LONDON (ICIS)–Supply chains continue to be
challenging throughout Europe as legislators
roll out tighter restrictions on movement to
stop further spread of coronavirus.
While the chemicals industry remains a
‘critical infrastructure’, essential to support
the flow of goods in the food and
pharmaceuticals sectors, supply disruptions
have had an effect on trade-flows throughout
the region.
As China slowly returns to production,
congested supply chains have rippled across to
Europe, exacerbated by unruly demand as
consumers across the value chain stockpile
material.
The impact of coronavirus has mirrored a
military attack: hampering movement over land,
sea or air in a bid to prevent death tolls from
climbing higher.
LAND
Crude oil prices
continue to fall and the impact of this is
trickling downstream into the chemicals sector.
With many chemicals not able to be stored on a
long-term basis, this will also have an impact
demand in the container segment; slower
downstream production will leave tankers fuller
for longer.
When material is ready to be delivered, truck
deliveries are also beset with delays bound
together by extra layers of red tape.
Legislators across Europe continue to update
more stringent measures restricting movement to
contain infection rates, which has caused some
vehicles to be delayed by lengthy
customs checks.
Previous checks done at Polish border points
had been impacting traffic in the surrounding
countries, but this has since cleared and
traffic remains at steady levels.
Although freight drivers are free of these
restrictions, the shutdowns have still had an
impact.
Austria have continued carrying out rigid
checking, which is delaying the supply of food
and medicines to Italy, which has so far
registered the most coronavirus-related deaths
worldwide.
Drivers have been subject to more thorough
checks at borders or are prevented from leaving
the vehicles to unload cargoes in a bid to
contain the further spread of the virus.
Along with the added bureaucracy, truck drivers
have personal concerns about entering places of
higher infection rates, where facilities are
limited for them, also slowing down the supply
chain.
With these constrictions on supply, and the
lack of downstream production in the automotive
or electronic downstream markets, many products
in the chemicals sector are likely to remain
stationery for the foreseeable future.
But for those products used in food packaging
and the medical equipment, transporting these
goods will remain a priority throughout
quarantine measures, with logistics a key issue
for all concerned in the value chain.
SEA
Demand in the
shipping sector has deflated as the industry
struggles with the new legislative challenges
brought about by coronavirus.
Many ports remain open for business as usual
including the Port of Antwerp in Belgium – a
key petrochemicals hub in northwest Europe – to
ensure that pharmacies and supermarkets
throughout Europe continue receiving supplies.
Throughout Europe, some authorities such as the
Port of Rotterdam in the Netherlands are
rolling out strict enforcement of free
practique – meaning that vessel captains must
ensure authorities that the ships crew are not
carrying contagious diseases with them.
Along with this, there have been quarantines in various
European ports, which has served to slow
supply chains in the shipping industry.
Despite more competitive prices, shippers have
slapped premium on deliveries to Italy because
people are reticent to travel there at this
time.
As with many chemicals companies, Credit Suisse
said major shipping companies like Maersk and
Hapag-Lloyd are recording an impact on their
financials.
AIR
The aviation industry
has been hit hard by the pandemic, with
commercial travel falling to a standstill.
Because of the crashing loss of demand, jet
fuel prices fell
to historic lows in the European market.
Budget airline EasyJet announced this week that
it has grounded its entire fleet, with no
indication about when they will restart, and
many airlines will struggle to survive without
government help.
This has impacted freight planes, as airlines
faced bottlenecks in getting appropriate
permissions and crewing cargo flights amid
quarantine restrictions.
The International Air Transport Association
(IATA) praised the European Commission – the
EU’s executive body – for acting with “speed
and clarity” in providing guidance to ensure
crews can efficiently operate exempt from
quarantine measures.
To ensure shipments of medicine and medical
equipment, the IATA urged EU member states to
act quickly in ensuring the guidance is
followed, and other governments were also
encouraged to follow suit.
Overall air freight is used to transport just
over 52m tonnes of goods per year, which
account for more than 35% of global trade by
value, but this equates to less than 1% of
world trade by volume, according to IATA.
Any constraints on this will put further
pressures on logistics supply.
Because air transport has been hit so hard,
many distributors may choose to send cargoes by
sea.
Analysts from investment bank Credit Suisse
said this week that their estimations assume a
majority of manufacturers in China have now
returned to work.
Global delivery services firm FedEx has
recorded a boost in demand from Asia, said the
bank, as its China flights have been full over
the past fortnight and has achieved record load
factors on intra-Asia services from its hub in
Guangzhou.
FedEx are now reacting to the Europe-US travel
ban by extending transit times, “dynamic spot
price management and peak surcharges, clearly
suggesting the move will raise prices due to
supply constraints,” according to Credit
Suisse.
