’s worked for companies renowned in operating systems, kaizen continuous improvement and strategic planning cadences.