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.
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 stationary 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.
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.
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.
Front page picture: Containers being
unloaded at Los Angeles Port; archive
Source: Etienne Laurent/EPA-EFE/Shutterstock
Insight by Morgan Condon
Additional reporting by Clare Pennington and Shruti Salwan
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