With the coronavirus outbreak in China affecting the import and export trade, Australian retailers and suppliers are concerned that consumers will soon start experiencing shortages of products ranging from iPhones to batteries. There are widespread factory shutdowns in China as millions of people remain in lockdown and subject to strict travel restrictions and quarantine measures.
While some retailers say it is too soon to see a noticeable impact on stock, with many shipyard and factory workers taking time off for lunar new year anyway, they are preparing for shortages in coming weeks.
China is Australia’s largest trading partner, with major exports including clothing, toys and electronics. Items like blinds and plantation shutters are also in short supply at some companies, with consumers waiting an extra four weeks on orders.
Qantas on Thursday announced a major reduction in services, cutting flights to Asia by 16% for at least three months, with flights to Shanghai suspended and those to Hong Kong and Singapore reduced.
Its low-cost brand, Jetstar, will likewise reduce its Asia flights by 14% until the end of May, impacting routes to Japan, Thailand and mainland China.
Vicinity Centres, landlord for shopping centres throughout the country including DFO Brisbane, the Strand Arcade in Sydney and Chadstone in Melbourne, has downgraded its earning forecast.
CEO Grant Kelley said: “At Vicinity, we have seen a material decline in foot traffic at some of our key centres since late January 2020, particularly where there is a high proportion of international visitors, which in turn is impacting sales. As a result, we are forecasting modest reductions in percentage rent, ancillary income and hotel bookings.”
A spokeswoman for supermarket giant Coles said stores were working with suppliers and transport partners to minimise the impact on product availability. But logistics remain challenging, especially through some major ports in Shanghai and Tianjin.
“Like most retailers, we have been impacted by the extension of Chinese New Year, which saw factories closed for longer than planned and delays in production due to staff requiring government permits to return to work,” the spokeswoman said.
“Products such as antibacterial hand washes and hand sanitiser products are already low in stock and there are shortages forecast for non-food items like stationery, clothing, and electrical goods.”
Coles had also experienced delays in refrigeration equipment being shipped out of China for store renewals. Meat that Coles would usually sell to the Chinese market has been diverted to the other Asian countries that they export to, of which there are around 40.
A Woolworths spokesman said there had not been any disruptions to supply or procurement at this stage. A spokeswoman for clothing and stationery brand Cotton On Group, Australia’s largest global retailer, refused to comment.
Anaconda, camping etc gear store. Staff told me it was because of the China lockdown.— Jane Appleseed (@gambabiondo) February 19, 2020
Apple said there would be a shortage of products, including iPhones, due to factory closures in China.
“Worldwide iPhone supply will be temporarily constrained,” a statement from the company said. “While our iPhone manufacturing partner sites are located outside the Hubei province – and while all of these facilities have reopened – they are ramping up more slowly than we had anticipated.
“The health and wellbeing of every person who helps make these products possible is our paramount priority, and we are working in close consultation with our suppliers and public health experts as this continues. These iPhone supply shortages will temporarily affect revenues worldwide.”
Australian Retail Association head of public affairs Yale Stephens said while he had not received any reports of supply chain disruptions, the industry was suffering from reduced patronage.
“We are only a month in so whether [supplies chains] change depends how long this crisis goes for and how badly it affects Chinese companies selling to Australian retailers,” he said. “But the hospitality trade is being particularly severely hit, particularly Chinese restaurants, so we are just encouraging people to support those businesses.
“There are livelihoods at stake here: those of the hardworking mums and dads who’ve put everything on the line to open a business, and those of the staff they employ whose jobs are in real danger of being lost.
“If we lose iconic local retailers, or tourist operators offering unique experiences, or loved restaurants and cafes that are forced to close, we won’t get them back – and that compounds the potential loss here.”
Mark Boulter, executive officer of Safe Sustainable Seafood Australia, said he was not aware of any seafood import shortages to date, but said if the coronavirus event continued for months it would impact on imports from China.
