Effects of the Coronavirus COVID-19 on the transport sector

12.03.2020

Coronavirus seems unstoppable. The virus that originated from China not only has had a fatal impact on people’s lives but it is also threatening the entire transport world, as bans and border closures are being applied. One of the most important is that one of Italy, where from this March 10th, mobility is restricted throughout the country. Since February 2020, many things have changed and will keep constantly changing because of the coronavirus and its effects on the transport industry. Moreover, outside the European borders the situation remains critical in some countries of the Mideast, creating troubles on intercontinental transport.

How does the Coronavirus affect the logistics industry worldwide?

Transport in any form is being affected. The Association of European Freight Forwarders Clecat and the Polish Chamber of Forwarding and Logistics have raised their warnings about the limited export loads and the extra delays of port operations due to the lack of transshipment operators and warehousemen. Eastern countries are also starting to notice the intensification of limited transport due to the coronavirus , making the European economic black whole bigger and stronger. Delayed deliveries and increased prices because of the coronavirus.

Combining the fact that the number of goods imported is limited along with the shortened routes the transport companies carry out, we can be prepared for some big changes on a trade level as a result of the COVID-19 outbreak. As the expert Jerome de Ricqles estimates, that in a not so distant future, the inability to cover the demand will result in an increase of freight rates and the overall transport costs by the end of March. Inevitably, this will have a direct impact on the final prices of goods.

How does the coronavirus affect the freight sector in China?

Let’s be clear, China is a very big supplier in a worldwide level and many transport companies within Europe get to transport goods that carry the “Made in China” label. Given the fact that the country is facing bans and border closures, exporting becomes more complicated for both sides. As a result, a significant number of containers full of merch produced in China, are immobilized due to the COVID-19 outbreak.

Despite the coronavirus outbreak in December 2019, China is starting to reopen its factories. It feels rather optimistic to see that for the electronic machinery goods, country’s largest export, the resumption rate of factories are 90% in Zhejiang (as of February 20), over 60% for Jiangsu (as of February 16) and Guangdong is at around 50% (as of February 19), as brought by Ganyi Zhang. These number definitely give high hopes, but there’s still a long way to go until the whole industry restores back to its full capacity.

What effect does the Coronavirus have on the European logistics market?

Trying to maintain calm, the European authorities are taking very seriously the threat posed by the coronavirus to the entire continent. Since the beginning of the crisis blunt measures are being taken in order to stop the expansion of COVID-19 within European borders. These preventions are already directly affecting the transport of goods by road, especially in places where more cases have been registered. A great example is northern Italy or the borders with the Asian countries.

More precisely in the transalpine country, the most restrictive decisions have been already taken, to control the epidemic menace. This on its way has been having a series of important consequences for transport.

After several containment measures, the Italian Government has taken another step and has decided to "isolate" the whole territory, including Milan, nation's most powerful economic engine. These severe measures will be extended, for the moment, until April 3, directly affecting millions of people and therefore the entire country. In the case of transport, the situation is that “any displacement” of entry and exit of the territory has been banned except for “non-extendable labor requirements or emergency situations”. What this restriction mean for the professional drivers is that “cross-border workers will be able to enter and leave” to carry out their work and return to their countries of origin unless the people who travel are subject to quarantine or have tested positive for the virus.

What does the coronavirus mean for drivers?

In these regions it is mandatory to carry out medical checks on drivers (taking the temperature and evaluation of symptoms) at the loading and unloading points. In some more extreme cases carriers are even required to wear a mask, something that many of them have already denounced the Italian transport associations for.

By wanting to reduce risks and given the fact that the situation is already much complex, Italy, claiming health reasons, decided to momentarily cancel the Schengen Agreement by closing its borders so that they can establish medical controls at the access points. Although we are currently far from that scenario, the situation changes day by day.

Italy is, as we say, the most affected country in the European Union, but the cases registered in all the surrounding countries are increasing. In Spain, hundreds of confirmed cases (mostly minor) have already been exceeded, with outbreaks in Madrid and the Basque Country. And although no preventive restrictions have been taken yet, it could eventually occur in case of a drastic increase in contagions.

The slowdown that all these measures are assuming is undeniable, at all levels. In fact, and focusing solely on the transport of goods by road, we must not only meet the direct costs of these restrictions. What we also need to take into consideration are all the indirect ones, starting with the shortage from the points of origin, which necessarily implies a lower need for loads, up to economic losses that these adversities may suppose to the transport companies, being able to undertake cuts in their budgets.

Taking into account that the number of cases will not stop growing for the moment, it becomes more important to provide proper information on the evolution of the coronavirus. Of course, we need to be cautious not to fall into sensationalism and avoid making decisions that may be irreversible for certain sectors. Prevention is definitely key and a favorite alternative that many countries use when it comes to treating this global agitation. However, commerce will never completely freeze and as it happens in all such cases, after a couple of months, the coronavirus will be a bitter memory for all of us to recall.