Coronavirus outbreak affects logistics industry

The coronavirus epidemic has had a significant effect on the transport industry. The Chinese New Year break segued to quarantine and shipping from China has been stalled for almost a month.

Before the Chinese New Year, manufacturers sought to ship as many goods as possible, make it on ships and trains at any cost. Since the epidemic, Chinese agents have been trying to keep online operations going but the work has been slow due to temporary closure of many Chinese factories.

Maritime shipping companies were forced to cancel voyages and suffer additional losses. They are already having a difficult time since the new regulation by the International Maritime Organization introduced in January. Maritime companies are required to switch to cleaner types of fuel. The epidemic only made it worse. To avoid further downtime, maritime giants decommissioned their vessels to conduct renovation and changed itineraries.

What will happen now that the situation is starting to improve? What consequences can we expect? What will happen to freight rates and railroad tariffs?

China currently resumes active shipping, maritime lines reduce freight rates to fill their ships; the rates differ a lot from the ones before the New Year, but experts believe that they will be restored by the end of March. The freight traffic flows are also being rerouted. Some of the them will be switched to railways due to a more attractive shipping time because the deficit caused by a one-month disruption in deliveries will not go unnoticed. Air cargo transportation has been partially suspended, and everything will depend on whether flights are canceled from China and South Korea. We have already faced several epidemics, such as bird and swine flu, but the state borders were open and there were no large logistics issues at the time. The current coronavirus situation will depend on the politicians’ actions.

Shipping will not be cancelled, of course, because we need logistics everywhere. But the freight traffic flows will be redirected, new routes will appear as well as new suppliers whose rates will be higher than China’s. So we will face a general price hike.

For many logistics companies, crises provide an opportunity to show their experience, professionalism and competence in offering alternative routes.

By Yelena Nikolayeva, Head of the International Logistics Department at ARIVIST Group

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