Good morning. Here’s your Daily Situational Awareness for Tuesday, 11 January 2022. You can receive this daily briefing by signing up at https://forwardobserver.com/daily-sa
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TODAY’S BRIEFING:
- February supply chain disruptions
- Logistics cyber attack linked to Russia
- China closes borders to imports
- Hong Kong bans international flights
- Hazards Warning
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SITUATIONAL AWARENESS
FEBRUARY SUPPLY CHAIN DISRUPTIONS: A combination of surging Omicron cases with China’s Zero-Covid policy, the Chinese New Year holiday season, and slowed manufacturing for smog reduction ahead of the Beijing 2022 Olympics is forecasted to have an impact on the global supply chain in February. Some of these factors were predicted, however, the surge of Omicron cases and the continued high demand for products have not subsided in time for the supply chain to catch up. (Analyst Comment: Increased lead times for products are forecasted to extend throughout February into March. With demand still high, ports in the United States at Los Angeles and Long Beach are still at record levels and account for almost a quarter of all shipping capacity waiting at berth. Labor shortages to trucking are reported as the critical problem for providing relief at these ports; however, Omicron is contributing to staffing shortages in the near term. – D.F.)
TRUCKING CYBER ATTACK LINKED TO RUSSIA: During peak holiday shipping, a ransomware attack “brought down most everything” for Minnesota-based logistics firm Bay & Bay. The Conti ransomware group, based in St. Petersburg, Russia, exploited a Microsoft Exchange vulnerability to shut down Bay & Bay’s fleet of more than 400 refrigerated trucks. Microsoft issued an urgent update in November for the vulnerability, but the cyber gang gained access before some companies could update their systems. (AC: Most cyber attacks aren’t reported, indicating the number of recent attacks is likely higher than a single logistics carrier. The timing of this attack is noteworthy as the Russia-based network executed its seizure during a peak shipping gridlock. In June 2020, President Biden told Russia that cyber attacks against the food supply and logistics industry are “off-limits.” Extended targeting of refrigerated trailer operators could induce severe regional supply chain disruptions for food and medical products. – D.M.)
CHINA CLOSING BORDER FOR IMPORTS: China is closing or restricting passage through its border control checkpoints with Vietnam, Myanmar, and Laos. Truckers bringing local food products into China are being held up at border checkpoints while the food they are transporting rots. The new border restrictions are in response to Beijing’s zero-COVID policy which is having detrimental effects on daily life in China. Farmers and truckers are unable to transport their food products across the Chinese border and Chinese produce wholesalers are complaining they do not have enough food for the upcoming Chinese New Year. Many truckers are dumping their produce at the border rather than waiting days, or even weeks, to be cleared through the border checkpoints. (AC: The economic impact of China’s zero-COVID policy is stretching across international borders. Initial concerns about microchip manufacturers in Xi’an and possible shortages in consumer goods worldwide, including the U.S., have given way to concerns about domestic food supplies within China. Expect compounding effects from China’s COVID policy on supply chains and economies as the Beijing Winter Olympics draw nearer and Chinese leadership panics over rising COVID cases. – M.M.)
HONG KONG BANS INTERNATIONAL FLIGHTS: Last week Hong Kong reimposed COVID restrictions including a ban on international flights from seven countries. Hong Kong chief executive Carrie Lam announced a two-week ban on travelers from Australia, Canada, France, India, Pakistan, the Philippines, the U.K. and the U.S. Lam also imposed internal restrictions on in-door dining and a 6pm curfew for Hong Kong residents. Anticipated revenue losses are estimated to be around HK$6 billion to HK$8 billion (US $780 million – $1.04 billion) over the 14 day lockdown period. (AC: China is pursuing a zero-COVID policy and is imposing draconian lockdowns on any cities reporting new COVID cases. Anticipate further lockdowns and restrictions as China moves closer to the opening of the 2022 Beijing Olympics in February of this year. – M.M.)
HAZARDS/WX:
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