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Dear Valued Customer, The overall COVID-19 conclusion within the transportation and logistics sector remains so far so good, and it is becoming more business as usual, rather than business as unusual. By now suppliers, customers, forwarders, port operators, trucking and warehouse providers have gained significant experience in how to mitigate COVID-19 impacts and we overall do not foresee major logistical issues in terms of cargo movements in the months to come. The big question remains how volumes will develop on the back of the global economic development and ultimately how will this affect the supply and demand situation. So what does the economic crystal ball tell us? Full consequences for the pandemic remains unknown McKinsey has drafted below three macro-economic scenarios ranging from a 13 % to 22 % decline in global trade in 2020. There is a general consensus that we are experiencing a delayed effect within the transportation and logistics sector, hence that eventually the effects of the decline in the global economy and trade will result in a significant drop in volumes across all transport modes. |
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There is though also a consensus that the global economy will rebound fully in 2021. Below overview from IMF (International Monetary Fund) shows projected GDP growth in 2021 with the global average GDP growth projected to be around 5,8 % in 2021 vs. – 3 % in 2020. |
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Graph from: https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/OEMDC/ADVEC/WEOWORLD |
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Airfreight continues on the path of slow recovery Global air traffic overall increased in July with more and more airlines resuming flights as the gradual reopening of societies continues. Whereas this is a clear trend, it is expected that it will continue to be a slow and gradual recovery for rest of 2020. As for supply and demand, the worst pressure on space is over due to the natural decline in PPE volumes (Personal Protective Equipment), however in selected corridors space remains scarce. Subsequently a moderate decline in rate levels is also apparent on majority of trades. With this said, levels remains significantly higher than 2019. Demand is expected to be moderate in Q3 with some level of impact expected when tech launch season resumes in Q3 or Q4 with the likes of Apple and other tech companies take up a lion share of the capacity. As COVID-19 pandemic continues to accelerate in US and Latin America demand is still high fueled by PPE volumes, and as a result rate levels ex Asia to US/Latin America remain higher than normal. Ocean freight pressure moves on to Trans-Pacific trade Within ocean freight the worst effects of blanked sailings are ceasing, however carriers continue to operate with a very high level of capacity discipline in order to sustain rate levels, and until now with success. This development is evidenced by a number of carriers posting financials results that include a significant improvement vs. same period in 2019. The largest trade of them all Asia-Europe is experiencing a stable period both in terms of capacity and rate levels. From Europe to Asia a significant improvement in the capacity situation is apparent in comparison with the months of April, May and June and for the same reason rates continue a steady decline from the historic high level seen in Q2. Rates are still above 2019 levels and not expected to settle at 2019 levels before we enter into 2021. With the acceleration in COVID-19 pandemic in US the trans-pacific trade remains very volatile and massive rate increases are now being implemented as a result of the pressured situation. Despite more capacity having been deployed significant space pressure has been the case over the last month. SCFI spot rates to US Westcoast increased 17 % last week bringing them above the USD 3000/FFE mark for the first time in the 11 year history of the SCFI index. Rail freight stable with isolated congestion challenges Overall rail freight is stable from a capacity perspective, however sporadic delays can occur due to congestion at one of the major European rail hubs in Malaszewicze, Poland. From a volume perspective rail freight is continuing to see a steady increase. More and more customers now regard rail freight as a regular transport mode, and include rail in the overall supply chain planning as oppose to only using rail freight as an emergency product when ocean freight delays occur.
Road freight is back to normal Road freight within Europe is returned back to normal without disruptions. For further details on specific countries and mode of transport, see our overview here. All information in this advisory is offered to the best of our knowledge and is prone to change. If you have any specific questions, please reach out to us. Yours sincerely, |