How the profile market has evolved since the start of the pandemic, until the blockade of the Suez Canal and the start of the conflict in Ukraine

Bolintin Deal, 22 November 2022: The local transport industry has gone through major changes in the last 3 years, and will face new challenges in the coming period as well. Starting from the outbreak of the pandemic crisis and up to the geopolitical and economic uncertainties of the moment, the players in the profile industry had to constantly find new solutions to deal with the paradigm shift and to support customers.

According to Gebrüder Weiss Romania, one of the main players in the local transport and logistics market, the profile market was, in 2019, characterized by stability, the players in the market as well as the customers, having very structured actions, delivery times, routes and the volume of transported cargo. With the outbreak of the Covid-19 pandemic, at the beginning of 2020, the profile market entered an extremely alert and unstable rhythm. Compared to the area of ​​our country, the period March - April 2020 was marked by a sharp decrease in transported volumes and volatility in terms of the countries where the goods came from, the routes and the areas of destination of the goods. After several months of declining volumes, the pandemic context led to an accelerated growth in e-commerce and thus an explosion in transported volumes.

"All these changes have been corroborated with the need for players in the transport industry to maintain functional teams at all times, to avoid delivery blockages, in an extremely difficult labor market, where finding staff has been a real challenge. Above all, the traffic restrictions had a major impact", said Viorel Leca, General Manager of Gebrüder Weiss in Romania.

Costs even more than 6 times higher

The company representative also pointed out that all the instability in the first half of 2020 has led to major disruptions in the transportation industry. First, the costs increased exponentially and, moreover, there was no longer any predictability about them.

"In terms of air and sea transport, the shock wave caused by the pandemic was quickly felt at the level of costs. Thus, if in 2019 a 40-foot shipping container had a shipping cost of approx. 2,500 dollars, in recent years it even reached a peak of 16,000 dollars. In addition, the imposition of traffic restrictions has led to a need to find alternative solutions for customers and create special transport models", emphasized Adelina Anghel, Area Manager East Gebrüder Weiss Romania.

And at the level of reported costs for the transport of goods by air there was a shock. Most of the goods that need a short transit time and are transported by air are brought in on passenger planes. As the imposition of traffic restrictions led to a dramatic drop in passenger air traffic, cargo traffic was implicitly affected. As a result, the costs for air transport have increased significantly, if we refer to the spring of 2020 vs. that of 2019. And in this context, carriers have had to find alternatives to meet customer demands and ensure a continuous flow of goods, especially for key industries where the supply of raw materials or other components is vital.

The semiconductor crisis and its impact on the transportation market

"In addition, the automotive industry was affected by the supply-chain crisis, generating a semiconductor crisis, all the more so as the industry was already facing the great challenges imposed by the pandemic. The semiconductor crisis was caused by several factors and started with the outbreak of the coronavirus pandemic. The adoption of the work from home model has led to increased demand for PCs, mobile devices, servers and network equipment. At the same time, traffic restrictions imposed by each country, such as the establishment of special corridors for freight traffic or the quarantine/isolation of drivers, but not only, have affected the production of microchips. All this led to a delay in the supply chain, which put a lot of pressure on the transport players", said the representative of the company.

Blockage of the Suez Canal, a new challenge for the industry

An important effect in the shipping industry was also determined by the six-day blockade of the Suez Canal by a stranded cargo ship in the spring of 2021.

The blockade of the Suez Canal came at an already difficult time for maritime transport, in the context of a year affected by the pandemic, as well as international trade. According to official data*, the Suez Canal is the most important link in trade between Europe and Asia, with around 30% of the world's daily container traffic passing through it. About 12% of global trade, about a million barrels of oil and almost 8% of liquefied natural gas pass through the canal every day. Financially, each day means an estimated $9.6 billion in traffic along the waterway.

The fact that the Suez was no longer navigable for 6 days had major effects on the shipping industry. Thus, players in the segment faced massive delays and losses due to inability to unload or load cargo from certain ports. Further, all this translated into price increases for most goods.

According to Adelina Anghel, the side effects for transport were seen immediately after the opening of the Suez Canal. "Although most European ports anticipated increased traffic once the problem in the Suez Canal was resolved, there were great difficulties in coping with the sudden increase. Maritime transport lines were, countless times, forced to unload containers in ports other than those of original destination, as a result of congestion in Europe's most important ports, Constanța being one of them. There were quite a few cases when we had to notify customers that their goods were unloaded in other ports in the area, not in Constanța, and that we had to find solutions for the subsequent delivery to the destination. At the same time, maritime lines have often prioritized exports, so that they can take equipment to areas in Asia where the largest volumes are loaded", said Adelina Anghel.

