What happens next with transportation to and from China? It’s getting better, but experts warn against long-term effects
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Prices of air services are rising dramatically, admits Rohlig Suus. Nevertheless, it is air transport that is one of the main beneficiaries of the gradually increasing volume of freight traffic between China and Europe.
There is no doubt – companies that have become completely dependent on Chinese suppliers are still in the most difficult situation.
“Although companies in China are restarting production and there is already an increase in volumes, not all factories have returned to full operation. Chinese businesses are still struggling with a shortage of employees, lack of components and even packaging,” admits Andrzej Kozłowski, member of the board of Rohlig Suus Logistics.
Currently, “the biggest challenge for his company is the decreasing number of air connections, high demand for rail services and the rising prices of services in these freight services”. “However, we are not experiencing major delays in the delivery of import containers to our customers. Instead, there are problems with the availability of containers for export, especially refrigerated ones,” this is how Rohlig Suus describes the situation related to the organisation of container transport.
The largest increased air traffic with China (bilateral) is recorded by the company in two industries – manufacturers of components for medical devices and hygiene products. Thanks to the fact that Rohlig Suus is a logistics operator of one of the largest companies in the FMCG and pharmaceutical sector, it is able to keep track of the situation related to the transport of such goods. The biggest problem is the cost.
“Due to the suspension of many connections and the consequent reduction in the availability of space for air cargo, air service prices are rising dramatically,” the company admits in the commentary it sent us.
Tension in the air
Goods for export and import in both directions are slowly increasing. As early as the beginning of March, companies were talking about stagnation in business relationships. “We’re seeing a significant drop in shipments from the Far East. This applies to maritime, air and rail transport. However, the effects of coronavirus can also be seen in intra-EU trade – one of our global customers has, for example, temporarily closed its production in Germany. (…) There is also a great deal of tension among importers, who are afraid of increased controls, trade restrictions, etc,” admitted in the first week of this month Piotr Sienkiewicz, Development Director at Rusak Business Services customs agency.
Exports to China did not increase, while the volume of goods imported from there decreased. “The amount of customs clearance is affected by many factors, so we do not have the right tools to determine how big the drop was due to the coronavirus. We can venture a guess that in the Far East the decrease was no less than 30%,” estimated Sienkiewicz. 0
However, he predicted that everything was heading in the right direction in trade relations with China. “It seems that in the Far East the worst is behind us and the situation is slowly starting to return to normal. Instead, more and more complications are beginning to emerge within the EU,” he argued.
By rail or air
This is confirmed by Magdalena Barczyk, expert in sea and air freight sales from Human Possibilities.
“The amount of handled cargo has decreased by 50 percent, but so far it was only related to the situation in China, the biggest drop was recorded at the turn of January/February. Now the situation changes and the problem starts to arise on the European side,” she wrote for Trans.INFO.
There are two major recipients of the growing number of cargoes between China and the EU. First of all, rail transport.
“During the Chinese New Year (CNY) and during the peak of the epidemic growth in China, connections were cancelled, so that the number of containers in March and early April that arrived or will arrive in our country will be lower than in the corresponding period after the Chinese New Year in 2019. Currently, thanks to the resumption of production at almost all plants in China and the lifting of restrictions on the movement of both people and cargo, the situation has stabilised, trains are returning to regular service from almost all rail terminals. Interestingly, the first trains from Wuhan are planned for the end of March. Currently, rail transport from China seems to be a very beneficial solution, both in terms of delivery time and costs,” convinces Bartosz Wilga, Director of the Commercial Department of the Maritime Agency Gdynia.
These statements are supported by the representative of Rohlig Suus.
“As far as exports from China are concerned, there is more traffic than in the same period of 2019. This is due to delays in factories and component shortages and the need to replenish stocks as soon as possible. A considerable number of companies decide to shorten the time of delivery of goods by replacing sea transport with much faster rail transport,” says Andrzej Kozłowski.
For a similar reason, the popularity of air transport has increased, which, according to experts, has, understandably, taken over particularly urgent cargo. As Magdalena Barczyk explains, after initial inquiries about sending e.g. masks to China, the direction has been reversed – today it is the Middle Kingdom that is starting to secure supplies in Europe. Transport is now organised by air as it is the fastest method.
Losses to the maritime industry
The crisis was probably most evident in maritime transport.
“Taking into account the time of transport from China to Poland, which takes about 40-45 days, the decrease in the number of imported containers is noticeable in Poland about a month after the festive period. The mentioned CNY period was significantly prolonged due to the development of the virus pandemic, which paralysed work and life, and translated into the organisation of ocean services between Asia and Europe,” explains Bartosz Wilga.
“Due to the lack of production capabilities (because of closed factories, lack of possibility to deliver goods to the port, limitation of population movement), which resulted in reduced demand for sea freight, the shipowners decided to temporarily bypass individual ports with subsequent ships (situation from February 2020), which currently translates into smaller volumes of containers that will arrive in Poland in March and April,” he adds.
According to the representative of the Maritime Agency Gdynia, “recently, the number of handled cargoes has decreased by about 30-40%, however, this is due both to the natural decrease in the amount of cargo in imports from the Far East because of the CNY and the extension of the period of time off work caused by the coronavirus pandemic”.
“In addition, the withdrawal of ships from ocean services has translated into a significant increase in sea freight prices, as well as the introduction of seasonal freight surcharges in exports, which will obviously translate into lower demand for them,” says the expert.
And this is not an isolated observation. “The effect of the decrease in volumes is, among other things, doubling the number of blank sailings, i.e. no departure of ships in a particular week. We are seeing a large increase in exports from Europe. The above causes a decrease in prices of sea transport from China and at the same time an increase in rates in the opposite direction,” confirms the representative of Rohlig Suus.
“However, at this point it is difficult to clearly assess the consequences of the lack of supply of goods caused by the development of the pandemic. In the case of our company, in February we recorded a noticeable decrease in import volumes from Asia, which is partly due to the shorter working month in China due to the mentioned Chinese New Year. However, in March we can see that this trend is changing and we are seeing a positive increase in the number of imported goods,” he adds.
Experts indicate that seaports already work regularly. Nevertheless, the impact of the coronavirus on the economy will not be easily mitigated. It is already estimated that the global container shipping industry could lose up to 10% of its volume this year.
“As far as ports and terminals are concerned, they should expect a loss of about 80 million TEU of transhipments in 2020,” comments Lars Jensen, CEO of the container analysis provider Sea Intelligence, quoted by gospodarkamorska.pl. Experts warn against the long-term negative impact of the coronavirus pandemic.
“It will affect not only consumer spending, but also the willingness and ability of companies to order goods, since a possible liquidity problem is beginning to emerge,” we read on the portal.