Monitoring the effects of coronavirus on transportation and logistics
To be honest, we’ve been meaning to write and publish this article for more than a week now. But with every passing day, we thought maybe the time wasn’t yet right. There was so much information still flowing in, so much news to analyze. How COVID-19 is affecting individuals, society and the economy changes hour by hour as new cases are confirmed, governments mandate safety measures, scientists work to develop vaccines and people across the world scramble to hoard a years’ supply of toilet paper.
Within just a few days, the U.S went from business as usual, essentially, to cancelling international corporate conferences, NCAA March Madness, suspending the NBA season, restricting travel from Europe, shutting down college campuses and k-12 school districts.
Finally we realized … this is just the nature of this global crisis. There will not come a point, until we can look back and agree in hindsight that the worst of COVID-19 is behind us, that anyone – not government officials, not healthcare authorities, and especially not transportation and logistics experts – will really feel like they have a handle on what’s next. It all depends on how society reacts, and how quickly, to this yet-unpredictable virus.
But for today, we want to give customers and carriers our perspective on how COVID-19 will affect the logistics industry, and how Agforce is here to support you through the uncertainty.
What we know now, and what we predict next
COVID-19 originated in China, a primary importer to the US, and specifically in Wuhan, a major manufacturing hub. Initially, this outbreak and its subsequent effect on production were expected to significantly affect the volume of product coming into US ports, thus affecting domestic shipping levels, first on the west coast, then on the east coast.
A synopsis from the Journal of Commerce says “The coronavirus disease 2019 (COVID-19) is delivering some early year disruption to the container shipping market. Chinese factories may be slowly getting back to work but the damage is already done, and there’s no guarantee factories will be up to full power anytime soon. China travel restrictions are crimping domestic truck delivery and challenging factories’ ability to get crucial components from their suppliers. Unsurprisingly, the backlog of factory orders is frustrating container lines and importers alike.”
The slow-down didn’t happen immediately, however. Due to the fact that most people carry high inventories because of the Chinese New Year, supply was able to match demand. As the lack of imports begin to be felt across the ports, those markets dipped quickly and caused ripple effects in other markets. Then, as those supplies dwindled and imports halted, the industry began to slow. The Wall Street Journal Logistics Reporter Jennifer Smith wrote that the Port of Los Angeles is projecting a 25% decline in container volumes this month. But even in Wuhan, which has been hit hardest by the virus, containment measures are proving to have worked and production is slowly coming back online. This effect will be slow, and it will likely be late April or May before supply chains begin to churn again. But then what?
Don’t expect rates to go back to where they were at the end of 2019. As China ramps their industrial production back up, the freight will begin to hit our ports in late April or May. We expect rates to be very elastic during this time with pockets of tight capacity arising. Rates could jump quickly depending on demand and timing. Another factor will be how the US handles containment of the virus and the effects on the economy domestically. It is still too early to predict the effects of the virus in the US to our freight markets, but we will continue to monitor it closely and update our customers. If you want to give your Agforce rep a call to talk about strategy for when this happens, we would love to talk to you.
Customers and carriers, remember we’re here for you
We’ve always treated our customers and carriers like partners, and that treatment goes double when times are tough. We urge you to wash your hands well and often, follow guidelines from the CDC, and try not to panic. We’re here to help you develop a business strategy that will guide you through the pendulum-like swings of the coming days, weeks and months.
If you have concerns or want to talk strategy, give us a call at 877.367.2324 or email firstname.lastname@example.org.
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