Coronavirus: Disrupting Construction Supply Chains

Coronavirus (COVID-19) is an acute respiratory disease that’s grown into a global epidemic. Spreading at an alarming rate, the World Health Organization (WHO) declared a Public Health Emergency of International Concern on January 30th, 2020. There have been over 100,000 reported cases of COVID-19 since the outbreak began in Wuhan, China back in December 2019.

As the virus nears global pandemic status, world leaders face tough decisions. But they’re not the only ones. Businesses and industries everywhere are feeling the effects of this global issue. Unfortunately, the construction industry is no exception. According to the Canadian Construction Association (CCA), Canadian construction firms should brace themselves for slowing economic growth. While it’s difficult to know exactly how long this downturn will last, the focus is on the short term for now.

What This Means For Canadian Construction

The biggest issue the construction industry faces is a disruption in supply chains. This is due to a lack of goods coming in from China. China is Canada’s second biggest trade partner; nearly $50 billion in goods is imported from China each year. Over $500 million worth is imported for each of the following construction sectors: iron and steel, plastics, glass and prefab buildings, electrical and electronics.

In Wuhan alone, there are 164 manufacturing facilities creating products used by the global construction industry. This number includes 13 construction material manufacturing plants. The epidemic has put the Chinese city into various states of lockdown since the end of January. Plant workers have been unable to go to work due to quarantines and travel restrictions. Facilities were even forced to shut down completely.

While China’s economy is suffering the most from the outbreak, Canadian construction firms should prepare for the ripple effects of COVID-19 sooner rather than later. “It’s not only that materials will be unavailable, it’s that materials will be unaffordable,” warns Cheri Hanes, a construction risk engineer with Axa XL. Many contractors have already reported major delays in receiving supplies from China. 

Breakdown of Supply Chains, Logistics & Contracts

Hanes urges constructors to conduct a supply chain audit to identify any possible shortages of material. Once done, a supply chain plan of action can be developed. The focus shouldn’t be solely on Wuhan, but on China and beyond, including any third parties affiliated with suppliers and partners. Transparency and open communication between all parties is integral to lessening the blow of these extraordinary circumstances.

The possibility of a breakdown of strategic partnerships and logistics will make it difficult to complete the contractual obligations of construction projects. Experts recommend keeping track of all efforts that are being made to find alternative solutions. This will come in handy in the case of a force majeure claim.

As COVID-19 begins to hit closer to home—there are currently over 60 confirmed cases in Canada—there is the looming risk of having to shut down construction sites completely. This happened to one redevelopment site in Burnaby after an employee showed symptoms related to coronavirus. His results came back negative just a few days later, but the project was put on hold during that time.

In Conclusion…

The coronavirus has proved just how vulnerable the Canadian construction industry really is. Reevaluating the ways in which we currently work is vital. Construction firms need to find ways to build more resilient supply chains so that they aren’t as affected by global trade disruptions. And while contractors can’t guarantee their employees won’t get sick, they can take precautionary action. An example of this is to install hand-washing and hand-sanitizing stations on-site to help minimize the spread.

While we don’t yet know to what extent the construction sector will be impacted by the coronavirus, we’ll definitely find out in the next few months. What’s clear at this point is that we rely heavily on international imports—perhaps too heavily.

What precautions has your company taken amidst the COVID-19 outbreak? Have your construction projects been negatively impacted by the epidemic so far? Let us know in the comments below!