Coronavirus hits the transport – sea freight blocked by closed ports, air freight prices increase by over 100%
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In Chinese ports, the number of container transhipments fell by more than 20%. Several vessels did not call at DCT Gdansk terminal last week. The offices of logistics operators in Wuhan and Tianjin are still closed. What do companies do in the face of the crisis caused by coronavirus?
Logistics operators who handle cargo from China must constantly monitor developments and comply with the restrictions imposed by the Chinese services.
At present, shipowners are gradually shutting down further ports where container handling (loading/unloading) may be endangered. As a logistics operator, we have the opportunity to offer an alternative in the form of air or rail transport tailored to the needs of the customer. However, we should bear in mind that maritime transport accounts for about 95% of all cargoes that are transported in the world. Therefore, it is not possible for all these goods to be transferred to other means of transport without significant delays,” Dawid Graczyk, sea freight branch manager at Raben Logistics Polska, warns.
For Raben, transport to China is only a small part of the business, but nevertheless the development of the coronavirus situation is being closely observed there. Apart from sea transport, the company still also handles air transport to China.
Despite the fact that most airlines have cancelled their passenger connections, freight planes operate without major disruption. The offer also includes chartered transports,” explains Piotr Toczyłowski, airfreight branch manager at Raben Logistics Polska in his commentary for Trans.INFO.
Nevertheless, the strong influence of coronavirus on the supply chain is also evident here. “Air transport rates to China, compared to those before the New Year, increased by more than 100%. Due to the low supply of loading places, the average transit time was also extended by an additional few days,” Toczyłowski reveals.
When transporting air cargo, we rely exclusively on the services of reputable airlines associated in the International Air Transport Association (IATA). The Chinese direction remains in the offer, although it should be added that the level of current prices discourages companies from exchanging goods and limits the trade of goods to the necessary minimum, allowing mainly to satisfy production needs,” he adds.
A certain burden of cargo handling was taken on by rail transport. However, interest in this direction has increased only minimally.
The small difference is explained by the fact that many factories in China are closed. The availability of drivers in China, who can take up the delivery of goods to railway terminals, as well as restrictions in road traffic between individual provinces remains a difficulty,” explains Janusz Witanowski, Seafreight Branch Manager at Raben Logistics Polska. “We expect a significant increase in volume, when factories will return to normal operation and goods produced with a significant delay will be urgently needed,” he adds.
They have hope
Similar, optimistic prognoses, are made by the Danish container shipowner A.P. Moller-Maersk. A few days ago, the media quoted the CEO Soren Skou, who said that the company expects the dire market situation to change within two months. In his opinion, March is supposed to be the last weak month, followed by a ‘strong rebound’ in April.
The representative of one of the largest container operators in the world gave these estimates not by chance – a moment after the publication of a weak financial report for the last quarter of last year and after giving forecasts for operating profit in 2020. It is to be $0.44 billion lower than the analysts assumed, claims gospodarkamorska.pl.
Sea and land disturbances
Not only Maersk (which cancelled more than 50 courses from China in two weeks) is struggling with the disruption of supply chains around the world caused by coronavirus. Other examples can be easily given.
DB Schenker’s offices in Wuhan and Tianjin are still closed, “in line with local government regulations,” the company says in a press release. One of the major threats to shipments imported by sea is rising rates and production shortages. Road transport, on the other hand, is struggling with road restrictions. For example, with a limit of 200 trucks crossing the Ping Xiang border in Jiangxi province per day. “Estimated time for customs clearance is 1-2 days,” says the company. Rail services to Wuhan and Zhengzhou are suspended.
In turn, Amazon is increasing its stock of Chinese goods and amending the rules of cooperation with suppliers. According to “Business Insider”, the company is to provide them with five additional days for shipping products to their warehouses and to cancel the surcharge for late delivery. “Last minute” orders were necessary to secure the supply chain of the American giant, for which up to 40% of the goods sold online come from China.
The risk management experts employed by logistics operators constantly monitor the situation. They investigate whether their employees have contracted COVID-19 (coronavirus disease), as well as the situation with producers of the goods they transport.
However, the scale of the problem makes it difficult to talk about substitute solutions that would be able to protect the entire supply chain. Especially in companies that are completely dependent on supplies from China. As one of the logistics operators (who did not want to officially comment on the situation) told us, it is unrealistic to prepare a crisis strategy to completely secure the supply chain. We can only try to limit losses and minimise the impact on some of its elements.