Customer Advisory: Covid-19 Regional Updates

April 3rd 2020

Dear Valued Customer,

We would like to reassure our customers that Trade Link remains open for business and here to keep your supply chains moving.  Our operations in Canada and elsewhere continue to operate despite the challenging environment and we have strategies in place to ensure an uninterrupted service for our customers and safety of our global teams.

As the World Health Organisation upgrades the global risk of the Covid-19 pandemic to ‘very high’ and with most countries in the world imposing partial or complete border closures, the movement of goods remains challenging and dynamic.

Virtually every aspect of the economy is feeling the effects of the Covid-19 pandemic with 94% of Fortune 1000 companies experiencing supply chain disruption.  Manufacturing has been especially impacted – with several industries reporting contraction in March according to the Institute for Supply Management’s (ISM) Manufacturing Report on Business.  The report’s key metric—the PMI—at 49.1 fell 1% from February’s 50.1, halting a two-month run of PMI growth.

On Tuesday, the Port of Wuhan in China reopened for business after more than two months of being locked-down.  As China moves to resume production and normal operations, we are seeing carriers cancel sailings, air freight capacity collapse and cargo owners postponing orders in response to a decline in consumer demand.

Meanwhile, countries are trying to keep borders open to the flow of goods.  Commercial trade across the U.S.-Canada border, for example, is continuing but freight volumes are down on prior year.   Nearly 24% fewer truck drivers entered Canada from the U.S. last week compared with a year earlier, a sign that Covid-19 is hurting cross-border freight between the two countries reports Freight Waves.

As part of the EU’s overall efforts to keep essential transport flows moving, the European Commission has already issued guidelines for countries to set up so-called “green lanes” for land (road and rail), sea and air transport, to keep essential transport moving, though wait times for commercial movement between EU countries has increased substantially.

The International Air Transport Association (IATA) released February 2020 data for global air freight markets showing that demand, measured in cargo tonne-kilometres (CTKs*), decreased by 1.4% compared to the same period in 2019.   Airlines in Europe suffered a sizeable decline in year-on-year growth in total air cargo volumes in February 2020, while North American and Asia-Pacific carriers experienced more moderate falls.  International seat capacity has dropped by almost 80% from a year ago and half the world’s airplanes are in storage, suggesting the aviation industry may take years to recover from the Covid-19 pandemic.

As for Sea Freight – further blank sailings and service suspensions are expected to be announced as carriers attempt to manage the downturn in box volumes resulting from Europe and the U.S. respective lockdowns and less demand for what China produces.  Some commentators predict that many of the ports of Europe are only going to be running at 20-30% capacity in the coming months, making ocean liners with capacity for ten thousand containers overkill.

Against a backdrop of increased air freight rates, longer transit times in both air and ocean freight and trucking border delays, rail is seen as more of a viable option, particularly between China and Europe.   In the eastern Chinese city of Suzhou, China-Europe freight trains have fully resumed operation with over 50 percent increase in the number of trips in March year-on-year reports Forbes.

As we continue to monitor developments of the Covid-19 pandemic, we are adapting our response on a daily basis.  We have strengthened our business continuity plans to protect the safety and wellbeing of our employees and to ensure an uninterrupted service for our customers.  Measures include:

  • Ensuring all employees and agent teams are equipped to work from home as and when lock-down restrictions require office closures. Our global teams are currently working from home and office, enabled by shared IT-systems, processes and collaborative technology.
  • Keeping meetings virtual.
  • Communicating and following guidelines and safety protocols from the Canadian Government and the Public Health Agency of Canada (PHAC).
  • Liaising closely with customers, suppliers, partners and colleagues in key territories to monitor and manage supply chain developments in line with local market safety protocols and restrictions.
  • Closely monitoring all media and global reports to gather facts and insights on the current Covid-19 situation to support customer planning and decision making.

We continue to work closely with our partners and carriers to mitigate supply chain impacts and implement contingency solutions, including charter services.

