The strategic importance of road transport is shown now more than ever. During the period of the coronavirus epidemic, it is crucial that the sector be able to play its role and guarantee the smooth functioning of supply chains, in particular for essential products such as food and medical equipment, recalls the IRU in a press release published on March 13th. However the challenge is colossal, at a time when it is necessary to reconcile this imperative with the preservation of the health of transport workers and citizens, but also to constantly adapt to the rules and restrictions put into place by governments, sometimes without coordination.
The crisis is already becoming hugely apparent, in terms of both supply and demand for transport
1 / The decline in transport supply
Since Monday March 9th, all of Italy has been quarantined. However, government restrictions do not apply to the transportation of goods. Despite this the study of the road networks in Milan, Turin or Rome carried out by Reuters clearly shows that the roads have been emptied of their vehicles. The right of withdrawal is being used very regularly by drivers. A German driver refused to drop off his goods destined for a school in Italy and left it at the Brenner Pass in Austria. This anecdote has been picked up by several media in Italy as a sign that the drivers no longer want to drive through the country.
In France, according to evidence that we have collected from road hauliers, many drivers are refusing to go to warehouses or operating rooms in the Oise, one of the largest Covid-19 clusters in France. The right of withdrawal is being systematically invoked. And as President Emmanuel Macron pointed out during an address to the French people on March 12th, the country is only at the beginning of the epidemic.
The Polish authorities have imposed border health checks for all vehicles coming from Germany and the Czech Republic. At the Brenner pass in Austria, the temperature of drivers coming from Italy is being controlled. These measures are causing significant traffic jams (more than 50 km recorded on March 12th, 2020 on the Italian side of the Brenner), which is causing carriers to halt their activity to international destinations.
These are only a few examples. But it is obvious that health aspects are still insufficiently taken into account in the transport sector. The IRU is calling on governments and authorities to "clearly communicate enforcement procedures for vehicles, drivers and cargo or passengers, especially for quarantine areas." In Spain, the association of international road transporters has requested that the government provide personnel with personal protective equipment, including masks and disinfectant gels.
2 / The decline in transport demand
At the same time, demand for transport is drastically decreasing. According to the IRU, the decline in intercontinental container transport could lead to a reduction in road transport activity of up to 20%, depending on the duration of the crisis. "This could lead to a global loss in operator revenues of $2 trillion" is the organization's estimate.
In the European Union, international and domestic traffic is also plummeting.
Traffic leaving Italy has disappeared. In an AFP dispatch quoted by Antenne magazine, Jan Buczek, of the Polish Association of International Road Carriers, points out that transport with Italy has become almost non-existent. The overall drop in sales revenue within the whole of the European Union could reach 40%.
German car factories are suffering from a lack in supply of parts from China. They are starting to lay off their workers. This is also the case in France, where the Minister of Labor announced on March 12th that 60,000 employees from 3,600 companies have also been laid off.
The fall in demand for transport affects all countries and the carriers are looking on helplessly at the collapse of their national and international markets.
1 / Tensions at both extremes of transport prices
The transportation market will continue to contract. Transport prices, which are generally a tool for regulating supply and demand, will rock like a drifting ship. We will be seeing both very low and very high transaction prices during the few weeks that the crisis will last for.
Some buyers could try to take advantage of the windfall of declining demand to drive prices down. On the other hand, carriers could be tempted to raise prices to deliver sensitive areas with essential products. We can already see some examples, according to a testimony from an Italian driver relayed by the Polish site 4trucks).
2 / Operating conditions to be relaxed
Transportation will be crucial to keep up supplies. Germany has fully understood this and has already extended the possibility for trucks to circulate on Sundays in order to resupply the food and health sectors.
The IRU, which calls for coordinated measures, is appealing for more flexible driving and rest times "to ensure efficient logistics for critical goods (food and medical supplies) and enable drivers to leave affected regions or quarantine zones as quickly as possible". The organization also asks to "Lift delivery restrictions to ensure delivery can take place at safer times, in the night for example".
3 / Depleted cash accounts
The situation is all the more critical in road transport as the profession is characterized by a very high proportion of small businesses. The situation of small carriers with fragile cash account balances will be tragic. They will not be able to withstand the contraction of the market during several weeks and will have to close if no financial aid is provided. Several countries have already announced measures to enable their SMEs to survive during the crisis period, such as France. International bodies are also starting to mobilize. The European Commission has announced the release of 37 billion euros of funds.
The shock will nevertheless be very difficult to absorb. Small carriers will miss the economic recovery. This will most likely favor a concentration of the sector at minimal cost for the strongest, which will result in transport prices finding their way back up again. This will be the occasion to readdress the problem of the lack of drivers ... but today, concerns are elsewhere. For the time being, let us be thankful to the carriers for their sense of service and responsibility.