Share:

COVID-19 Effects on Transportation Modes

Carolyn Salzer • 4/16/2020

Wonder how shelves continue to be stocked or why certain items continue to be unavailable? As the COVID-19 situation evolves, disruption continues to impact transportation and supply chain networks. However, decreased volume and increased consumer demand aren’t the only factors at play. Each transportation mode such as rail, ports, air, and trucking is experiencing varying levels of delays, restrictions, and workforce capacity issues. These sudden shifts in normal operations are disrupting industries and employees working to keep essential goods moving through the supply chain. 

Cushman & Wakefield’s Logistics & Industrial professionals unpack key insights and provide commentary on each mode of transportation.  

Truck Freight 

Overall, truck freight has slowed down following an initial spike at the beginning of the pandemic. However, the federal and state governments are pushing to keep the supply chain moving despite tightening truckload capacity.  

How have truck drivers been affected? 

  • Commercial truck drivers were exempt from the non-essential business closures and stay-at-home orders implemented by most states. 
  • Truck drivers have reported long wait times at pickup and delivery points due to decreased on-site personnel and busier receiving schedules. 
  • Some carriers are waiving physical signatures on LTL and small parcel shipments; however, drivers are still expected to record the time, any exceptions, and name of the consignee. 2 
  • Truck drivers are less willing to book loads to hard hit areas causing spot market and ad hoc rates to climb. 2
  • Amenities such as food and restroom stops are becoming a challenge to truck drivers along certain routes. 
  • Across the US, there’s been a significant drop in volume in lanes that normally have freight. 
  • Less-than-truckload (LTL) freight cannot be held in destination terminals due to limited space, resulting in extra fees. Many LTL carriers are then returning freight less than one day after a load cannot be delivered to a closed facility. 2

“We are seeing increased detention on truck loads, offsetting some of the savings from the temporary hours of service removal whereas LTL has seen a change in flow of goods for consolidation/deconsolidation. Refrigerated truck rates may continue to increase for urgent orders of essential goods while eCommerce businesses rely on spot market providers to quickly replenish their distribution centers in order to fulfill increased online shopping orders.” 
Tray Anderson | Executive Managing Director, Logistics & Industrial Lead, Americas 


Port Cargo 


According to global transport and logistics company, Kuehn + Nagel, port terminals are prioritizing essential products such as medical goods over other shipments, however cargo remains flowing into the U.S. and Canada. In addition, the majority of East Coast ports have maintained normal operating hours, while some ports and container freight stations have seen reduced hours or temporary closures. The Port Authority of New York & New Jersey announced they have remained open and operating under normal conditions while their marine terminal operators, longshore labor, and warehouse/distribution center operators are working to support the 28 million consumers in the hard-hit region. 

What else have ports been experiencing during this time? 

  • Cruise ship terminals have been hit hard as movement is a significant component of revenue for Southern ports like Miami and Tampa. 2 
  • According to recent data from New Harbor Consultants, Pacific Coast ports experienced 20% lower import TEUs in Long Beach and Los Angeles compared to the year-earlier month.
  • The table below shows volumes were still growing on the East Coast in February, up almost 14% in Savannah and Charleston.  

Port Loaded TEUs – Feb 2020 
Changes vs. Prior-Year Month % 

Import

Export

Long Beach

-17.9

+19.3

Los Angeles

-22.5

-5.7

Oakland

-9.2

+15.4

Northwest Seaport

-8.0

+4.5

Vancouver

-11.8

-8.6

Houston

+3.4

+28.2

Savannah

+13.6

+19.7

Charleston

+13.5

+19.6

Virginia

Not Available

Not Available

Baltimore

-12.8

+8.0

NY-NJ

+1.7

+0.4

Source: New Harbor Consultants

“Ports recognize the critical role they play in the supply chain. From port directors and harbor pilots to stevedores and line handlers, they all are committed to fulfilling their role in moving product off the dock. The State and Federal government has declared these operations as ‘critical’ and ports will remain open. Port Authorities are making every effort to meet the challenge of providing for the safety and health of these workers.” 
 - Bill Throne | First Vice President, Cushman & Wakefield | Thalhimer 


Air Cargo 


Right now, the air cargo industry is out of tune as global supply chains are tightly interdependent. According to freight forwarder, Agility Logistics, air cargo capacity out of China was off 39% in February. As China’s supply chain aims to get back on track, rates for moving goods will continue to climb. It’s impossible to predict when capacity will stabilize but premium levels may be seen for some time. 

