Estonian businesses with Chinese supply chains struggling due to COVID-19

Post and parcels from China.
Post and parcels from China. Source: Siim Lõvi/ERR

Estonian companies whose supply chains are linked to China are suffering both directly and indirectly from the effects of coronavirus, with access to spare parts being limited and increased costs.

The hottest item this week is a hand sanitizer. It is chased by schools and families alike to follow the Health Board's recommendation to continuously wash and disinfect hands. However, hospitals and outpatient clinics must not, under any circumstances, run out of disinfectant as otherwise no operation or blood sampling will be possible.

The disinfectant is manufactured by Chemi-Pharm, an Estonian company located near Tallinn. However, the bottle pumps used to obtain the device are manufactured in China. And there are production glitches, as demand for them around the world grows.

Kristo Timberg, CEO of Chemi-Pharm AS said: "The impact has come through the supply chains. The first thing we felt was when the Chinese factories were shut down, supplies stopped, and then we began to have difficulty with accessories - pumps and the like. Fortunately, we started to notice and see it early. At first, there were moments when we were worried, but now, by spring, we've solved this problem for ourselves and been able to secure supplies."

The necessities from China have partly arrived and partly on the way.

"At any given moment, there are now several containers on the way here, just as we have been looking for alternatives for suppliers in Europe. But the pressure is great - we are not the only manufacturer in Europe to chase those same supplies," Timberg said.

Also the raw materials from which the disinfectant is made are not always available, but they come mainly from Europe but also from Estonia, such as spirits.

The Estonian cheese producer E-Piim, for whom China is an important export partner, is also holding its breath. Exports have not yet fallen, nor have large stocks been created, but indirect effects are already noticeable.

Jaanus Murakas, Chairman of the Board of AS E-Piim said: "If we are talking about shipping a container of cheese to China or Japan for $3,000 per container, today it could be as high as $ 5,500 or $ 6,000 per container. So prices have doubled."

However, the increased competition in transport costs does not allow the final price of the product to be increased.

The situation in China also affects Omniva and retail customers. Parcel sales have fallen by a third in a year, and Omniva sees a direct cause for the spread of coronavirus.

Kristi Unt, operations manager at Omniva said: "It's a bunch of different things: it's that production was shut down in China, the merchants were not working, the workers were in quarantine; then the airlines have stopped flying to China - to our knowledge, only Aeroflot still flies to that point, and probably people are also ordering less because there is a perception that shipments will not arrive."


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Editor: Helen Wright

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