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Aeolus Perspectives 18th Edition: The day after Coronavirus: trade and global freight figures due to the global crisis


Aeolus Perspectives 18th Edition: The day after Coronavirus: trade and global freight figures due to the global crisis

The emergency has dealt a severe blow to global trade and international traffic. To grab a possible recovery, trade and T&L companies have not to pay attention and possibly foresee all the evolutions in the global scenario and even also each local one.

The Coronavirus outbreak hit hard the global freight too. According to a simulation by the International Transport Forum (ITF), the restrictions to contain Covid-19 result in a strong reduction of global freight transport volumes of more than one third in 2020. The overall national and international freight could be about 37% lower than the level foreseen before Covid-19. Detailing, a cut of more than half is thrown for ASEAN countries, Russia/Central Asia, and India.  In Europe and America, the lowering should be around 40%. The Andean countries could have a 50% fall. Mostly because of the extraordinary growth of online shopping all around the world during the lockdown, urban goods transport proved to be more resilient with down only 8%.

These figures are the consequence of the heavy setback in global trade too. World Trade Organization (WTO) economists believe the global merchandise trade is set to plummet by between 13% and 32% in 2020 due to the COVID-19 pandemic. And that is partly confirmed by recent research by McKinsey Global Institute too. Already some months ago, the economic research institute of the international consulting group McKinsey & Company assumed the global unconstrained trade demand could drop by as much as 13% to 22% in the second and third quarters of 2020. During the global financial crisis of 2008, the largest quarterly decline in trade volumes had stopped around 5%. The negative foreseen impact on global trade could be even worse than the one on global GDP (estimated to decline by 3% to 8%) and probably even longer. Trade volumes could take 15 to 48 months to recover to fourth-quarter 2019 levels. Many trade and transport and logistics (T&L) companies are already suffering the consequences with large falls of volumes e revenues and foresee a sensitive turnover reduction for this fiscal year.

By McKinsey researchers, the next global trade development now strictly depends on different scenarios that can potentially happen. And these last ones are set by times and efficacy of responses by both public-health and economic-policy as well as how businesses and citizens react to these initiatives. But the Coronavirus impact surely can vary significantly by commodity mix and geography too. For instance, even in an effective health response and partially effective economic-interventions scenario, the short-term trade volume of automobiles (expensive and durable goods) is forecast to down by more than 50%. That is because of extended shutdowns for some factories and decreased spending by consumers too. In the same general context conditions, the trade volume of cereals (basic consumer goods) should not decrease by more than 5%. That should reasonably be because of the higher degree of production automation as well as of the increase in demand for at-home food consumption. The reduction can be even more restrained for companies of which the suppliers are more worldwide spread out. This feature can mean less control of the global supply chain - that can be solved, however, applying a more structured risk management approach -, but reduce the effects of an unexpected stop of productions and supply. As matter of fact, the effects of the crisis also on individual trade lanes vary significantly by which commodities are transported on that and by COVID-19 emergency status in each region as well. In Asian countries, the effects are expected to be larger and stronger on exports than on imports, while the impact on east-west trade lanes is likely to exceed that on north-south lanes.

After managing the crisis’s immediate challenges, companies have now to mind about their return to the normal (or prepare themselves to a "new" normal), reckoning with all the potential after-Coronavirus scenarios may happen. A good strategy to face these uncertain times sounds having a more and more real-time and deeper awareness of all the trends. In an even wider and more global trade and supply network any and some new variables must be considered for correctly measuring the complex and enlarged impacts of the Coronavirus crisis: commodity, regions, modes of transports, trade lanes. A detailed understanding of the factors affecting the overall supply and demand enables companies to develop short-time a real-time assessment of the most probable and relevant scenario any moment to better face unexpected challenges and also find out opportunities. The global T&L companies can make conscious decisions for better setting assets and talents or refocusing their sales force on commodities and trade routes that are less impacted or fast recovering. And, the same way, infrastructure providers and operators can quickly and accurately evaluate their capital investment plans under alternative scenarios.

The crisis is a threat to trade and T&L business but can also place the opportunity to change and better-enhance processes, find new ways of working, seek out and catch new chances on perhaps new markets. COVID-19 will surely have a strong and lasting impact on the world economy and single companies too. But trade volumes will recover. Companies that will be able to forecast and correctly read the scenarios and quickly and bravely change according to them will emerge with a real competitive advantage. A new era is next to come. A new way of mind is necessary for living there.

“COVID-19 transport brief. How badly will the Coronavirus crisis hit global freight?”, ITF – International Transport Forum, May 11th 2020
J. Condon, S. Gailus, F. Neuhaus, M. Peña-Alcaraz, “Global Freight flows after COVID-19: What’s next?”, McKinsey & Company, July 2nd 2020

TAGS: Aeolus perspectives, Transportation, Logistics