As the title suggests, in this post we’re focusing on how manufacturing capacity has rebounded since the start of the pandemic, with a focus on China.
This is the third in a series of posts outlining how we are seeing the supply chain rebound. Included in the series are:
Covid-19: Updates on manufacturing capacity (this post)
Covid-19: Logistics status – upcoming
Covid-19: Demand trends – upcoming
It’s worth pointing out that the timing of the start of the pandemic in Wuhan coincided with the Chinese New Year (a time of year when most factories shut down to let workers travel home to be with their families). Usually this shut down runs from late January until early February. With the lockdown, the delay in returning to business extended into late February.
A report by Deloitte states that by the end of February, only 70% of large enterprises and 43% of SMBs had restarted operations.
Since then there have been multiple anecdotal reports stating capacity is ramping back up to 100%, if not already there. We have heard this both through private conversations and also public discourse…
What I’m seeing in manufacturing & global logistics:
1) Our Chinese partner factories seem to be fully operational again.
2) Air freight from China to USA that was $2,000 a month ago is now nearly $9,000 due to less planes in the air.
Logistics is now the bottleneck.
— Marshall Haas (@marshal) March 30, 2020
Let’s see if there is any quantitative data to back up the anecdotal evidence.
China gets 59% of its power from coal, with the industrial sector using 95% of the country’s coal capacity in 2017 so if we can track coal consumption we can probably get a pretty good idea of industrial capacity.
Fortunately Carbon Brief put together data from WIND tracking coal consumption versus previous years using the CIDC Daily Production Activity Tracker. You can see how 2020 coal consumption compares to previous years in Figure 1.
Figure 1. Compiled by Carbon Brief from Wind Information. It shows daily coal consumption around the data of Chinese New Year for various years.
Overall this shows that by March 28th capacity seems to be back to normal after a 30 day slump. This backs up the anecdotal evidence.
This data is focused on China since this is where we see most clients having their manufacturing centers. However, other countries who have not had the same time to recover from the pandemic still have a reduced capacity, even in SE Asia. We had one client tell us about how inventory in Thailand was being locked down for at least two weeks at the start of April.
With China on a path to industrial recovery, getting inventory produced shouldn’t be a problem for much longer. In the next post in this series we will discuss the constraints surrounding logistics and the ability to get inventory from your manufacturer.
If you need help financing inventory purchases, touch base with our team here (just add your email to the bottom of the page). A team member will reach out to set up a discussion to see how best we can help.