The logistics industry plays a key role in both international trade and the worldwide economy. While changes in the transport sector gradually affect the overall business climate, changing market factors can cause instant disruptions for logistics companies.
2020 was not an easy year due to the coronavirus pandemic, lockdowns, and an economic downturn. So far, 2021 has not been much easier.
Markets are still hearing the echoes of the pandemic year. There are fears of a continued economic decline, new restrictions, and other business hardships. Meanwhile, pent-up demand for raw materials has translated into a massive buying frenzy.
Logistics market experts are talking about the next raw materials supercycle. Over the past century, there have already been four such booms. The last one was observed in 1996 and peaked in 2008. Investment bank analysts at Goldman Sachs and JPMorgan believe the current commodity run-up will exceed that of the previous supercycle. The logistics managers' index predicts that demand for raw materials will continue to grow for at least another 12 months and drive up prices for products and services – including those related to logistics.
Natalya Pavlovitskaya
"Customers are tirelessly ordering raw materials. They are trying to buy everything in advance, put their people and processes to work at maximum capacity, and schedule operations months in advance. As a result, all these raw material purchases are increasing demand for transport and driving the supply of available fleets down sharply. Compared to past disruptions, the transport crisis of 2021 is more comprehensive, and its outcome is unpredictable," says Natalya Pavlovitskaya, Head of AsstrA’s Germany Division.
The average market rates for scheduled road, sea, and rail transportation have skyrocketed. Analyst Todd Fowler of KeyBanc Capital Markets predicts that spot prices for transportation services will rise by 70% in the second half of 2021 and will grow by 30% this year compared to 2020.
The raw material crisis, however, is not the only issue affecting the logistics industry and influencing demand for transportation. Exchange rates and fuel prices are also key macroeconomic factors. In recent months, while experts forecast the US dollar will continue its current descent until 2024. Fuel, which plays a key role in the transport sector, is becoming more expensive day by day. Experts predict that its price growth will slow down in the coming months and plateau in the second half of 2021.
"Due to the growing demand for transport, carriers who liquidated their businesses a year ago have begun returning to the market. Some players are renewing their fleet parks, while others are expanding and queuing up for new vehicles. Today they can expect to wait 7-8 months for a new truck, whereas the previous average waiting time did not exceed 1.5-2 months. Fleet repair and maintenance also takes longer, as increased demand has led to a shortage of spare parts."
Today’s international market conditions are volatile and dynamic. Forecasting is useful in short and medium-term planning, but it does not guarantee success. Companies need to be able to respond instantly to changing circumstances. From a demand and supply imbalance through restrictions and sanctions to congestion on the EU-CIS border, today’s logistics market is full of challenges. Even so, international logistics company AsstrA stands ready to provide clients with reliable, uninterrupted transport services.