The rising diagnoses of Covid-19 virus, coupled with the increasing need for quarantines, lockdowns and distancing measures, has caused “significant change” to operations in the shipping and logistics industries.
However, Michael Kramer, President of Stolt Tank Containers, in an exclusive interview with Container News, believes that an opportunity exists in this tough period for flexible tank container operators, such as Stolt, to grow their businesses.
“This virus, like other major events over the past 25-30 years, will have significant impact on our industry,” said Kramer. “In the short term, we will likely see an increase in demand as customers will need to continue moving product from their plants to keep production lines running but at some point, demand will fall given the deep global recession that is inevitable.”
This poses the questions: how deep will the recession be and how long will it last? Can the industry ride it out like in the past given the nature of the event hitting all areas of a business rather than a top down event like in 2008?
“All levels of the economy are affected this time around, not just the top tier and this will truly disrupt our activities,” emphasised Kramer.
He notes that many in the industry will come under immense pressure and the handling of the challenge ahead is now critical. “Some new entrants to the market may decide to exit while others who have liquidity constraints or inabilities to operate remotely during the crisis may struggle.”
According to Kramer in the longer term, globalisation will not go away, and customers will look at networks and cargo flows among other things, and many will revisit chosen plant locations and future supply points; safety stock and all supply chains will be scrutinised, and “flows will change thereby impacting our businesses”.
He also predicts additional requirements will be placed on logistics suppliers to be more resilient and responsive in times of need and that the industry will see a shift from mostly “price buying” on the parts of customers to one that is a balance between price, value, reliability and stability.
No matter how long it takes for this pandemic to be resolved, there is no way the industry can avoid its adverse effects he says.
“We have already experienced some of this with China and other markets being shut and it is inevitable that the global economy and global trade will head into a recession or a depression and that will impact the tank container industry greatly.”
Tank Container Correspondent