The default alternative route for sea traffic between Asia and Europe is to bypass Africa via the Cape of Good Hope, which adds up to two weeks to the journey. Beyond the delays, piracy concerns, due to the unprecedented concentration of shipping in such a small area, raised new issues in the early months of 2021 and showed, once again, that Europe's supply chain is one fragile.

The conflict in Ukraine has left its mark on local transport

Another difficult moment with immediate and long-term effects for the transport industry was the outbreak of the conflict in Ukraine. With the geo-political situation in the region, Ukraine ceased, at least in the first phase and for certain categories of customers, to be one of the viable options for transport, be it land, air or sea. Thus, the profile industry had to reconfigure its routes and face new major changes.

"Odessa port was no longer an option for cargo traffic, so many of the vessels unloading at this point were re-routed to Constanța, which led to a very large congestion. The authorities in the port area of ​​Constanta tried to take the best measures to cope with the very high traffic, but they could not prevent the delay in unloading the goods and delivering them to customers. As a result, carriers have had to find new routes and approaches to meet demand. Moreover, the port of Constanța has become an essential point in the movement of goods shipped from Ukraine, accentuating the congestion in the port", according to Adeline Anghel.

Once again, the crisis in Ukraine has put even greater pressure on the supply chain and the shipping industry. Geo-political tensions also have a knock-on effect affecting airlines and sea freight. They are already suffering from the fuel price increase.

Second, European countries, as well as the US and Canada, have banned Russian airlines from entering their territories, and Russia, in turn, has banned European and Canadian aircraft from its airspace. In practice, airline routes, already affected by the pandemic, have been reduced, leading to a new increase in prices for the transport of goods.

Rail freight is also affected as many European companies are prohibited from running contracts with Russian railways. This will disrupt freight activity between Asia and Europe that transits through Russia.

For next year, the company's representatives expect that the unstable economic situation, locally and internationally, together with the geopolitical uncertainties, will lead to a decrease in transported volumes. However, the major opportunities come from the area of ​​special customer niches that are increasingly forced to consider innovative transport models and alternative routes to the traditional ones.

"Certainly, in the case of our company, the digitization of services, adding new ones to the portfolio and offering support to customers at key moments have made and will make a difference in a market that has been majorly affected by continuous changes in recent years", concluded Viorel Leca.

* https://www.suezcanal.gov.eg/English/Navigation/Pages/NavigationStatistics.aspx

Image: Adelina Anghel, Area Manager East Gebrüder Weiss Romania: If in 2019 a 40-foot shipping container had a transport cost of approx. 2,500 dollars, in recent years it even reached a peak of 16,000 dollars.

(Source: Gebrüder Weiss)

Image: Viorel Leca, General Manager Gebrüder Weiss Romania: All the instability in the first half of 2020 led to major disruptions in the transport industry. First, the costs increased exponentially and, moreover, there was no longer any predictability about them.

(Source: Gebrüder Weiss)

Image: Following the blockade of the Suez Canal, the shipping lines were repeatedly forced to unload containers in ports other than those of their original destination, as a result of congestion in Europe's most important ports, Constanța being one of these ports.

(Source: Gebrüder Weiss)

About Gebrüder Weiss in Romania

Present in Romania since 1994, Gebrüder Weiss is based on a national infrastructure of logistics hubs located in Bucharest, Arad, Sibiu, Cluj, Bacau, Brașov, Constanța and Craiova. The company provides intelligent logistics solutions for its customers and provides flexible distribution services through road, rail, air and sea transport.

Since 2018, the company has also launched a home delivery service in Romania, focused on cargo orders - Home Delivery, and in 2020 it opened a logistics hub dedicated to this service, from where cross-docking operations are managed, the terminal serving the entire country.

With the launch of myGW in Romania, in 2021, and the integration of ETA (en. Estimated Time of Arrival) into the portal, the company's customers have access to all relevant information from a single account, anytime and anywhere (status, relevant documents, stocks , orders).

One year after the launch of the myGW portal in Romania, 400 users managed 415,000 shipments and placed 30,000 orders through the portal.