Only a week ago it looked as if the Coronavirus, officially called COVID-19, was finally slowing down. China, where the virus originated from, started reporting fewer cases and fatalities, as well as slowly started up their manufacturing industry after an extended Lunar New Year break. However, after a surge of new cases in Iran, South Korea, and Italy, the World Health Organization is on the brink of declaring the virus a global pandemic.
With this new surge of infections and the potential of a global pandemic, it doesn’t look like the transportation and logistics industry will see operations return to normal for a few months at the very least. While the end of coronavirus still isn’t in sight, carriers are already looking at what the impending rebound will look like.
The coronavirus has limited all forms of transportation to North America. Flight restrictions have resulted in limited capacity for air freight, and a high number of blanked sailings have put maritime freight on hold. The lack of incoming freight by air and sea has also reduced trucking freight as well.
There is no doubt that when the virus does die down that there will be a surge in demand, which will significantly tighten capacity. What isn’t known yet is how freight rates will be impacted.
Yossi Sheffi, a professor of engineering at MIT and director of the MIT Center for Transportation and Logistics stated there are two possible ways the transportation industry will react.
The best-case scenario, for carriers anyways, is that in a few months “we’ll start having a boom of stuff coming into the West Coast, and trucking rates and rail rates will spike.”
The other possible scenario, according to Sheffi, is that there are no spikes in rates. This is likely to happen if the outbreak becomes a pandemic. If the coronavirus does become a pandemic, it’s going to take six months to a year to recover from and it’s worldwide.” According to Sheffi, this could bring the transportation sector down to levels of 2008 when the great recession began.
Sheffi also warns that the dip in trade as a result of the coronavirus isn’t over. Most of the freight arriving in North America was shipped before the virus put China into a lockdown. Even with manufacturing puttering back up, it will take weeks for it to regain full steam.
Carriers will gain the most during the coronavirus rebound, while shippers will struggle with tight capacity and potentially higher rates. The transportation industry should brace themselves for the fact that the coronavirus rebound might not happen until Q2 or Q3.