Coronavirus Logistics Update 9 (COVID-19)
Another update on the effects of the Coronavirus on the logistics and supply chain industry. In related issues Boris Johnson, the UK Prime Minister is still in hospital but appears to be improving. The UK is still experiencing an increase in reported cases and deaths so it is most likely the lock down will continue. There was talk of it being lifted in some form next week, this will not happen and it likely to continue on until at least the end of April.
The World Trade Organisation sees a very negative impact of the virus on global trade. Their economists are forecasting that over the next year trade may fall by around 13% in best case scenario and in the worst where it gets out of control it may drop by almost a third. While 13% does not seem too terrible a drop, in global terms that is going to be ten’s of thousand containers not shipped. The WTO Director has issued a video on youtube to address this here. Consumer demand is going to drop off over the coming months as mass unemployment begins to have an effect, as consumers cut back on everything in order to save money. With a lot of the Western World facing a recession later in the year this is only going to get worse.
Shipping lines such as MSC are tackling this with increasing the number of blank sailings from Asia to Europe in April and May. They are also trying to find ways at smoothing out demands by offer additional services such again as with MSC offering to store containers at hub ports.
As mentioned in previous posts this reduction in sailings is going to have an impact on hauliers working out of ports such as Southampton and Felixstowe. It means fewer containers to be moved and unfortunately an oversupply of hauliers wanting to move them. The only two good thing for hauliers at the moment is the lack of traffic on the roads and large drop in fuel prices over the past couple of weeks. However this no doubt will leave some struggling and when the demand returns the risk is there are going to be too many containers and not enough hauliers.
Despite the current doom and gloom on the ocean freight sector, the airfreight is still experience strong demand and China-Europe rail sector is showing increasing demand. This is all down to the previous Chinese lock down which has created a gap in supply chains which need to be filled before the first seafreight containers arrive. Ii is expected by May for the airfreight demand to have passed its peak. Despite the overall slowdown in the world economy, the China-Europe rail sector may continue to grow as it offers much quicker routings than ocean freight and is considerably cheaper than airfreight. This has a benefit for many supply chains while it is around double the price of a container as it means buyers are able to react quicker to market demands and declines. Stock can be turned around much faster and ensure that the all important cash flow is not tied up. Companies which only ship pallets and part containers are now able to take advantage of the rail link as groupage services have been launched.
If you are interested in any of the these rail services then AJF can help. Feel free to drop us an email or you can still ring us.