With the global freight industry experiencing the full brunt of the coronavirus, many Australian businesses are also feeling the downwind effects of bottlenecks in supply. How will the coronavirus pandemic affect shipping to Australia?
There are no definitive answers, unfortunately, as much of what will transpire in the coming months and years is open to debate. Regardless, a few effects are already being felt. Here are a few things to expect going forward:
A Cargo Storage Crisis
Victorian warehouses and ports are full to the brim with excess cargo from international locations. This capacity problem is expected to worsen throughout May, but only if further restrictions are put in place.
The problem isn’t so much that goods can’t come and go. In fact, Australia was one of few countries to have avoided the 20 March restrictions on imports and exports from China. That’s good news if your business imports goods from China, but it doesn’t mean business as usual.
With 80 per cent of the world’s trade taking place by the sea, it stands to reason that the coronavirus pandemic affects everyone. From manufacturer to consumer, the entire supply chain has been disrupted. The silver lining, however, is that it hasn’t come to a standstill outright but rather it’s under tremendous strain. Not the best news, sure, but not the worst either.
Supply and Demand
Since the problem isn’t fully explained by the reduction in importation of goods, especially from China, why are there supply problems in Australia amidst the pandemic? The problem likely has to do with decreased demand from consumers.
Since everyone is at home under quarantine, the normal quantity of goods demanded has dropped significantly. Of course, this is all aggregate. Some goods such as food and essential items are still hitting store shelves, but many goods simply aren’t in demand.
With a lower demand and excess supply, the economic equilibrium point needs to be readjusted. In other words, businesses are importing too much product that simply isn’t coming off the shelves. Even worse, many such products are having problems hitting the shelves in the first place due to a bottleneck at the ports and transport hubs.
Manufacturers, importers, and businesses of many types understand that inventory is a major driver of landed product costs. Too much inventory that isn’t being turned over leads to depreciated values, inventory holding costs, and can certainly be a cause leading to the failure of a business.
The coronavirus pandemic’s induced lockdown restrictions will continue to aggravate this supply bottleneck and exacerbate current inventory problems. Importers and small businesses should remain optimistic about eases to the restrictions as announced by Victorian Premier Dan Andrews’ recent easing of restrictions in the state.
Gradually easing the restrictions and permitting small businesses to operate as well as permitting the public to go outdoors once again to purchase and consume will likely see the aforementioned inventory bottlenecks eased.
Before the coronavirus pandemic, shipping within Australia was complex enough that freight brokerages were useful for streamlining costs and optimising transport modes. With restrictions and lockdowns in place, the need for a reputable freight broker has never been more apparent. Contact Freightbroker Australia to find out how we can help your business logistics in these trying times.