Coronavirus Logistics Update 17 (COVID-19)
This is another short article on the effect the coronavirus has had on the logistics and supply chain sector. In general news the number of deaths has continued to fall in the UK. More services are beginning to reopen with restrictions. May be a bit later but face masks are going to be made compulsory for anybody using public transport in the UK from the 15th June. Both the UK and USA stock markets have continued to rally at at an incredible pace, despite all the warnings the economy is going to suffer. The Nasdaq has already hit an all time high this week, and it looks like the DOW and FTSE may well join them in the next few weeks. Despite all this optimism as mentioned last week there are still reports being published saying that there is going to be an economic downturn, which means the logistic sector is still facing serious challenges ahead.
Drewery is reporting in its analysis which it undertakes each week is showing now at the end of June only 7 sailings are due to be cancelled compared to 115 sailings scheduled. According to Drewery this will be the lowest number of cancellations since April. However they are also still saying that they see no clear peak summer season pick up this year and shipping lines are still going to continue cancelling sailings into the third quarter. Reuters have been reporting on how shipping lines are using the longer Africa Cape route now fuel prices have declined to avoid the Suez Canal and save money. They report that this is having a negative effect on buyers who need their goods as quickly as possible, they have been left to fight for space on vessels and containers being rolled over from one sailing to another. However they also report some shippers actively using the slower routes as mobile storage. The shippers are aiming for the cargo to arrive at its destination as the Covid threat declines and economies re-open up, avoiding the need for costly local warehousing. Additionally those buyers who pay the supplier when the goods arrive at their destination have been able to delay payment and help control their cash flow.
IATA has issued a press release which shows the effect of Coronavirus on airfreight trade. Overall global demand fell by almost 30% when measure in cargo tonnes kilometres and belly freight had dropped by three quarters in April. This clearly shows why airfreight rates have dramatically risen in the past two months as despite the cargo downturn, due to the demands from PPE shipments there was simply not enough capacity in the market, even with the extra freighters put into service. IATA has highlighted in their press release how this is causing supply chains to suffer delays and increased costs. It will be interesting to see how May is compared to April.
Regardless of all the issues in the world and transport due to the Covid-19 outbreak, possibly the world’s biggest logistic company Amazon is continuing to expand its airfreight division, taking on a further 12 767 freighter aircraft. This will means once in service they will have a fleet of over 80 aircraft. More and more people are using e-commence and this means Amazon just keeps getting bigger and making greater inroads into the logistic sector.