Export challenge: China’s botanical firms in supply chain battle as global orders rebound for immunity ingredients
Shaanxi Plant Extract Association, which has over 100 member companies, said that although China had come to a market standstill due to the coronavirus outbreak, business started to pick up in early March.
According to Yinjun Hou, the chairman of the commerce department at the association, about 80% of its member companies have resumed work and the spread of the coronavirus in the US and Europe has increased the orders that it has received for its immune-boosting plant extracts.
He said that most of the orders came from the US and the number of orders have doubled, especially for fungi and plant polysaccharides that were linked to immune boosting benefits.
“The US and European companies are now trying to stock up their goods in case the epidemic worsens. As such, they have sent more orders to China for ingredient purchase,” he said.
However, the problem was that “a rebound in orders does not necessarily mean that export is smooth.”
He said that the reasons were twofold. One is due to a slowdown in China’s supply chain service and second is because the logistic channels between China and the other countries have decreased, in turn affecting exports.
He has not yet found the best solution to resolve the problem and the crux now is to “grab hold of time” to try to export as many goods as possible.
“Our biggest worry now is that the goods cannot be exported. It is going to be a big issue if the products are stuck at the ports.”
Indeed, China’s exports have plummeted by 17.2% in January and February this year as a result of the epidemic, according to the China customs data. Imports into China, on the other hand, has dropped 4%.
“Coronavirus caused a shut-down of the majority of flight schedules into and out of China, drastically reducing belly capacity available to lift cargo out of Asia.
“In real terms, Asia-Pacific belly freight capacity is down 85% year-on-year as of February 25, forcing cargo onto the freighter fleet which has expanded by only 4% year-on-year,” said a report from the South China Morning Post which quoted Peter Stallion of airfreight derivatives broker Freight Investor Services.
Nonetheless, another China industry expert told us that the Chinese government has been trying to encourage exports.
"The situation has improved a lot, the government still supports and encourages exports,” director of the China Chamber of Commerce for Import and Export of Medicines and Health Products (CCCMPHIE) Zhang Zhong Peng said.
Still confidence in China-made goods?
Asked the impact of the virus on market confidence in China produced products, Hou said that some companies had indeed hesitated to buy China-made ingredient.
“In early February, we received news that there are some overseas companies who want to change their suppliers to those from the South East Asia or India.
However, there was not much real impact as the virus had spread to more countries and companies could not react in time.
“However, before the companies could react and change their suppliers, the epidemic had spread in many different countries by the end of February.
“And so, the possibility of changing suppliers is not as high.”
China itself is also seeing a shortage in resources and firms in the plant extract industry are in fact competing with one another for resources, according to Hou.
“There is a shortage of raw materials such as food additives, and traditional Chinese medicines in China, because companies have just resumed their operation.
“Many of the stocks from last year have been used up and there is a competition for these raw materials,” he said, adding that cash flow was also another big issue for small-medium enterprises.
Nonetheless, he believes that the situation will improve as the industry resumes operation on a wider scale.