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COVID-19 Scrambles Freight Activity for Trucks, Trains and Ocean Carriers: ABI

The panic buying and overall disruption to supply chains caused by the COVID-19 pandemic has led to a massive need for trucks to help restock stores, shrinking the capacity available for other products.

The result is a historically tight trucking market that has dropped 20 percent in volume in the past two weeks, global tech market advisory firm ABI Research said in a new white paper.

“Rising costs, shrinking capacity and panicked customers are shaking up the freight transportation and logistics markets,” Susan Beardslee, principal analyst at ABI Research, said.

The whitepaper, “Taking Stock of COVID-19: The Short- and Long-Term Ramifications on Technology and End Markets,” noted that the American Association of Port Authorities expects first-quarter volume to show a decrease of at least 20 percent, including blank sailings, which may cost carriers $1.9 billion. Rail freight has also been impacted, with intermodal down by approximately 50 percent, including from California’s Long Beach and Los Angeles ports–the leading container ports in the United States and the busiest in the Western Hemisphere.

Global air cargo volumes for the past month are expected to be down 9 percent, ABI said, and new restrictions on passenger travel from much of Europe to the U.S. will further affect air cargo capacity.

“In the short term, there has been more than a six-week delay in shipments for cargo sourced from China,” Beardslee said. “Other markets from Vietnam to Mexico often rely on Chinese components and raw materials, creating a knock-on effect to the supply chain, including transportation and logistics. The initial loss of road transport demand has begun in the ports and is moving to the warehouses and inland routes. Cargo capacity demand in China is beginning to demonstrate some initial signs of growth, with airfreight between China and the U.S. growing 27 percent over the last 14 days, creating a demand-supply imbalance.”

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The World Container Index assessed by Drewry, a composite of container freight rates on eight major routes to and from the U.S., Europe and Asia, decreased 1.7 percent to $1,503.98 per 40-foot container (FEU) for the week ended April 16. Freight rates on New York to Rotterdam, Holland, fell 8 percent to $504 per FEU, while rates from Shanghai to Los Angeles declined 6 percent to reach $1,605 per FEU. Drewry expects rates to remain challenged.

The whitepaper said in the longer term, there is little visibility to forecast, which will have a material impact on transportation and logistics this year. Transportation requirements will be hard to predict. Capacity and pricing swings are anticipated across transportation modes, with the associated impact to shippers worldwide.

The report said shippers should evaluate options and model changes across modes of transportation, considering interruptions, delays and significant price increases. Manufacturers and retailers need to develop prioritization plans for customers, as well as systems integration whenever possible, along with predictive analytics and scenario modeling.

“Keep in mind that as some countries begin to scale up production and transportation, others may move into containment strategies to address an outbreak,” Beardslee added. “This will require near-real-time visibility across modes and the flexibility to adjust everything from inventory quantities and locations to substitution whenever possible.”