GLOBAL SUPPLY CHAIN UPDATE – An Overview of the Domestic and International Scene

Compliance Alert

We are in the midst of an unprecedented global crisis. There is an information overload as experts share opinions, statistics, and projections about COVID-19’s effect on the economy. It is now clear that the intercontinental supply chain will not return to “normal” until late Q1 or Q2 2021. As time passes, we are able to see more clearly how the pandemic is impairing international and domestic business. Furthermore, we can begin to plan for the future. In this update, we will look at the current status and forecasting of the following situations – global economy, steamship lines, container storage and domestic trucking for 2020.

GLOBAL ECONOMY
Current Situation: The good news is that there are some countries who are already seeing a decline in the coronavirus curve. However, there are other countries that are still paralyzed by the virus and are limiting their engagement in the global marketplace. While China’s ports are all fully functional, container throughput is down between 15-30% depending on the port. We must keep in mind that countries will reopen at different times and with varying capacities.

Forecast: In 2009, the global economy saw a decline of 0.1%. Economists are predicting 2020 will see a loss between 2-3%. While there will be periods that the economy shows signs of encouragement, they will be short lived and not have a significant effect on the overall recession.

STEAMSHIP LINES
Current Situation: Blank sailings are increasing at a historic pace. Announced cancelations through the end of June are expected to halt 6.4 million TEU’s. Trans-Pacific sailings have seen a decrease of 20%, while the Asia-Europe traffic has aborted 25-30% of scheduled sailings. Financially speaking, the news isn’t much better for steamship lines. Eleven carriers have a large amount of short-term debt due in 2020. Six of them have negative working capital. With decreased cargo movement, many will not survive discounted shipping rates.

Forecast: Until countries begin to re-open, international orders will continue to either be decreased, delayed, or cancelled. We can expect to see the number of blank sailings continue to climb as the year progresses. There will be short peaks during traditional retail seasons, but these spikes will be flatter and shorter than their usual historical tendencies. If there is a war on shipping rates, we can expect to see some of the steamship lines that were already facing financial woes to either dissolve or merge with those that have a stronger balance sheet.

CONTAINER STORAGE
Current Situation: Ports and warehouses are starting to fill up. In a recent survey, 35% of the responders said they are either close to or at full capacity. Many also said they are looking to the private sector for additional space to stockpile containers. Some terminals are offering long-term storage at alternative locations in order to keep their dock space functional with cargo, both essential and non-essential, moving at a regular pace. Steamship lines are beginning to offer programs where cargo is stored at a designated location during transit.

Forecast: The cargo storage situation will vary from location to location. Several factors will determine the fluidity of a port including container throughput, amount of essential cargo, site capacity, and customers response. Some ports will see severe congestion, while others will maintain a healthy flow of container traffic.

DOMESTIC TRUCKING
Current Situation: Truckers are the lifeblood of the domestic economy. The good news is that there is an abundance of truckers ready to move cargo from the terminals to customers. However, there are also factors that are hindering the delivery of the cargo. Terminals are not operating at normal speed as they adjust to a number of issues including daily screenings of truckers and workers for COVID-19, reduced hours in order to cleanse and sanitize equipment, and overall staffing issues. In addition, it seems importers are taking longer to unload the cargo which reduces the number of loads a trucker can deliver each day.

Forecast: As the coronavirus is contained and companies get back to work, the stashes of containers will eventually begin to flow as normal. Expect to see bottlenecks at the terminals during peak retail seasons. Each area of the world will see different challenges, which will allow them to return to normal operations at varying times. That being said, it will most likely be 2021 before the flow returns to pre-COVID-19 conditions.

While the pandemic is inflicting deep wounds to the global economy, we will recover. Vessels will begin to sail in a reliable cadence. Containers will move in and out of the terminals without having to be stored for long periods of time. Truckers will travel our freeways with an assortment of commodities. It is not a question of if, but a question of when the supply chain will return to normal. It will take patience as every affected country has unique criteria in place for their transportation and economic recoveries. Domestically, the same applies by region, state, and county. The economy will recover and while it will most likely take another year or longer, we will prevail.

The experts at TLR are monitoring the global supply chain and cargo movement trends and activities on a daily basis. Please feel free to contact us with any questions at BD@shiptlr.com.

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Heather Kiesel

News & Updates

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