Coronavirus Logistics Update 12 (COVID-19)

This our twelfth update on how the COVID-19 virus is impacting the Logistics sector. Briefly in general coronavirus news, the UK is planning how to ease lock down with the UK government saying we are now past the peak and next week will issue updates on how it plans to go about doing this. However we have not had confirmed that the 5 points that need to be fulfilled for removing the lock down have actually been met yet. Despite this many more shops are opening up and road traffic has increased considerably over the past week. Many construction sites are starting up again or have plans to restart which will drive demand for more construction goods and increased road haulage. It is not only the UK looking at easing restrictions, several other countries included some of the currently worst hit Italy and Spain and looking to relax the much tighter controls. Further afield both Australia, New Zealand and South Korea are all report no new local cases and have begun to remove their restrictions. However Germany has decided not to ease their restrictions as they noticed a slight increase in cases.

Returning to the logistics sector.In airfreight it is now reported that rates have now begun to rise out of Hong Kong after being much lower than other mainland China areas such as Shanghai. This is driven by shippers trying to find alternative routes routes which are not only cheaper but also have spare capacity. Airlines in general are suffering particularly the ones loaded with debt and limited cash reserves. In Australia Virgin has already gone into administration basically destroyed by the huge debt mountain it had. In the UK Virgin airlines future is also not looking very good. The airline is 49% owned by Delta with the rest by the Virgin group. While it has made some profit in the past the previous couple of years have not been particularly outstanding and is very vulnerable. If it does go then it is going to create a hole in airfreights routes out of Manchester and leaving BA with reduced competition on several routes.

Ocean freight is still seeing blank sailings being announced as shipping lines struggle to try and match supply with demand, especially from Asia. However the industry is beginning to see the situation stabilise. Rates have fallen slightly for May sailings across some routes. However forwarders in Asia are still facing difficulties in getting load containers to the port and overall cancellations as factories remain shut or on reduced staffing levels so are unable to load containers. Within Europe there are reports of capacity to store incoming containers running low with offsite container yards filling up. The shipping lines introduction of services which shippers can delay the containers on routes at transshipment hubs can help the situation. But this is all additional costs which some party in the supply chain will have to eventually take.

Larger logistics companies are having to rapidly adapt what will be the post coronavirus world.  While some are expecting the demand for logistics to rapidly rebound later in the year others are not as sure and have begun laying offer employees. DSV one of the largest forwarders in AJF’s local area has been reported it plans to reduce its freight and logistics personal by nearly 10%, citing expected lower demand for services because the decline in the world economy.

Overall while the currently worst hit countries appear to be getting a hold of the virus, without any cure or vaccine available the outlook still looks unsettled with the risk of a secondary wave of infections, and economies all around the world severely impacted.