As more countries go into lockdown across the world, exporters are being hit hard by the impacts of coronavirus on their businesses, with logistics systems in turmoil and cashflow being stretched.
More than 440,000 people have been diagnosed with Covid-19, resulting in countries enforcing lockdowns in efforts to control the spread of the virus, which originated in China’s Hubei province at the end of last year.
Exporters in every corner of the globe are now facing major operational and financial headwinds as logistics networks across industries become chaotic.
A spokesperson from Capespan, a South African-based exporter and importer of fruit, tells GTR that the company is looking at adapting its supply chain and risk responses to ensure that its customers can access fruit, as it turns its focus to transporting South African citrus fruit that has just come into season to northern hemisphere customers.
South Africa will lockdown at midnight on March 26, however the country’s ports will remain open for the import and export of essential goods, and agricultural operations will continue.
As more countries in Europe, the now so-called epicentre of the pandemic, shut down their borders, issues around trade logistics, such as port delays and the backing up of containers, are making trade difficult, says Capespan.
Elsewhere, in Asia, seafood traders in Vietnam have seen up to 50% of their export contracts cancelled or delayed due to the outbreak, according to the country’s seafood exporters association.
The Hong Kong Trade Development Council (HKTDC) reveals in its latest Export Index that local exporters have become cynical about the city’s short-term export outlook across all industries.
More than 90% of the Hong Kong exporters surveyed say that Covid-19 has adversely affected their companies in areas such as logistics (80.4%), supply of labour (76.2%), relationships with overseas buyers or suppliers (60.5%) and supply of raw materials (56.1%).
Meanwhile, in the Middle East, travel restrictions have reduced the global demand for oil, and without a new production agreement in place between major oil producing states, there is an oversupply in the region. As a result, oil prices have fallen by more than 50% since the start of the Covid-19 crisis, says the International Monetary Fund (IMF).
Financial squeeze
Supply chain disruptions result in a knock-on effect of products not arriving, being late or potentially damaged, and as many businesses are looking to stretch cashflow, exporters need to take measures to ensure they have enough cash in case a buyer cannot pay.
Capespan says it has proactively restructured certain loan repayments as it recognises that the company might need to stretch its cashflow as uncertainty remains around whether the market will be able to pay on time.
A spokesperson for NP Aerospace, a UK-based defence manufacturer which exports to North America and Europe, tells GTR that given the escalating Covid-19 situation in the US, “there will be further challenges not only for exports but for imports as it could have an impact on the component supply chain”, adding that: “Shipments are a critical part of the day-to-day running of our business. Over the last few weeks we have seen sharp increases in freight costs – as much as five times in some cases – and lead time variations, particularly in our key markets of Canada, the US and Europe.”
While financial support for exporters and businesses battling the economic impacts of Covid-19 is being made available by banks and governments, co-ordinating governments’ Covid-19 actions when supply chains involve many companies and countries is a tricky task. NP Aerospace says that, like many of its suppliers and customers, it is reviewing the situation daily and reacting accordingly, while considering its support options available.
Included in recently announced measures, the World Bank and International Finance Corporation (IFC) last week approved an increased US$14bn Fast Track Facility (FTF) to assist countries and companies in their efforts to prevent, detect, and respond to Covid-19.
IFC will increase its Covid-19 related financing availability to US$8bn as part of the US$14bn package, up from an earlier US$6bn, to support private companies. The bulk of the IFC financing will go to banks to enable them to continue to offer trade financing, working capital support and medium-term financing to businesses struggling with supply chain disruptions.
“This package provides urgent support to businesses and their workers to reduce the financial and economic impact of the spread of Covid-19,” says David Malpass, president of the World Bank.
On March 20, HSBC announced new measures to help its UK business customers that trade overseas tackle supply chain disruption. Importers and exporters will have access to £3bn – the funds build upon the support package HSBC revealed for business customers earlier in the month – as well as pre-approved 60-day extensions on trade loans.
The European Bank for Reconstruction and Development has also revealed it will provide emergency liquidity, working capital and trade finance to help existing clients cope with the fallout from the outbreak of Covid-19, as part of an emergency €1bn support package.
Meanwhile, the Asian Development Bank announced a US$6.5bn initial package to address the immediate needs of its developing member countries as they respond to coronavirus. The support includes US$1.6bn for MSMEs and domestic and regional traders.