The Coronavirus pandemic has caused unprecedented disruption to the logistics industry, some aspects look to change the landscape for good. Over 2020 each market experienced the pandemic differently.
The impact on the freight forwarding industry has been quite distinct. While the air freight market needed to tackle diminished capacity due to restricted passenger travel, the sea freight market had to navigate volatile demand and a deforming of supply.
Air travel is likely to take time to recover to 2019 levels, leading to sustained low bellyhold capacity and thus high prices. The Coronavirus may be a turning point in the air freight industry’s development. There was a political movement in the US to ban all air cargo on air passenger flights, following the 9/11 terrorist attack. This was resisted successfully by the industry and its supporters. The extended disruption over 2020 has generated further interest in this approach once more.
The sea freight market experienced whiplash effects due to demand volatility, capacity shortages, and at various times, over-supply. Following a wave of consolidation over the last seven years, shipping lines were in a much better position to ride out the storm than they would have been a few years ago.
However, the overall freight forwarding market is expected to rebound. According to the IMF, global trade levels are projected to reach pre-COVID levels in 2021.
The global contract logistics market did not escape the deep impact of COVID-19 either. This comes after a year of significant disruption which saw manufacturing capacity taken offline and retail sectors across the world effectively shut down.
The Coronavirus crisis placed stress on supply chains as never before. Whilst most of the attention was focused on the response of the transport industry and the difficulties it has faced in moving product on an international and domestic basis, the warehouse sector has also experienced enormous challenges such as volatility and unpredictability caused by erratic customer behaviour, cargo pile-ups and unsynchronised supply and demand as the pandemic took hold in different locations at different times.
Nonetheless, there were positive developments for the contract logistics market in 2020 as well. While the impacts of COVID-19 have been negative in aggregate, certain sectors have seen significant growth in sales, such as grocery retail and consumer electronics, as a considerable proportion of the global workforce has reoriented to working from home.
The European road freight market was primarily damaged in early 2020 by the outbreak, due to national lockdowns and government-imposed restrictions on everyday life.
The shutdown of vast swathes of the European economy meant demand for road freight declined sharply, particularly in industrial sectors. There were certain bright spots, however, in areas such as consumer electronics and healthcare & pharmaceuticals.
The disruption caused by border closures and crossing times continued for several months. This combined with the varied and mismatched rules across the continent meant some countries began to reopen whilst others remained closed, resulting in difficulties due to out-of-sync trading.
Overall, the European economy is expected to recover from the effects of the pandemic in the near future. EU GDP is projected to grow at a real 2020-2024 CAGR of 3.2% according to the IMF, with pre-crisis output levels met by 2022. This bodes well for the European road freight market, which typically shows a strong correlation with economic performance.
The success of the express market was significant as e-commerce arguably catapulted the retail industry into 2030. While other sectors scrambled to assess the decline in volumes and revenue, the express sector bucked the trend of experiencing a bumper year.
Logistics providers have commented that a significant proportion of 2020 has felt like peak season. With many ‘non-essential’ retailers, largely high street brick-and-mortar stores closed, e-retailers experienced a surge in sales as consumers turned to e-retailers to fulfil their shopping needs.
The pandemic is set to change the behaviours of consumers permanently regarding online shopping, creating capacity concern for logistics providers on the back of increasing demand. Express companies made significant investments as well as imposing surcharges over 2020 to help alleviate the strain.
The outbreak of COVID-19 was the defining feature of 2020 and though much of the world is on a path of recovery, many countries are still dealing with the ramifications of the virus. However, 2021 looks set to be promising in terms of a return to normality for logistics services but uncertainty remains as does the potential of structural change.
Source: Transport Intelligence, January 19, 2021
Author: Holly Stewart