Accurately predicting exactly how staggered exits from COVID-19 lockdowns will impact global supply chains is all but impossible. In Europe, much will depend on the extent of the demand recovery and how easy it is to manage cargo flows and storage capacity, according to a senior logistics executive interviewed by Lloyd’s Loading List.

Asked whether the ramping-up of economic activity in Europe and the resumption of freight flows would be hindered or facilitated by the fact that individual countries are set to end confinement status at different times, Hellmann Worldwide Logistics’ chief commercial officer, Jochen Freese, replied:

“It's difficult to say frankly. On the positive side, it could allow for an orderly easing of the current constraints on storage capacity, rather than see cargo being released in a single go, so to speak, which could be a bit chaotic.

“But on the other hand, the extension of lockdowns in certain countries such as Spain, Italy, France and the UK into May means that such (storage capacity) issues will continue in these markets for a good while yet.”

Optimism fragmented; Germany shines

In a previous interview with Lloyd's Loading List at the start of April, Freese expressed optimism that freight markets might return to normal at the of end of May or in early June.

Quizzed on whether he maintained this view today, Freese noted: “At Hellmann, we are dealing with 56 countries and I'm spending a good deal of time on the phone with my leadership teams in these countries to analyse the situations locally.

“If I take a Germany-centric view, with the country making its first moves towards normality, I would probably be as optimistic as I was a few weeks ago. But if I look at the global picture and take into account the extended lockdowns in a number of European countries, Mexico now being more affected by COVID-19 and uncertainty over how the US is positioned with regard to the virus, perhaps a little less so.”

“Germany opening stores with floor space of up to 800 sqm is obviously a positive development and I would expect replenishment orders to resume quickly, followed by a gradual pick-up again in the retail and FMCG segments in the coming weeks.”

Auto sector reboot

He said Germany's automotive segment was also preparing to restart output by the end of the month or early May, even though returning to full production will take some time.

“Of course, one could speculate that the ramp-up of German automotive OEMs [Original Equipment Manufacturers] could be short-lived given that many of their suppliers are in Spain where the lockdown could remain in place until the second half of May. But one would think the OEMs will have contingency provision in place to offset such a scenario. Time will tell.”

Coronavirus drives rates

Coronavirus lockdowns and urgent demand for health care products continues to skew traditional freight demand and supply patterns meaning there is excess container capacity on the seas but cargo uplift shortages in the skies.

“In ocean, there is far less tension than air on the capacity side where more and more airlines have converted passenger planes to carry cargo-only even though they will never give you the equivalent of a freighter's capacity,” said Freese.

“The result is that rates are at crazy levels - the highest I have ever seen. Getting freighter capacity is a real battle.

“It's a far more relaxed picture for ocean freight without a doubt. There is less capacity because of the blank sailings etc. While production levels in China are gradually getting back to normal, the orders are not there yet.

“Moving goods from Europe-China is more of a challenge as demand is stronger eastbound. Most of the westbound containers which were on the water before the lockdowns took effect in Europe are likely to have arrived now at destination ports, only to be confronted with a shortage of storage capacity as a result of supply chains being frozen amid a collapse in demand.”

Freese added: “But there is some new stuff. Not everything has stopped completely. We are seeing some PPE shipments going as ocean freight but volumes are well down on what we'd normally see.

“Nevertheless, I'm convinced the shipping lines will increase capacity in the not too distant future as things improve on the demand side with lockdowns easing in Europe.”

Source: lloydsloadinglist