There’s no doubt that the current pandemic has completely disrupted the international freight industry. Demand in international markets dropped at astonishing levels, restrictions were imposed at ports across the world, major shipping companies announced scores of blank sailings and airports became completely overrun with cargo backlogs.
The statistics speak for themselves. The International Transport Forum recorded a 53 per cent drop in air freight volumes in the European Union 27 alone in the second quarter of 2020, whilst sea freight volumes in the United States stagnated and the volume of goods moved by sea fell by 4 per cent in the European Union 27. McKinsey predicts that trade volumes won’t recover to the same levels as the fourth quarter in 2019 for another 15 to 48 months.
So what’s the future for importers and exporters post-COVID? How will we emerge into a post-pandemic world? Below, we’ll take a look at how industry is currently adjusting and explore what a post-COVID shipping industry might look like.
How are importers and exporters adjusting to the pandemic?
The unexpected shockwaves we’ve outlined above have forced global supply chains to quickly adjust.
Industry has embraced more affordable air-sea solutions that involve transporting freight using a combination of both air freight and sea freight. Such services have been highly effective at saving time (avoiding the delays that are coming with sea freight) and saving money (steering clear of exorbitant air freight charges).
We’ve also seen an active move to sea freight over airfreight during the past year. Importers have been willing to deal with the with longer transit times given that the pandemic has radically driven up the costs of air freight. This has largely been because of restrictions imposed on passenger transport by governments across the world, as well as the limited space on cargo aircraft currently giving priority to vital medical supplies (such as face masks and PPE).
What could a post-COVID shipping industry look like?
There is certainly a future for the global shipping industry. But the sector will not emerge from the pandemic unscathed, and it will quickly need to identify its own operational weaknesses if it’s going to recover (and eventually thrive).
Below, we’ve highlighted some challenges we anticipate that the freight industry will face in post-pandemic life.
- Smarter supply chains – The challenge for importers and exporters will be to streamline their shipping processes in the most cost-effective way possible. As we’ve discussed above, more players are adopting alternative air-sea solutions, and are even moving to sea freight entirely over the more expensive airfreight. As businesses have adjusted to the timeframes offered by ocean freight, it’s likely smarter supply chains will be built with less reliance on air transport.
- Container repositioning – The coronavirus has created a major container repositioning problem. The slowdown in ocean freight has led to major inefficiencies when repositioning empty containers, which amounts to about 5 to 8 per cent of a carrier’s operating costs. To reposition the empties means filling up slots in vessels, creating pricing pressure for the full containers on the same ships. This has proven especially problematic for China, who experienced scores of blank sailings in the pandemic’s early days. If this continues post COVID19 we could see further container availability constraints adding excess transit time as shipments get delayed.
- Meeting environmental obligations – After the dust of the pandemic settles, a significant challenge for the shipping industry will be to make progress on the environmental objectives set by the International Maritime Organisation (IMO). Enforcement of IMO 2020 Regulation, which we discuss elsewhere, was pulled back in some locations around the world but authorities may prioritise these regulations when things return to normal.
Will global supply chains adapt to a post-COVID world?
International supply chains will need to adapt to a world after the Coronavirus in order to revitalise the global economy. Below we offer three suggestions as to how this can be done:
- Move closer to home – Importers and exporters should start to look at international markets closer to home (with more regular services) to combat the impact of extreme disruption. Air freight across long distances (e.g. to and from Europe) won’t return to pre-COVID19 levels for a while, meaning your transit times with sea freight to European destinations could blow out to six weeks.
- No more international travel – We expect that people won’t feel the need for international travel any longer, even when international flights become more readily available. The rise of video conferencing has massively changed the way we work, with programs like Zoom and Microsoft Teams taking the business world to new technological heights.
- Remote working: Will the local business model change as people move away from large overheads and facilities to an adaptable remote workforce? Removing overheads means greater amount of cash flow, which may be exactly what importers and exporters need to streamline their shipping process and get back to profitable trading.
Final words – remote, but still physical
Even though COVID-19 has forced our industry to work from home and communicate through online technologies, the challenges we face are fundamentally physical and logistical. The global economy is still heavily connected through physical assets and infrastructure – vessels, aircraft, terminals and ports.
Whilst we’re constantly facing challenges that nobody has ever seen before the industry has adapted to changing environments quickly – and will continue to do so in a post-COVID environment, whatever that may be.
If you’ve got any queries about what the future for importers and exporters post-COVID means to your business, don’t hesitate to contact our friendly team at International Cargo Express. Whilst we’ve never seen anything quite like this before, we’re no strangers to helping importers and exporters navigate the challenging shipping landscape. You can contact us or leave a comment below.
or call us on 1300 227 461