COVID-19 quarantine measures will hinder market recovery

As the COVID-19 panic slowly unwinds, some of the problems and opportunities that will emerge in its immediate aftermath are beginning to become discernible.

In the short-term, capacity management might be quite difficult. All sorts of barriers have appeared that are making the old ways of working more difficult. For example, there are likely to be restrictions on the movement of workers in the transport sector.

In an early case a few days ago, China imposed more difficult quarantine restrictions on aircrew operating international flights, leading to pilots from UPS and FedEx having to take frequent virus tests. At present this is not a huge tactical problem with freighter services still operating more-or-less normally, however, both FedEx and UPS have complained noisily about the new rules, as have their aircrew.

Similarly, crews of container ships have been stranded in various parts of the world as border authorities impose quarantine periods on them. Some crews are stuck on their vessels whilst other vessels cannot get crews. In the near future, it is likely that the business of crewing vessels will become more cumbersome resulting in less efficient use of shipping capacity.

Getting rid of these restrictions may take several weeks or months after many countries have ended their domestic quarantine policies. Some places in the world may still have a residual presence of the disease, prompting other nations to impose some form of restrictions on workers and travellers originating from there.

A parallel might be made with the imposition of new barriers and checks after 9/11. Although it tends to be forgotten now, some of the suggested measures around anti-terrorism security were quite extreme, such as the idea that every shipping container moving into the US should be scanned for radioactive materials. It is surely quite likely that similar conditions may apply in certain regions, at least temporarily.

The effect of such an approach will be to reduce adaptability of freight transport markets, heightening market booms and slumps. As demand picks up around the world over the coming weeks both shippers and logistics service providers will have to cope with a freight transport supply-side which is not operating at its optimum. Capacity will be depressed by all sorts of obstacles.

Of course, this will benefit those who adapt to the new environment. For example, the profile of ‘sea-air’ services may change whilst the attraction of overland freight between Europe and China or within Asia is also likely to benefit.

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Source: Transport Intelligence, April 07, 2020

Author: Thomas Cullen