New data has revealed the shattered state of global supply chains, with shipping fluctuating wildly due to a cratering of international trade volumes.
The American Association of Port Authorities saw its Q1 trade volume decrease by 20 percent, while intermodal transport volumes are down by approximately 50 percent in the United States, and global air cargo volumes for March down 9 percent, with worse numbers expected for April.
Despite the lower usage, costs for all of those forms of shipping have shot up between January and March, according to data compiled by shipping information firm TAC Index. The cost of air freight has hit all-time highs on the index as capacity has been cut by around 35 percent globally due to passenger airlines heavily reducing services, according to Air Cargo News.
Neel Jones Shah, head of airfreight for San Francisco, California, U.S.A.-based freight forwarder Flexport, told The Loadstar, costs are “the highest I’ve ever seen.”
Freight analytics firm DAT said trucking prices rose in the U.S. in March, with van rates moving from USD 1.79 (EUR 1.64) to USD 1.87 (EUR 1.71) between February and March and reefer rates going from USD 2.09 (EUR 1.91) to USD 2.19 (EUR 2.0) per mile, according to The Trucker, but now that a surge in U.S. “panic-buying” has subsided, trucking rates have begun to fall precipitously, with van rates sliding to USD 1.72 (EUR 1.57) per mile and reefers dropping to USD 1.99 (EUR 1.82) per mile.
“March was the storm before the calm, especially for carriers hauling consumer staples, which experienced strong freight levels,” American Trucking Association Chief Economist Bob Costello told HDT. “But there was a huge divergence among freight types. While freight to grocery stores and big box retailers was strong in March, especially late March, due to surge buying by households, freight was anemic in other supply chains, like that for gasoline, restaurants, and auto factories.
Pricing continued to weaken through the end of April as volumes have declined, so current rates are actually lower, Costello said.
“COVID-19 is adding a new level of pricing pressure due to the sharp decline in load volumes into an already overcapacitized market,” he said.
A new whitepaper from global tech market advisory firm ABI Research, “Taking Stock of COVID-19: The Short- and Long-Term Ramifications on Technology and End Markets,” predicted the global pandemic will have a devastating impact on freight transportation and logistics.
"Rising costs, shrinking capacity, and panicked customers are shaking up the freight transportation and logistics markets," ABI Research Principal Analyst Susan Beardslee said. "In the short-term, there has been more than a six-week delay in shipments for cargo sourced from China. Other markets from Vietnam to Mexico often rely on Chinese components and raw materials, creating a knock-on effect to the supply chain, including transportation and logistics.”
Continued restrictions on passenger travel around the world is further affecting air cargo capacity, Beardslee said. That has further constricted the market, as so-called “belly cargo” in passenger flights accounts for 50 percent of all air cargo, according to Beardslee.
“When this capacity is drastically removed between Europe and the United States, availability will be significantly impacted and spikes in pricing are expected,” she said.
"Cargo capacity demand in China is beginning to demonstrate some initial signs of growth, with airfreight between China and the United States growing 27 percent over the last 14 days, creating a demand/supply imbalance," Beardslee explains.
In response, the governments of some countries, including Australia, are directly organizing cargo flights to jump-start supply chains frozen by market instability and shipping bottlenecks.
“The COVID-19 crisis has led to major air freight shortages and disrupted supply chains around the world,” Australian Deputy Prime Minister and Minister for Infrastructure, Transport, and Regional Development Michael McCormack said in announcing the initiative.
Such efforts may become more common as global markets head toward more marked recessions. The International Monetary Fund has predicted that by year’s end, global trade will fall by between 13 percent and 32 percent, and a 3 percent contraction in the world economy in 2020, compared to just a 0.1 percent drop in 2009 at the height of the Great Recession, according to Bloomberg.
The result will be bad for transportation companies and those that depend on them, but exactly how bad is hard to predict, Beardslee said.
"In the longer-term, there is little visibility to forecast, which will have a material impact on transportation and logistics this year. Transportation requirements will be hard to predict. Both capacity and pricing swings are anticipated across transportation modes, with the associated impact to shippers worldwide," Beardslee concluded. “Shippers need to evaluate options and model changes across modes of transportation, considering interruptions, delays, and significant price increases. Both manufacturers and retailers need to develop prioritization plans for customers, potentially with set limits per customer.”
Photo courtesy of Amarin Jitnathum/Shutterstock
