• Back-to-back typhoons disrupt supply chains in East Asia

    07 September 2020

    Supply chains in East Asia are still facing impacts ranging from congested ports to closed production plants after two powerful typhoons developed in the Western Pacific and caused widespread disruption in the region over the past seven days. The brunt of the impact has been experienced on Japan’s Kyushu Island and in the area between Busan and Ulsan in southeastern South Korea. While manufacturing operations are likely to resume in the coming 24-36 hours, exacerbated congestion issues at ports may continue to slow supply chains possibly until mid-September 2020.

    Typhoon Haishen

    Earlier today on September 7, Typhoon Haishen made landfall southeast of Gangneung in South Korea as the tenth typhoon of the Western Pacific’s storm season. The storm had sustained wind speeds of 140 km/h (85 mph) when it made contact with South Korea’s coastline as an equivalent to a category 2 hurricane on the five-tier Saffir-Simpson scale. Authorities said the typhoon temporarily disrupted power supply to some 17,000 customers nationwide. The storm is expected to exit the country in the early afternoon of September 7 and continue traveling north until it makes landfall in North Korea on early September 8 after which it will gradually dissipate.

    Before making impact in South Korea, the storm made landfall on Japan’s Ryukyu Islands off the country’s southwestern coastline on September 6, bringing strong winds and heavy rain to the region and cutting power to some 440,000 households and businesses on Kyushu Island, the third largest of Japan’s five main islands.

                                                                                                      Figure A: Typhoon landfall areas in South Korea; Source: Resilience360

    Typhoon Maysak

    Prior to this, Typhoon Maysak moved through the Western Pacific before making landfall near South Korea’s port city of Busan on September 3, with sustained winds at 155 km/h (100 mph), also equivalent to a category 2 hurricane. It crossed the Sea of Japan thereafter before hitting North Korea and China’s Jilin province. The storm caused flight cancellations and minor power outages on Japan’s Okinawa Island, while more than 120,000 customers were temporarily without power in South Korea.

    Storms exacerbate port congestion levels

    Despite a large number of flight cancellations at South Korean and Japanese airports, impacts on logistics movements in the region are likely to primarily translate into delays at key container ports as well as transport difficulties for road freight due to damage, flooding and landslides. Due to the short interval in between the typhoons, ports across East Asia have been unable to reduce backlogs at container terminals and additional closures forced by Typhoon Haishen will further add to the congestion issues.

    In particular ports in South Korea and China have recently faced longer average waiting times for inbound vessels due to port disruptions caused by the typhoons since late August. Intelligence received by Resilience360 indicated that both the Port of Busan, South Korea’s largest port, and the Port of Gwangyang have experienced 5 days of waiting times for incoming vessels on September 5 and 6, up from about 3 days before the passing of Typhoon Maysak at the beginning of the month. The ports were not expected to reopen before September 8, following extensive damage assessments, and average waiting times could have increased by then.

    In China, key container gateways at the Port of Shanghai and Ningbo have also been facing congestion issues. Shipping lines reported waiting times of 36-48 hours at terminals in Shanghai and 24-48 hours in Ningbo, ahead of Typhoon Haishen’s passing last weekend. Both ports were expected to be closed for at least 24 hours on September 6 and 7, likely worsening congestion levels as well.

    Early reports on Typhoon Haishen’s impact in South Korea indicated that road transportation may also experience some disruption due to flooding and landslides. One landslide reportedly cut transportation links near a tunnel on a road connecting Busan with Changwon.

              Figure B: Status and congestion levels at ports affected by Typhoon Haishen; Source: Resilience360

    Auto and technology plants disrupted

    While industrial facilities remained largely intact following the passing of Typhoon Maysak, temporary production halts in the automotive and technology sectors across Japan and South Korea have been reported due to Typhoon Haishen’s impact. Most plants announced a 1-day operational disruption either due to precautionary measures or for damage assessments.

    In Japan, car makers Toyota, Honda, Mazda and Nissan halted manufacturing plants on Kyushu Island, which accounts for about 20 percent of Japan’s car production. The stoppages were in effect for September 6 and/or September 7 Production stoppages have also been announced by car parts makers Yachiyo Industry Co. Ltd. and Musashi Seimitsu Kogyo Co. Ltd. However, no major damages have so far been reported at the plants.

    Similarly, technology equipment makers Canon and Mitsubishi Electric halted production at some plants on September 7. While Canon suspended operations at seven factories in Oita, Nagasaki and Miyazaki prefectures, Mitsubishi Electric halted production lines at its semiconductor factories in Fukuoka, Nagasaki and Kumamoto prefectures.

              Figure C: Suppliers located in the Busan-Ulsan area per industry sector; Source: Resilience360

    In South Korea, Typhoon Haishen caused power outages at the Hyundai Motors assembly plant in Ulsan. Repair works were being conducted, but the company expected it would take some time before the factory could resume normal operations. Similar power outages were also reported at a factory of Hyundai Mobis Co., South Korea’s biggest auto parts maker. In total, 30,000 households and businesses lost power in Ulsan city, with additional supplier factories likely experiencing some level of disruption as well.

    The greater Busan area is home to nearly half of South Korea’s automotive production, while Ulsan is an important manufacturing base for the chemicals industry. According to Resilience360 data, about half of all suppliers in the Busan-Ulsan cluster are made up by the automotive industry (52.36 percent), followed by chemicals (14.59 percent) and engineering suppliers (14.59 percent). Since petrochemical plants are often located within short distances of the coastline for greater access to cooling water and shipping networks, these are particularly vulnerable to secondary impacts from storms such as flooding that may linger on longer than the initial impact from winds.

    Over the coming days, while most of the affected manufacturing plants may come back online, logistics delays are likely to continue for longer at key ports in South Korea and China where it may take up to two weeks to return to normal operations in case the weather remains stable. Customers with an interest in these ports should explore the possibility of unloading cargo at less congested ports and use alternative modes for the final transportation leg.

    In light of quickly changing weather forecasts, supply chain managers relying on suppliers or logistics operations in western Japan and southeastern South Korea are advised to keep abreast of the latest developments and to ensure that they understand the risks to their production and transportation networks in the area, for instance, by assessing the preparedness of key suppliers and carriers.

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