Logistics Industry Insights: Q2 2020

The Freight Market Braces for the Full Impact of the Coronavirus on the International Economy

 

As the Coronavirus pandemic makes its way across many parts of the world, people are struggling to calculate the impact not only on the economy at large, but on industry across America. For the freight industry however, the market outlook is substantially better than some other areas of American industry.

The retail and grocery industry especially has experienced a sharp increase in demand for food, beverages, and other household goods. It is expected that the demand for food, beverages, household cleaners, and medical supplies will continue for the second quarter.1

American Trucking Associations’ chief economist, Bob Costello forecasts that if America can flatten the curve of the coronavirus and reopen the economy, the fourth quarter could show the signs of a recovery. “You’ll go from seeing the worst quarter in our lifetime to some of the best quarterly numbers, in the fourth quarter that we have seen in decades,” says Costello.2

“While many trucking fleets are exceptionally busy,” Costello said, “there is a significant disparity in the industry. For example, trucking firms that supply grocery stores, hospitals and clinics are working around the clock. But those that carry items such as automotive parts to plants or deliver food to restaurants are struggling.”2

 

US Department of Transportation Expands National Emergency Declaration3

 

Due to the continuing spread of the Coronavirus pandemic, the U.S. Department of Transportation’s Federal Motor Carrier Safety Administration (FMCSA) has issued an expanded national emergency declaration.

“Under Secretary Chao’s leadership, FMCSA is providing additional regulatory relief to our nation’s commercial drivers to get critically important medical supplies, food, and household goods to Americans in need. The nation’s truck drivers are on the front lines of this effort and are critical to America’s supply chain. We will continue to support them and use our authority to protect the health and safety of the American people,” said Jim Mullen, Acting Administrator of the FMCSA.

The expanded declaration stipulates regulatory relief for freight operations that are supporting emergency relief such as:

  • Medical supplies and equipment related to the testing, diagnosis, and treatment of COVID-19
  • Supplies and equipment necessary for community safety such as masks, gloves, hand sanitizer, soap, and disinfectants
  • Food, paper products, and other groceries for restocking
  • Fuel

 

Impact on US Imports as Coronavirus Amplifies Trade War with China

 

Despite the continued trade war with China, Chinese manufacturing is recovering, and its products are expected to hit the US markets sooner rather than later.1

In fact, these products are currently being transported via airfreight providers to hasten their desperately needed arrival to the market.4 Transportation companies are expecting a major capacity crunch as they arrive into the US.5

 

What Can Freight Logistics Expect for Q2 and Beyond into 20206

 

As the Coronavirus takes its course, the performance of the markets in the second quarter will heavily depend on the severity and longevity of the virus outbreak and market closures. If America can successfully flatten the curve, then this disruption in freight should be relatively temporary. However, if it persists as it has up until now, the US economy could slide into a recession, which will only exacerbate the projected outlook for many industries across the nation.

While volumes continue to underperform during these chaotic times, capacity is expected to decline for the immediacy. But as with all trends, after a fall there is usually a rise and the retail economy should recover when the economy reopens.

 

Sources:

    1. Zipline Logistics
    2. Transport Topics News
    3. FMCSA
    4. DAT Freight & Analytics
    5. Supply Chain Dive
    6. Freight Waves

 

 

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