How have travel restrictions played a role in air cargo shipments? 

  • Trade flows are still operating with reduced staff and/or work-from-home policies despite travel restrictions. 2 
  • Passenger planes have started to move air cargo as ship and rail decreases. 2 
  • Europe and North America’s trade lane is dominated by passenger aircraft so there has been a decrease in available capacity. 2   
  • There is limited available capacity in the overall market as airlines cancel flights and some freighters. 2 

“The historic balance between air cargo demand, capacity and rates has rarely been so disrupted as it is in the midst of COVID-19. We will get back to a more normalized state but that will take time as different regions of the world ramp back up demand for goods from overseas at different times. A significant share of that demand may require air shipment to jumpstart manufacturing and distribution in the U.S. Air handling capacity in major cargo hubs may be extra-burdened in the interim. In the long-term, growth of international eCommerce shipments and accelerating of global supply chain movement will drive demand for air cargo capacity – including on-apron and nearby warehouses.” 
Ben Conwell | Senior Managing Director, newCommerce Advisory Group, Logistics & Industrial Services 


Rail Freight 


In the midst of the ongoing crisis, rail car volume continues to be on par or slightly below year-over-year activity. Railroad giants, BNSF and Union Pacific, felt an initial shift as they would have handled China’s imports. Across the U.S., rail car storage is in demand, especially tanker cars that carry and store crude oil. 

How have volume and storage been affected? 

  • Rail freight continues to flow but a drop is be expected in Q2. In addition, U.S. ports have seen a reduction in imports which has subsequently caused lower rail container volume. 1 
  • There has been some difficulty locating enough SIT car yard storage as empty cars crowd the controlled lines. 1 

“We should start to see formal economic rail data and freight car volumes in the next few weeks as they tend to lag, but the impact of COVID-19 and the Russian/Saudi Arabian crude oil market overload is anticipated to have real impact on railroads and rail car demand. Like most modes of transportation, rail is a critical part of America's infrastructure. From delivering raw materials to manufacturing facilities, essential equipment to hospitals, fresh vegetables to grocery stores, and grain to farms with livestock, rail will continue to play a critical role in supply chains as we battle this crisis.” 
 - Michael Flynn | Director, Logistics & Industrial Lead, Americas 

While it’s still uncertain how the rest of the crisis will play out, we will continue to see prolonged effects from COVID-19 throughout all areas of the supply chain. 

The transportation industry has plenty of experience when it comes to disruption and changing environments, but its fast-paced and adaptable nature puts it in a solid position to continue to weather the evolving situation.  

Sources: 

1 https://www.supplychaindive.com/news/coronavirus-intermodal-freight-rail-demand/574183/ 

2 https://www.kn-portal.com/updates_on_coronavirus 

Related Insights

V&A Automobile Dealership Industry Challenges Report
Article • Valuation

Automobile Dealership: 2020 Industry Updates

Auto dealerships are probably the least talked about asset class in commercial real estate – and yet, they’re in the early stage of epic disruption—disruption that could potentially upend the entire auto-retail business over time.
Stephen Kay • 1/23/2020
Covid-19 lease update (image)
Article • Occupier

Lease Provisions to Explore Amid COVID-19

Many of you are wondering if and how your financial obligations under your leases might be alleviated, either by the lease language itself or through your insurance policies.
Ken Ashley • 4/1/2020
Debt Markets (image)
Article • Investment

What to Watch in the Debt Markets

Equity market volatility is at some of the highest levels on record and private CMBS issuance has ground to a halt leaving banks with an inventory of mortgages stuck in the securitization pipeline.
David Bitner • 4/6/2020