The unprecedented year of 2020 is now in its second half. As we approach the 4th quarter, fears of a second wave of the Covid-19 pandemic are growing. Despite the continuing uncertainty, business productivity is gradually increasing. China is the global economic recovery’s key driver. The country was the first to be hit by the virus and is now the first to lead the way out of the crisis.
According to transport and logistic company AsstrA’s Research and Development Division, in 2020 a 4th-quarter increase in production activity will affect the freight market much more than in 2019. That is because quarantine measures have caused pent up demand for transport services.
From January to March 2020, global economic activity declined as a result of the situation in China, the world's largest exporter. In the EU, the first national economy to suffer significantly from the virus was in Italy, where measures were introduced on March 9 to contain infections.
“At the beginning of the pandemic, a number of carriers refused to accept cargo. The transport companies that continued doing business adapted their drivers' schedules and working conditions in accordance with WHO requirements. Therefore, available transport capacity decreased. Against the background of the closure of a number of manufacturing companies in Europe in the 2nd quarter, supply kept up with demand for transport services,” says Vitali Eremenco, Deputy COO for Road Freight Transportation at AsstrA.
Global economic activity is recovering as quarantine measures ease, but export growth remains weak. Carriers redistributed transport assets and have thus been able to keep rates reduced until Q3.
“Freight rates are rising today. The reason is the expectation of a season of high demand and the decrease in transport capacity due to quarantine restrictions. Further transport service pricing dynamics directly depend on the strength of demand, since supply is gradually recovering,” adds Vitali Eremenco.
In April, the World Trade Organization (WTO) predicted that in the worst-case scenario, the decline in global trade would be 13-32%. In August, experts said the decline in world trade would not be critical, thanks national governments’ steps to support local economies. According to WTO estimates, world trade volume will grow by 2.5% in the 3rd quarter, which corresponds to these optimistic forecasts.
The recovery in the European manufacturing sector is evidenced by the growth of the Manufacturing Purchasing Managers Index (PMI). PMI values above 50 indicate sector growth.
“PMI in the EU today stands at 51.7 - the highest level since December 2018. The figure indicates that business are working effectively to overcome the consequences of the pandemic,” says Vitalij Verbilovich, Head of the Research & Development Division at AsstrA.
AsstrA’s transparency partner Shippeo has developed an interactive supply chain recovery map available at this linke: https://livesupplychain.shippeo.com/#/. Information about production facilities and vehicles on the road is regularly updated.
“In early June, the EU economy was estimated to be operating at about 60% of its potential. According to the latest updates, European supply chains are operating at 94% capacity. The consumer goods, metals, and chemical industries are leading this growth, while the mechanical engineering and construction sector continue to recover from the pandemic,” adds Vitalij Verbilovich.