Coronavirus Logistics Update 11 (COVID-19)

Our eleventh update on the current effects of the Coronavirus on the logistics and supply chain sector in the UK and worldwide. In general terms there are now over 139000 confirmed cases in the UK with the daily death toll dropping slightly. The UK is attempting to roll out a testing system for key workers and a new centralised website to manage the distribution of PPE equipment, however both are delayed in getting operational. While there is still a lock down in the UK, there are increased signs of activity with more traffic on the roads and more commercial premises such as B&Q reopening. Apart from Scotland there is still no published lock down exit plan. The government is still concerned by a second wave of infections and over whelming the NHS.

The Road Haulage Association(RHA) and the Chartered Institute of Logistics and Transport have sent a joint letter to the UK government raising the plight of haulage operators and the financial duress they are under. They write in the letter that their current market intelligence says that now almost 50% of the UK’s lorry fleet is parked up and operators are experiencing severe cash flow issues as their customers delay payments. Significantly the letter mentions the very low profit margins in this sector which is part of the overall issue of haulage. It is very difficult to build cash reserves if your daily revenue only just covers your operations.

In the letter they ask the government to consider 5 areas which if implemented would assist hauliers:

• Fuel Duty Rebates for operators who a working in critical supply chains to help reduce their operating costs
• Rate refunds or holidays for all sizes of haulage yards
• Allow weekly Vehicle Excise Duty refunds for trucks which have not worked in individual weeks
• Weekly furlough of workers which would better meet the ups and downs of the sector
• Cash Grants per vehicle being operated to cover the fixed costs while they are unable to work

Meanwhile in all of this decline the shipping line HMM (previously called Hyundai Merchant Marine), has launched the HMM Algeciras container vessel. This container vessel at nearly 400m long can carry almost 24000 20ft containers making it the worlds biggest ship in the Ultra Large Container Vessel category. Maersk originally had the title before MSC took it in 2019.  HMM currently still have plans to run it on their Asian – Europe service, being a “THE Alliance” member. However whether there is going to be the cargo available to fill this ship both now and post Coronavirus will be interesting to watch.

There are more warnings form the UK Warehousing Association that there is still increasing risk of lack of storage for containers and palletised goods. The UKWA have issued advice to importers to start looking for additional space before the goods arrive in the country. This is especially important for cargo that is imported to meet a seasonal demand and has now missed the selling period and needs to go into long term store. The limited space available means that there is a possibility that importers may incur significant storage at the port quay or in an ERTS warehouse while they try to locate warehouse which will accept the goods for long term store.

Any anticipated decline in airfreight demand out of China along with pricing has not yet happened. Rates from Shanghai to Europe have reached nearly 9USD per kilo, with some spot rates approaching a staggering 15USD per kilo. Shipments out of Hong Kong have not be as severely effect with limited or no change in pricing in the past couple of weeks. With forwarders still reporting very high demand due to containing needs for PPE equipment in all countries around the world. In Europe there is continuing to be an active discussion over the introduction of handling surcharges by the airport ground handlers. Menzies Aviation report that this will not be applied to any goods classed as medical equipment or PPE. How long these surcharges will be in effect for are not know at the moment.

According to a new report put out by Shipping and Freight Resource, most of the forwarders asked believed they could fully recover from the effects of the virus. However almost half of them believed it was going to be a slow recovery with another third believing it will be a moderate speed recovery. One long term significant impact was over 67% of those asked planned to invest in technology to improve how they operated. The overall immediate picture is one of significant concern for some sectors. However it appears that once the crisis is eventually over, companies will be able to recover. This of course will depend on how long the crisis continues for.