Coronavirus Logistics Update 13 (COVID-19)

This is the thirteenth update on the continuing effects the Coronavirus is having on the logistics and supply chain sectors. In general news the USA is beginning to reopen up even while it is still showing increasing infection and death rate.  This is reflected in the financial markets, despite the terrible job loss news out of the USA and continuing tensions with China, the DOW, S&P and Nasdaq are now powering ahead refusing to pay attention to this bad news. It is shrugging off any fear about long term effects of all these shutdowns on the world’s economy. The Nasdaq may even break the 10000 barrier with the next week. This rally appears to have caught many market commentators by surprise with initially everyone saying the initial rally off the previous lows would not last. If the markets are right then it will mean the logistics sector will be back in demand at least by some sectors. However it is still unlikely that the Oil and Gas sector is going to recover much over the next few months with oil still below 30USD a barrel and long term contract prices are currently not forecasting much of an increase in demand.

Returning to the UK and despite the newspapers and other media outlets trying to imply the lock down in the UK is going to be all gone by soon, the reality is the UK government is only expecting to announce a very slight easement of restrictions on Sunday. This may include allowing garden centres to reopen and people to use parks to relax in. Scotland has decided to continue all its measures unchanged for another 3 weeks showing that this crisis is still far from over. Vaccine trials have begun with estimations of a workable one being available anytime from September this year to September 2021.

HackerNews had a thread this week on sellers looking for alternative e-commerce markets to Amazon. The thread discussed how sellers where getting disenfranchised with one of the worlds market and looking for alternatives such as Shopify. Several website designers noted that they were busier than ever with requests for setting up individual operated e-commence sites. For the logistics sector this means there will be more potential clients out there looking for fulfilment services, from devaning containers to reverse logistics. This may reverse some of the losses over the past decade to Amazon. Though with the current market share Amazon has is unlikely to be concerned at the moment by this development.

Ocean freight services are still seeing serious imbalances on availability of equipment and space on some routes from Europe to Asia and the MiddleEast. As a result shipping lines are coming up with new emergency surcharges which they can add to existing rates this includes an ESS surcharge which is short for Emergency Space Surcharge. This does not mean shippers will be guaranteed space, just they will be guaranteed the extra charge.  The continuing in balance in trade is also seeing Peak Season Charges being introduced. Overall exporting from the UK is in general going to be more expensive for the next few months.

Lloyds has reported that more and more vessels are now choosing to transit via the Africa Cape rather than via the Suez Cannel due to the very low oil bunker prices meaning it is becoming more cost effective. The one downside of this is the increased levels of pollution from these vessels burning more fuel due to taking a longer route. In the UK the expected shortage of container storage space has not occurred with currently there being no real issues for shippers looking for off site storage of incoming containers.

Once again airfreight is still in high demand for shipping from China to to the rest of the world. Medical and other related Covid-19 supplies leading the demand.  Some airfreight industry reports are now showing that the decline in airfreight space has finally reached a bottom and is beginning to show signs of increasing in the 1st week of May. However rates are still much higher than previous years even though oil is lower. Some shipments are still attracting additional cargo handling charges when they arrive at European Airports. May will be an interesting month overall to see how trends are going in this sector.