Our operations in Canada and elsewhere continue to operate despite the challenging environment and rapidly evolving situation.   We would like to update you on general market conditions and the status of Trade Link’s operations in key regions as follows: 

Trade Link Regional Updates:

Canada / US

Of the world’s 1 million-plus cases of Covid-19, nearly a quarter of them – more than 245,000 – are in the U.S with over 10,000 reported in Canada.  As the volume of cases continues to rise, governments are expected to introduce new restrictions and recommendations to slow down the spread.  Both countries are trying to keep borders open to the flow of goods.  Commercial trade across the U.S.-Canada border, for example, is continuing but freight volumes are down on prior year.

Meanwhile the Canadian rail blockades could have a lasting effect on U.S.-Canada trade, setting the stage for even greater fallout from coronavirus reports Fortune Magazine.  Freight shipments not expected to recover until the fourth quarter or even 2021 as consumer demands resulting in a slowdown of manufacture and supply of goods.

Trucking rates are climbing across the United States as demand to haul essential goods skyrockets, more than outpacing any decline in freight from shippers whose customers have shut down.   But transportation economists warn the market could cool soon if non-essential retailers such as Macy’s, and others remain closed and cancel existing orders from US suppliers or Asian factories according to industry reports.

Despite a challenging environment, all port and transport operations continue to function.

China

In our last update we reported that China were largely resuming production and normal operations.  On Tuesday, the Port of Wuhan reopened for business after more than two months of being locked-down.

Meanwhile, cargo owners are increasingly reducing and postponing ocean shipments from China to North America, according to industry reports.  The change contrasts dramatically with just a few weeks ago when shippers were looking to accelerate shipments through the supply chain to replenish inventories depleted as a result of the China shut down.

Air Freight

Air freight prices have spiked on routes out of China, by more than 200 per cent to destinations in Southeast Asia as factories desperately try to source components amid fears of further lockdowns, but also by more than 100 per cent to Europe and the United States, according to TAC Index, which monitors air freight rates. (https://www.tacindex.com/).  Chinese airlines are reportedly being told to maintain only one route to any specific country, with no more than one flight a week.  With close to half of air freight transported in the belly of passenger jets, the collapse of passenger flights saw demand for air cargo contract by 2.2% in February 2020, compared to the year-earlier period.

Sea Freight

Ports are open and operational, including the port of Wuhan.  Further blank sailings are expected from carriers, while bunker prices – fuel for shipping – have fallen by more than 90 per cent for some forms of fuel.  Carriers are making huge cuts in capacity with little warning, reflecting the speed with which demand is falling amid deepening lockdowns across major markets.

Rail & Road

Road and rail services in China continue to recover but capacity remains impacted due to lack of drivers and restrictions on inter-provincial trucking.  The knock-on effects of a decline in export orders, as companies cancel or postpone orders, is likely to result in cost increases.

Against a backdrop of increased air freight rates, longer transit times in both air and ocean freight and trucking border delays, rail is seen as more of a viable option, particularly between China and Europe.   In the eastern Chinese city of Suzhou, China-Europe freight trains have fully resumed operation with over 50 percent increase in the number of trips in March year-on-year.

We are closely monitoring the situation and our operations in China continue to function as normal.

Europe

Covid-19 lockdown is causing a record fall in eurozone business activity.  Composite PMI data showed the Eurozone suffered its largest ever monthly drop in business activity in March, as the Covid-19 outbreak gained pace. (source: The Guardian)

The European Commission has already issued guidelines for countries to set up so-called “green lanes” for land (road and rail), sea and air transport, to keep essential transport moving.  The move came after many Member States announced restrictions to transport – a full list by country is available here.  This list is updated regularly, as information becomes available.

Airfreight to/from Europe remains challenging, with the majority of carriers cutting capacity. Europe/USA belly capacity has dropped by more than 80%.  Alternative transport plan based on charters and freighters solutions are being implemented across the industry to ensure continuity of service.  European ports and rail are operating despite challenging conditions.   Trade Link’s European operations continue to operate as normal despite the challenging environment.

We will continue to provide updates as the situation unfolds.  If you have any question, please contact your Trade Link account manager, or send an e-mail to: load@tradelinkinternational.ca

Thank you for your continued support,

Your Trade Link Team

Other helpful updates and insights:

2020-04-03T09:50:48+00:00April 3rd, 2020|Global Trade, Logistics Expertise, Supply Chain Management|