What if the situation doesn’t go back to the way it was? What if the containers are abandoned by consignees at ports of discharge? Post-COVID, the shipping industry may struggle to normalize which will lead us to embracing new solutions.
The economy shutdown has led to certain supply shortages, and the pandemic situation is taking a toll on the global maritime segments, from oil tankers to containers. According to a recent report, the Global Logistics market accounted for $10.6 bn in 2018 and is expected to reach $15.8 bn by 2027, growing at a CAGR of 4.5% during the forecast period.
Apart from affecting countless lives, COVID-19 was a devastating blow to the global economy, deranging the supply chains and adding another victim to its list- Oil. Demand for oil has dropped by almost one-third as airplanes are parked on runways and cars sit at home, stilled by the lockdown. The lack of fuel demand across the world followed by a surplus in global oil markets leading to an acute dearth of available storage capacities, has resulted in a huge mismatch in the demand and supply of oil globally. This has left the market into a frenzy and is expected to lead to an ‘oil contango’. A silver lining to this fiasco, from a consumer’s standpoint, is that reduced oil prices will help in slowing inflation.
It is observed that the pandemic may have caused disruption in the global supply chains mainly because of the high-scaled sourcing regions being China, as it is one of the largest manufacturing economies including certain parts of Asia. It is, therefore, crucial that in addition to financial aid and subsidies, companies utilize collaborative platforms for partnership building and information sharing.
Due to the global logistics chain being severely disrupted, the associated production and consumption centres have been affected, greatly disturbing the downstream services and causing delays in evacuation of goods from the ports. As a result of these developments, some cargo owners have either suspended their operations or are finding it difficult to transport cargo and complete the paper work, resulting in inevitable container detention. This leads to the clogging up of the infrastructure thereby impacting the logistics ecosystem and causing a container imbalance. The imbalance caused due to the congestion in ports/terminals is not new but has reached a tipping point due to COVID. In order to tackle the situation, it is necessary for consignees to clear off pile up so as to ensure smooth flow of EXIM cargo. The GOI had announced the waiver of the demurrage and detention charges in order to give relief to the EXIM trade during the period of lockdown.
At JNPT (India’s largest port), containerized cargo volumes decreased by 37 percent in April compared to the same period last year and a fall of 12 percent has been recorded Pan India since the new financial year.
Sources have suggested that there has been a 35 percent drop in cargo capacity in China between February-end and March, while the air-freight costs have sky-rocketed, hence companies are looking at ocean freight to be a feasible option.
According to a survey, a number of vessels were rendered idle and unemployed, accounting to just over 1m teu of capacity and representing 4.6% of the total fleet. Most shipping lines resorted to spot freight rates and blanked sailings due a slump in cargo volume leading to a drop in demand of vessel space, but this is set to normalize in the coming weeks. To further cut costs, shipping lines have diverted ships on extended journeys as a way to avoid expensive transits. The large container carriers are at a lower risk as they opt to counter the impact through blank sailings, but the small and medium carriers are more exposed and vulnerable to this situation.
More than 50% of the capacity from the Far East will be withdrawn in an attempt to accommodate the expected declining volume to Europe due to the pandemic. In addition, “slow steaming” has been introduced by several shipping lines on several routes. Delays at various Chinese yards due to the outbreak have resulted in extended yard stays for the vast majority of container ships undergoing retrofits in China. While businesses are being urged to look for solutions to ensure that the demand and supply normalize, some carriers are resorting to one cycle of run with 7-8 ships.
As complex process chains and a considerable amount of investments are affected, the projects logistics business, is facing a host of challenges.
“During these times of tribulation, we provide end-to-end assistance in Ex work pick up of OOG cargo, CFS activities of stuffing / lashing / custom clearance and more importantly extended rate validity for long term projects to our customers’’,
as stated by a spokesperson, Sarjak Container Lines.
Out-of-gauge and heavy lift project shipments require special transportation equipment and engineering work, which limits the number of options for transportation and alternative solutions. As many warehouses have not been given permission to become fully functional, trucks have now become the warehouses for many players, industry insiders reveal.
Ever since India has gone through its initial lockdown period, the entire transportation ecosystem, including road freight movement, has come to a halt and among the worst hit were its fleet owners.
The Indian trucking industry deploys more than 8 mn drivers and 12 mn helpers. As a baseline, 30 mn people are directly employed by the trucking industry and more than 150 mn people depend on it for their bread and butter, say industry estimates. Although railways are stepping up and may serve a few sectors, the gap is yet large, with first mile and last mile still being a challenge.
The COVID situation has shown the industry how delicate the supply chain has become. During this time it is essential for logistics companies to immediately focus on enabling end-to-end visibility, process flexibility and collaborations to support their customers in anticipating disruptions and mitigating the impacts. Given that the effects of COVID-19 are far-reaching, new business models and logistic solutions with a new perspective are soon bound to rise in order to curb the after-effects.
Freight forwarders and freight operators such as Sarjak Container Lines are building digital capabilities to facilitate alternate route-to-market strategies and address potential operational gaps. Digital logistics is essential to drive the adoption of e-freight to combat the spread of the virus through paper documentation.
An approach of using the Internet of Things (IoT) in warehousing and distribution operations would help facilitate inventory accuracy, ensuring the placement of the products in the right place and time. In the long term, SaaS platforms for transportation management will also allow logistics companies to anticipate supply chain risks and promote sustainability goals with operational efficiency.
