Marina Iljina

Chinese new year brought an unexpected ‘present’ of coronavirus, which has made the entire world uneasy. nearly all economies are experiencing enormous losses, while citizens keep stockpiling protective masks and antiseptics.

The first hit of decline was felt by the world’s transport companies, since chinese imports/exports make a substantial part of their business.

The imbalance of the demand and supply is driving china mad

‘Carrying cargo by air to China constitutes 38 per cent of our company’s total export. The import index is 40 per cent.’ reported Stephan Haltmayer, CEO of Quick Cargo Service, ACEX Alliance partner in Germany.

The picture of Coronavirus in logistics looks like this: trucks stay parked in China, goods stay in warehouses and costs keep increasing. Costs that the clients are, of course, not ready to pay.

‘Our greatest problem today is that as Chinese factories renew their operations, the majority of the products will have to be delivered to the consumers in the shortest time possible. This makes us change the chain of operations, reducing the number of multi-modal transportation in favour of air transport.’ commented Ken Hui, CEO of Fans Trans, ACEX member in China.

At the same time, the majority of airlines have halted their operations or reduced the number of flights to China (both passenger and cargo), which means slower flow of cargo by air. Such an imbalance between the demand and supply is driving the Chinese market mad. Airlines keep increasing their tariffs every couple of days, while the cargo may be sitting for 7 days before it gets taken away.

‘Up to 90 per cent of our exports to China is covered in that country. The majority of banks are closed due to the unexpected events and payments from China get withheld. We must make advance payments, since the CASS IATA charges us for our past transportation costs. This has also had an adverse effect on our company’s money flows.’ reported Haltmayer.

Cooperation has slowed down

Coronavirus crisis has a negative impact on transportation by sea as well. Shipping companies, carrying cargo from and to Asia, cancelled a number of their routes.

‘We must move our container traffic to existing shipping line routes.’ commented Kamran Aleskerov, Director of AGGL, member of ACEX in Azerbaijan. ‘Moreover, cooperation has slowed down and the information on the status of various cargo that we get from agents, who cannot go to work or telecommute due to virus, is delayed.’

Many economies are undergoing difficult times due to a slow-down in the goods’ turnover between countries. People avoid public places and don’t shop that much. This results in dropping sales and smaller income taxes, which automatically reduces the volumes of goods, purchased from abroad.

‘Our clients start ordering regular shipments in longer intervals and, usually, in smaller amounts.’ explained Aleskerov.

The majority of Chinese companies can’t handle the crisis and close, go bankrupt, release their staff and cut wages.

‘The unemployment rates are expected to rise to 6-10 per cent in Hong-Kong and 10-15 per cent in China overall.’ predicted Ken Hui.

An economic downturn can be felt even in countries that have been diagnosed with Coronavirus only recently. There was only one reported case of Coronavirus in Turkey until 11 March 2020, but their logistics has started limping much earlier.

Exports reduced by a shortage of raw materials

‘The main goods that China exports to Turkey are raw materials for semi-finished goods that our country then exports to Europe.’ says Melis Oman, Director for Development at Airon Transport and Logistics, ACEX member in Turkey. ‘Lack of raw materials reduces our exports.’

Russia’s logistics companies have already encountered a downturn.

‘We have felt a lack of Turkish containers for marine shipping.’ commented Denis Bobrankov, ACEX Commercial Director in Novorosijsk. ‘According to our predictions, the period of stagnation will continue until mid-summer and the world’s shipping companies must focus on surviving it by maintaining operational resources and valuable employees.’

More than 400 international fairs cancelled

The majority of international logistics events (more than 400 fairs) have been cancelled due to the virus threat. Steven Alves, Managing Director of GFFG, ACEX partner in the USA, says: ‘I focused all of my efforts on organising our annual conference, which was supposed to take place in Bangkok. We have postponed our event to September and relocated it to Berlin, but continue to follow the healthcare situation in the world.’

Global economy is testing its survival chances without china

Coronavirus pandemic coincided with the global economic crisis. The trade war between the USA and China, unstable situation in the Eurozone, sanction wars, protectionism and other issues have clearly shown a shift towards an increasing inefficiency of globalisation in the long-run.

‘China has introduced unprecedented measures by stopping industrial production due to the pandemic. All economies are now forced to test if they can live without China and find ways to grow during the recession. In a way, it is a shift towards internal regional trade and forced experiments with new concepts and strategies.’ commented Miroslav Zolotarev, Board Chairman of ACEX Alliance.

Partnerships over money

However, despite the complicated situation in logistics, the majority of companies manage to stay afloat with new alternative and costlier operation options.

‘There are changes in the established pattern of production supply, e.g. instead of purchasing fruits and vegetables in China, they are now brought from Morocco, Israel and Turkey.’ commented Bogdan Butyrev, Director of Nawinia air and selected cargo department, ACEX member in Moscow and the Far East. ‘It all needs to be delivered, which requires operators to change their established operating patterns and promptly look for new partners.’

Of course, at the moment there is little that can be done by global company logistics experts to make a difference. The only solution today is to follow the situation and keep the business going by looking for alternative working methods and, finally, sit out until the end of the pandemic.

‘The primary task in this situation is to maintain the relations with our partners and companies inside the Alliance and strengthen them. The period of instability will end and partnership will mean more than money in the new development stage!’ ensured Miroslav Zolotarev, Board Chairman of ACEX Alliance.

ACEX group

acex international logistics group has been offering complex freight forwarding services using all types of transport and customs clearance all over the world for already 23 years. the company’s offices are established in the largest cities in russia, the baltic states and finland. the network has regional partners in 211 countries. the warehouse area constitutes 75,000 sq. m, offering storage space in all largest european and cis business centres. the main offices are located in russia, lithuania, estonia, latvia and finland.