The impact of the coronavirus on South Carolina manufacturers has been slight so far, but concerns are growing that supply chains could be disrupted if the outbreak continues to persist and spread.
“We have experienced some issues already. Limited, but some,” Daniel Schlegel, vice president of operations for Summerville-based KION North America, told the World Affairs Council of Charleston on Wednesday.
Schlegel said a supplier in Italy shut down its factory this week, leaving KION scrambling to find a new source for a key component in the forklifts the company produces. All of KION’s sites are assessing their inventories daily and in some cases switching from sea to air shipments if supplies dwindle.
Some Carolinas poultry and pork producers that ship products through the Port of Charleston are reporting backups because Chinese ports have reached their capacity for refrigerated cargo and there’s no one there to move containers to free up more space.
Shipping lines are encouraging customers to divert cargo to alternate ports and some are imposing surcharges for refrigerated cargo, said Jim Newsome, president and CEO of the State Ports Authority.
Ship-to-shore cranes load cargo at the Port of Charleston’s Wando Welch Terminal in Mount Pleasant. Containerized cargo volumes are expected to drop in Charleston and elsewhere due to the coronavirus. State Ports Authority/Provided
China accounts for about one-fourth of global manufacturing, and it is South Carolina’s largest trading partner, sending roughly $6.5 billion worth of goods to the Palmetto State. Since Jan. 5, shipping lines originating in Asia have canceled 13 container ship visits to Charleston.
Still, Charleston’s port could be in a better position to weather the coronavirus — dubbed COVID-19 — than its top competitor to the south. China accounted for 25 percent of imports to Charleston over the past year, compared with 41 percent at the Port of Savannah.
Newsome hasn’t specifically said how much lower cargo volumes could fall in Charleston as the virus persists, but he does expect a dip. The Georgia Ports Authority is projecting up to a 40 percent drop in imports over the next two months.
“We do see quite an impact,” Griff Lynch, the authority’s executive director, told the Atlanta Journal-Constitution. “We’ve been shut down by hurricanes for six days or a week. But this is really unprecedented.”
Volvo Cars, which is owned by China’s Geely Holding Group and gets parts from China for the S60 sedans it builds in Berkeley County, hasn’t experienced a production slowdown but “will continue to monitor the situation daily,” spokeswoman Stephanie Mangini said.
The same is true for BMW’s manufacturing campus in the Upstate.
“The BMW Group and Plant Spartanburg are monitoring the coronavirus situation daily,” said spokesman Steve Wilson. “For BMW Plant Spartanburg, our parts situation is stable and there is currently no impact to our production.”
Boeing Co., which builds the 787 Dreamliner commercial plane in North Charleston, issued a warning this month that the coronavirus could hurt first-quarter deliveries. Asia, particularly China, is one of the planemaker’s biggest markets.
Cummins, which builds turbochargers for heavy trucks at its North Charleston site and has factories in China, said its already-sluggish revenues will take a hit from the outbreak. The company is already in the midst of layoffs and cost-cutting brought on by weak sales in 2019.
“Right now, we don’t know what the exposure is going to be,” CEO Tom Linebarger told analysts during a conference call this month. “It is expected that our industry … will experience supply chain disruptions and loss of revenues in the first quarter due to the coronavirus outbreak.”
Lars Jensen, an analyst with Copenhagen’s SeaIntelligence Consulting, said the coronavirus has the potential to affect container shipping as much as the financial crisis a decade ago, with the illness currently costing liners up to $350 million a week in lost revenue.
While some in China have returned to work, government spokesman Zhang Kejian said it could take two months or more for manufacturing to return to full capacity. That’s taking place as other countries, including the U.S. and European nations, are reporting new cases and health officials warn a pandemic is possible.
Gus Faucher, chief economist for PNC Bank, said “U.S. economic fundamentals are still solid,” but an outbreak in the U.S. “would lead to reduced output because of workers unable to report to their jobs.”
Faucher downgraded economic growth predictions to 1.2 percent in the U.S. for the first half of this year, down from a 1.75 percent estimate before the coronavirus outbreak.
Aside from financial and supply chain damage, fear of the virus is starting to be an issue in some workplaces. Schlegel of KION said the Summerville manufacturer canceled a trade show appearance next month in Orlando because workers were worried about becoming infected.
The company also sent a note to its employees Wednesday with information about how to protect themselves in the event of a pandemic. Schlegel said there isn’t a whole lot at this point to say.
“Wash your hands, avoid gatherings,” he said. “I think it’s very important not to make people nervous about a situation like this.”
Another group canceled a convention next month in Summerville that was to feature speakers from foreign countries.
“It is a month before the meeting but, as we write this, the coronavirus has spread to 41 countries, including the U.S., and it continues to spread,” Shirley McGreal, founder of the International Primate Protection League, told attendees in an email.
She added, “we are just not willing to put anyone’s health, or life, in jeopardy.”
