For the better part of two months, the question has been when China’s economy would return to functioning fully and be able to meet the world’s demand. Yet now, we’re seeing the question may be less about China’s ability to supply, and more about the drop in global demand. As countries restrict movement of people internally and order retail establishments closed, the need to supply those retail businesses is on the decline.
Flexport’s COVID-19 China Trade Recovery Index provides a preliminary look at the air and ocean shipments of its customers, originating in China and being sent to the rest of the world. It measures not the correlates of supply chain activity, but the ultimate result of that activity—shipped products. Based on data through Tuesday, March 17, the slow recovery we described last week continues.
The index measures shipments relative to the normal low point of the week after Chinese New Year (CNY). In the chart above, the shipment volume at that date (CNY+1) is normalized to equal 100 and shipments for 2018 and 2019 are offered for comparison. Shipments a week ago (index value 229 in week CNY+6) had risen 13% from the week before. This week, shipments grew by an additional 18% (index value 271 in week CNY+7). That means that shipments are now almost 3X the level right after CNY, as compared with 4.6X in 2018 and 2019.
The additional measured activity in week CNY+7 reflects a boost in airfreight and a decline in ocean shipping, despite the increase in airfreight costs due to elimination of many passenger flights. Airfreight is now being used to move urgently needed supplies, such as personal protective equipment for hospital workers, or to replace depleted inventories. The ocean shipping decline is likely linked to overstocked warehouses in countries that import, rather than lingering production issues in China.
Check back next week for the latest report on the China Trade Recovery Index. In the meantime, to learn more about capacity and carrier increases or decreases, check our weekly Freight Market Update.
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