Pooling resources at a time of crisis

5 min read

Transport & Logistics

This is the first weekly update from Santander’s Transport & Logistics team on how the Covid-19 pandemic is affecting our clients and the sector as a whole.

Transport & Logistics

The logistics sector is at the forefront of the UK’s response to the Covid-19 pandemic and keeping goods moving will be critical to helping the country overcome the virus.

One of the most positive characteristics of the UK’s response to the Covid-19 pandemic has been a willingness on the part of many people and businesses to cooperate and help others adapt to the current challenges.

In this spirit, our trade partner in the logistic sector, the Freight Transport Association (FTA), has just launched a new service designed to allow members to transfer any under-utilised resources to areas where they could be more gainfully employed. In a number of sectors, transport operators are finding themselves considerably less busy than usual while other businesses, especially those in the critical supply chain are facing unprecedented levels of demand.

The FTA’s member portal will allow operators to share work and offer their services to help ensure that resources in the sector as a whole are allocated as efficiently as possible. At the same time, the FTA is about to update its logistics efficiency network service (LENS) load-exchange portal, with the new version set to come online by the middle of this month. Both services will, we expect, go some considerable way to help transport and logistics firms deal with the challenges the pandemic has created so far.

The FTA has also just released research into the impact of Covid-19 on workforces to date. At the time the data was collected, more than 12% of HGV drivers and 15% of van drivers were in self-isolation, typically as a result of displaying possible Covid-19 symptoms. Meanwhile, more than half of operators said they were scaling back or suspending non-critical operations – although redundancies have only been implemented in a small number of cases.

More than a fifth (21%) of respondents say they have already started making deliveries in what used to be restricted hours after the government relaxed the rules in order to cope with increased demand for critical goods such as food & medicine. 

 

Global trade down, air freight rates up

Lockdowns around the world continue to depress global shipping levels to a significant degree, despite the fact that many Chinese factories have now started to come back on line. The total volume of container freight between March and May is expected to fall by almost 20% year-on-year on the Asia-Europe route and by 15% on trans-Pacific crossings. 

As a result, shipping lines continue to cancel scheduled sailings across all key routes due to lack of demand, with some shipping lines cancelling up to 20% of the scheduled sailings. This will mean less choice for shippers as well as leading to delays in goods being shipped. It is worth noting, however, that this slump in demand is likely to lead to a decrease in spot rates for container shipping this month and next on most major routes.

Meanwhile, airfreight has seen freight volumes fall by 48% year on year. A significant number of passenger flights have been cancelled, with the biggest impact seen on routes connecting Europe with North America. These scheduled passenger services play a significant role in transatlantic freight. However, a number of airlines have started using their scheduled slots to start running freight-only flights to help with capacity issues, especially on trans-Asia routes as a result of production in China returning to some degree of normality.

The scarcity of services mean that transatlantic air freight rates have soared and are now as high as $10 per kilo – almost 10 times as much as at the start of 2020. Rates from China are currently in the $5 to $8/kg bracket.

The situation in India also has the potential to present significant challenges to UK businesses involved with trade with Indian business. The national lockdown has seen freight operators and logistics firms suspend operations across the country. A number of global leading logistics providers have halted their UK-to-India operations due to the situation. 

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