COVID-19 – Supply Chain Update
As the virus continues to spread across the globe the affects are far reaching and the impact on everyday life huge
Many businesses felt significant affect from China’s extended shut down following CNY and the outbreak of COVID-19 in Wuhan. As China has seemingly stemmed the tide with reports the country is back to 80-90% of pre Chinese New Year capacity, we now see many other countries slowing down and closing borders as there own fight against COVID-19 unfortunately gathers pace…
So what does this mean for global supply chains – In the UK “key worker” status has been given to anyone involved in the supply chain and defined as, “Those who will keep the air, water, road and rail passenger and freight transport modes operating during the COVID-19 response, including those working on transport systems through which supply chains pass”
So, whilst there are huge challenges across all modes within the Industry all parties are working extremely hard in the face of adversity to keep cargo moving to support economies and ensure vital food & medical supplies are where they are most needed.
If we look at each sector a little more closely;
Air Freight has been hit hard given the majority of cargo is moved on passenger flights which of course have been massively restricted firstly in China and now across the globe.
In fact, IATA recently updated its previous forecast of a $113 Billion drop in passenger revenue to a drop closer to £252 Billion which is equal to a massive 44% decline against 2019..
The reduction in services has seen a huge increase in demand for space left, with market rates upwards of $7per kilo upto $12 per kilo dependant on cargo make up on Key Asian / European routes. The picture is clear when you look at the number of cancelled flights which as of today looked like this; United Airlines 74% of all flights / American Airlines 49% / Delta 40% / KLM 63% China Eastern 23% / Air India 68% / Kuwait Airways 48% / Etihad Airways 32% Thai Airways 22% and these are only the bigger airlines that stick out. On top of this some airlines are not showing cancellations as they have suspended the service all together so then not classed as cancellations they are missing entirely; Emirates is a good example of this. www.Flightaware.com
Air Lines in many instances have now abandoned contracted rates as a result and have looked to reintroduce passenger flights to carry cargo only to try and support demand where possible.
Emirates being the latest to join the likes of United, LATAM, Turkish, Cathay Pacific, Korean, Delta, IAG in using some of their passenger aircraft on cargo-only services..
Freighters are in huge demand as well with figures as high as $1 million being quoted for a flight on services ex China into the US when the usual market rate would be no more than half this.
Coupled with the pressures on price usual routings are proving to be a challenge as controls continue to change from country to country
Services have been disrupted in the UAE & the USA, Tunisa and of course most recently in India so routing cargo has been a challenge as goods would often transit more than one country, many of whom have had stricter controls than others meaning alternatives and often creative routes have had to be found.
Our Air Freight teams are working tirelessly to find solutions and are on hand to assist where needed with any Air Freight inquires
With China having closed its doors for 4 weeks or more in some parts cargo volumes all but vanished and on the back of it so did many deep-sea services. Carriers faced with little or no demand were forced to take huge chunks of capacity out of the market by idling vessels to soak up capacity.
With vessels out and schedules changed usual services / transits etc have been affected and vessels have been out of position. As a result of such low output from China, Europe has faced a lack of empty equipment for exports as well as limited vessel availability which has seen prices soar in recent weeks, some 200% higher than the same period in 2019
Then as China has gradually come back online in recent weeks parts of Europe have been closing down causing carriers to look again at another wave of blank sailings as demand in Europe slows as routes to market close, especially with the retail and hospitality sectors.
We have seen India take drastic measures this week as they look to control COVID-19 with 80% of the country’s population on complete lock down and as such moving cargo through any sea / air ports is pretty much impossible at this current time. This move being the biggest lock-down of people in history with some 750 million subject to travel or work restrictions
Most other countries have moved to limit the moment of people but have worked hard to ensure freight & cargo movements continue to flow
FIATA (The International Federation Of Freight Forwarders) have already urged governments to keep ports open to allow the freight & logistics sector to help tackle the COVID-19 crisis and this is very much the position today in the UK. This move highlighted by recent article
We continue to monitor daily but the UK ports and associated services involved in maintaining the movement of containers are seen as vital and as such most likely to remain operational with measures in place to follow government guidelines of social distancing and strict hygiene to reduce the risk of spreading infection and ensure services remain in place.
The impact on the industry from COVID-19 will of course be significant with analysts predicting a 17 million TEU decline in overall volumes handled by carriers, a number that may well grow as the pandemic continues to spread.
We again are working with our clients daily offering alternatives to traditional sea including Rail, Air and Sea / Air where appropriate so please liaise with your local Business Development or Account Manager to discuss alternatives where needed.
As many EU states have moved to close their boarders to avert the spread of COVID-19 we have seen on the back of this huge queues of trucks carrying cargo stuck as they look to cross
As reported in loadstar, at one point last week there was a 50km queue at the main crossing between Germany and Poland, while lines of vehicles longer than 10km were seen at the borders of Hungary, Czech Republic and Slovenia.
So with over 75% of freight movements in the EU being by road you can see the huge impact this is having especially when you look at urgent commodities such as food and medical equipment vital in the fight against COVID-19 being caught up in this.
In response to delays government ministers across Europe are pushing EU member states to introduce green lanes for freight & cargo to pass boarders with minimum delay. There are calls also for any restrictions on nighttime & weekend driving to be lifted to further reduce down time and delays
For our customers our European Team are working closely to fine alternative routings including services by Sea, Rail & Air or combinations of all to insure timely delivery where ever possible
From Turkey we have weekly direct Sea Freight consol services in operation, comparable in transit to many trailer services in normal conditions and in the current climate and excellent alternative offering reliability and speed
We thank again all or of customers, partners & suppliers for their continued support during challenging times