Maritime and air shipping operations are under significant pressure from the COVID-19 pandemic, as countries balance the need for global trade with preventing another wave of infections.
According to recent survey data from IPC, 55% of their surveyed member executives reported abnormal shipping delays. This tightrope act is further complicated by a patchwork of port restrictions, escalating airfreight costs and other factors.
How can manufacturers course-correct international shipping requirements amid the disruption?
Traditionally, maritime cargo presents a lower-cost option, while airfreight lanes provide greater expediency in shipping. Companies who can reliably schedule their supply chains months in advance have typically turned to maritime freighting. However, amid the pandemic, shipping lanes have seen substantial cuts in liners and maritime capacity.
According to Danish maritime shipping consulting firm Sea-Intelligence ApS, global container service cancellations have grown from 45 two weeks ago to 212 last week.
Shipping analytics firm Drewry expects a 20-25% drop in sailings on the Far East to Europe/Mediterranean lanes and a 17-20% drop in Far East to U.S. routes in the second quarter of 2020.
Beyond these declines in maritime shipping, reductions in port operating hours — or even full closures in some nations — have led to not only disruptions in the supply chain, but also a unique labor challenge. For example, Maritime Executive reported that the pandemic has caused some 40,000 Indian crew members serving on merchant and cruise ships to be stranded worldwide. As a result, pandemic-induced port restrictions create a trifecta of reduced global port capacity, supply chain disruptions and labor shortages.
Ultimately, companies are finding themselves looking to airfreighting for possible relief to their international shipping challenges.
International air shipping lanes are also experiencing difficult times. According to the International Air Transport Association, airfreight traffic is anticipated to be 15-20% lower in 2020 than the previous year. In addition, the reduction in passenger plane flights has caused a surge in prices for shipping air cargo.
In March, analysts at Freight Investor Services noted a 12.6% increase in airfreight lane rates to China and a 21.16% increase in lane rates to Europe, which included a 55% rate increase to Frankfurt alone.
This pricing increase has significant implications for the technology industry, because key components that are already bottlenecked across different worldwide sites in varying states of lockdown require margin-eroding airfreight fees to make up lost time in shipping.
With both seas and skies affected, course-correction may lie on terra firma via railways and trucks. Eurasia has embraced rail, with volume on the China-Europe network surging 18% year over year in the first quarter, according to China National Railways.
Trucking provides a relatively stable option in North American trade, according to commercial fuel consumption data from Geotab.
As the global economy recovers in the coming months, these land routes may serve as viable substitutes for maritime and airfreighting, all while responding to increased domestic consumer demand.
Globalization is essentially the business of the shipping industry. The staggered infection spread and policy response from country to country will certainly result in continuous, yet uneven, waves of outbreaks until a viable treatment or vaccine arrives.
The novel coronavirus outbreak in a single country acts as a large stone thrown into a small pond, sending ripples all around. The more stones — or single-country outbreaks — thrown, the more turbulent the waters everywhere for international shipping and the overall global economy.