“We are currently organising a round of member meetings and this question will be on the agenda,” he said. “What we are currently highly aware of is the impact this situation is having on the domestic seafood sector, both those who are export focused mostly to China and the sectors of the domestic trade that are focused on Asian communities’ desirable species, such as live mud crabs and rock lobsters, and raw prawns.”
He said a combination of a low-key summer due to the bushfires and subdued Lunar New Year festivities due to the virus had depressed the demand for seafood over the past few months.
“We have not yet been able to determine the extent of this with our members,” he said.
Gerry Harvey, chief executive of the electrical and household goods retail chain Harvey Norman, refused to comment on whether electronics supplies had been affected.
Sony Australia said it was difficult to assess the impact that the health crisis would have on its business.
“We will continue to gather information, and assess the situation closely, taking action to minimise impact wherever possible,” a spokesperson said.
Stationery and electronics goods supplier Officeworks would not comment. A Kmart group spokeswoman said so far, supply chain disruptions had been minimal.
“Our absolute priority remains ensuring our team are safe and as a precaution, we have suspended all business travel in and out of China and Hong Kong until further notice,” she said.
Guardian Australia has also contacted JB Hi-Fi for comment.
Just had a quote today for plantation shutters by Accent who told me of delays b/c corona in China— 🇦🇺🔥💧dotheday (@Dotheday) February 19, 2020
While products such as hand sanitiser and face masks are in short supply, this is due to significant consumer demand rather than any interruption to supply chains. However, masks are not essential to protect against the virus, which is so far well contained in Australia.
On Tuesday evening the president of the Australian Medical Association, Dr Tony Bartone, met with health officials. He said that said apart from sporadic mask shortages there had been no reports of supplies of pharmaceuticals and devices to hospitals being disrupted.
Pharmaceutical companies GSK, Janssen, and Pfizer and Johnson & Johnson Medical said there had been no supply impacts as a result of the virus and subsequent business closures in China. A GSK spokeswoman said it was an evolving situation.
“We have supply chain planning in place for our products, which includes measures to secure reliable supply, such as holding strategic stock and dual sourcing,” she said. “At this time, we have adequate stock in place, however this is an evolving situation which we will keep under review.”
In a statement, drug company Astra Zeneca said it was working closely with global health authorities. “We have in place contingency plans to support our operations,” the statement said. “In order to protect employees, we have taken a decision at this time to restrict all non-business critical travel to and from China, including Hong Kong.”
Medical device and pharmaceutical company Bayer said it was in regular contact with suppliers in China.
Yep. Empty/low sock on shelves in Bunnings Aundel Qld— Brad (@Brad2428) February 19, 2020
“Currently we do not have an impact on production and market supply,” a spokeswoman said.
The world’s biggest miner, BHP, warned demand for resources could be affected. A BHP investor report issued on Tuesday said the disease outbreak, trade policy and geopolitics were key uncertainties for the sector.
“If the viral outbreak is not demonstrably well contained within the March quarter, we expect to revise our expectations for economic and commodity demand growth downwards,” the report said.
“This caveat applies, to varying degrees, across our portfolio and we will continue to monitor. In this regard, we highlight the distinction between a permanent loss of demand in oil due to foregone transport services; and temporary demand losses with the opportunity to be reclaimed, as in steel and copper end-use. We anticipate a net demand loss due to the 2019 coronavirus disease outbreak in the near term.”
With battery cell shortages also predicted, Guardian Australia has contacted Battery Specialties Australia, which supplies household, industrial, automotive and solar batteries, and Solar Juice, a wholesaler of solar panels and components.
Solar Juice co-founder and head of supply, Rami Fedda, said in a message on LinkedIn that he was working with two large manufacturers unable book a vessel until later in February or early March. Stock that was ready for shipment prior to Chinese New Year won’t get to the Solar Juice warehouse until March, while the company would be lucky to receive any new stock before April, he said.
The next gap in the market could be raw material, where even non-Chinese manufacturers have been warning of delays. “My best guess if there is an impact it will happen around May for non-Chinese panels.”