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The New Normal For Global Logistics In 2022 Amid COVID-19

April 25, 2022, Author: admin

The advent of the COVID-19 pandemic exposed the many vulnerabilities of global supply chains, which will continue to plague logistics industries today and into the foreseeable future. Close cooperation and high flexibility are needed to be prepared and respond quickly to the crisis and well into the post-COVID era.

 

A couple of challenges carriers, shippers and logistic providers faced in the past year include the ongoing pandemic, port congestions, global supply chain issues, capacity shortages, and rising freight rates. Looking ahead this year, experts predict that global supply chains will continue to face immense pressure, with some relief only arriving by the second half of 2022 at the earliest. Moreover, consensus points out that this pressure will affect the freight market well into 2022, with freight rates unlikely to return to pre-COVID times. Port congestions and capacity issues will continue to mesh with the consumer goods sector’s high global demand.

 

Monika Schnitzer, a German economist, expects the latest Omicron variant to further affect global shipping times in upcoming months. She warns, “This could exacerbate the already existing delivery bottlenecks.” Furthermore, she states that shipping times from China to the U.S. have already increased to 100 from the usual 85 days because of the Delta variant, which may increase further. These problems are also affecting Europe, wherein current events remain tense.

 

Carriers experiencing good times 

Although shippers faced high pressure in 2021, container carriers, in contrast, experienced a good year. Alphaliner, a well-known provider of shipping intelligence, published a forecast wherein the ten leading publicly-listed container shipping lines are set to earn around USD$115-120 billion in profit in the previous year. This windfall profit could lead to the transformation of the industry’s structure as the earnings get reinvested, Alphaliner adds.

Xeneta data analysts report that the initial contracts for this year reflect the record-high levels that lie ahead. Xeneta CEO Patrik Berglund poignantly asks, “When will it end?”. He expresses his concern over shippers needing rate relief only being met with even more costly blows to their bottom line. In addition, he admits that the combination of maxed-out capacity, high demand, dynamic consumer habits, port congestion, and general supply chain disruptions all make the perfect storm that is fueling an unprecedented rates explosion.

 

Global players are expanding

In December 2021, Maersk announced its USD$3.6 billion acquisition of L.F. Logistics, a logistics expert based in Hong Kong, to improve its logistics capabilities and coverage in the Asia Pacific. Another major deal announced recently is from Singapore-based PSA International Pte Ltd, in which they signed the acquisition of all the shares of BDP International, Inc. from Greenbriar Equity Group, L.P. BDP, headquartered in Philadelphia, USA, is a globally integrated supply chain, logistics, and transportation solutions provider. 

 

A new giant enters the scene

China Logistics Group, a new Chinese logistics provider, was also launched back in December and received much attention from the industry. According to China Central Television (CCTV) and Reuters, the company has a charter capital of around USD$4.7 billion and is actually a merger of five state-owned companies:

  • China National Materials Storage and Transportation Group
  • China Railway Materials
  • China National Packaging Corporation
  • China Logistics
  • Huamao International Freight Limited Company Shenzhen Branch

This new logistics provider will offer numerous logistics services, such as distribution, warehousing, intermodal transportation, packaging, and cross-border e-commerce. With this group, China plans to strengthen its intermodal transportation services and cross-border logistics business, as well as compete with current global logistics players.

 

Forwarders add transport capacities 

Many global freight forwarders have launched a range of new services between the United States, Europe, and Asia in response to the ongoing demand for greater transport capacity. For instance, GEODIS, a French logistics provider, launched their own-leased full freighter A330-300 aircraft to upgrade their AirDirect services in the regions mentioned above. This move came right after chartering their first vessel to alleviate container capacity shortages in their Asia-Europe routes. Operating between Chicago, Amsterdam, London, and Hong Kong, the aircraft also serves the China-Europe route during peak seasons. 

Another company that has proved the profitability of providing self-controlled airfreight with own-leased aircraft is DACHSER USA, a subsidiary of Dachser, a well-known global logistics provider. Since launching its weekly trans-Atlantic freight services between Frankfurt and Chicago back in 2020, more than 85 per cent of the company’s U.S. customers repeatedly rely on the service between Europe and the United States.

 

There is much work to be done

The recent pandemic and current world events mean that getting global logistics back to normal may be more challenging. Automation, digitalisation and ongoing investments in transportation infrastructure will help make airports and ports more efficient, which would help optimise logistics further. Labour shortages in the way of truck drivers, for instance, also mean more effort is required to maintain current logistics supply chains.

 

Conclusion

Despite the challenges mentioned above, with our vast knowledge and experience, Global Cold Chain Solutions strives to continue to provide reliability for the Life Sciences and Healthcare industry.  Feel free to contact our team today to find out more about our cold chain solutions.