Pressures building on air and sea capacity

Published in The New Zealand Shipping Gazette on March 21, 2020

By Chris Edwards, Vice President, Customs Brokers and Freight Forwarders Federation of New Zealand

Logistics companies are currently fielding a lot of questions from customers which we simply don't have the ability to answer. Our counter parts around the world are facing the same situation. The global picture is changing by the day and there are still many unknowns that make it impossible to determine the extent of the impact the Covid-19 pandemic will have on the supply chain globally and what the overall effect will be on New Zealand.

At the time of writing, Air New Zealand had just announced its up coming 85% reduction in capacity on its long-haul network and 80% reduction on its trans-Tasman routes. Jet star and Qantas had also announced major capacity reduction. Qantas will be cutting international flights by 90% and domestic flights by 60%.

I have seen one 'optimistic' commentator suggesting reduced passenger travel will free up space for air cargo. Quite the opposite is likely. While Air NZ has underlined its commitment to keeping trade corridors open, it is inevitable that capacity will be significantly reduced. The likelihood is that air freight costs will rise to unprecedented levels in the coming weeks.

Sea cargo poses different pressures. A new term that has entered the industry in the last year or so is 'blanking' - when cargo ships call at fewer ports. We were seeing a lot of this two or three weeks ago at the height of China's Covid-19 crisis, as Chinese manufacturing slowed to a crawl. With the same now happening in Europe, goods not being produced and ports operating with skeleton staff, we can expect to see more of that.

Even when Europe starts to return to work, there will be supply backlogs, with demand compounded by 'panic­ buying' of food. A shortage of manufacturing parts due to the backlog in Chinese manufacturing will further hamper global recovery - with freight caught in the widespread ripple effect of that.

While the Chinese situation is now starting to right itself - factories are operating and sea freight is moving again - they also have that backlog to deal with and the same air freight issues as the rest of the world. This is all liappening against the 'hidden' backdrop of the fact the New Zealand economy was slowing even before Covid-19. The logistics sector was noticing this from the end of November and things remained quiet after Chinese New Year.

Facing so many unknowns, the best we can do at present is to keep our customers abreast of all new developments and options. CBAFF is regularly updating our members so that they can inform clients and help them to make the best decisions.

We are fortunate tha t we are an agile indus tr y. The recruiting iss ues we have faced mean we have to be flexible emp loyers. We ca n work at different times to enab le shipm ents to be move d ' out of ho urs' and many people can and do work remotely and round the clock.

However, as a sector, we are going to be hard hit. I have already heard of businesses in our industry which are considering having to lay workers off - and we can't afford to lose good people. There has been a lot of discussion about how industries like tourism and forestry will need support through the Government's economic stimulus package. The logistics sector will need to call on that - because it's going to be a hard landing for us.

A group of European transport and logistics operations has recently written an open letter to European governments. The letter, signed by rail freight, cargo owners, road transport, container terminals and ports, points out that it is essential to keep the flow of goods moving, because the alternative could be economic collapse.

The logistics sector is working hard to keep goods moving the best we can for New Zealand now in the face of unprecedented challenges. Once the world gets back into business, we will be at the forefront of supporting the economy; helping New Zealand's manufacturers get the parts and materials that they need, enabling them to get their exports  offshore - and ensuring there are products on shelves for consumers . We need to be in the right shape to do that - and it is important that Government recognises that.