Kerry Logistics saw its Hong Kong performance in the freight forwarding business during the coronavirus outbreak lifted by the surge in shipments for healthcare products and increased B2C transactions with the public turning to online shopping amidst the various lockdowns implemented worldwide.
Simon Yam, executive director, international freight forwarding at Kerry, said the stellar performance of some of the world’s biggest e-commerce firms during the pandemic is reflective of the same support it has seen on its online segment with the surge in e-sales translating to more business for the logistics sector.
Rise in pharma, B2C
At Kerry Logistics’ Hong Kong base, Yam said the company’s e-commerce arm is “doing better than expected” as operations of traditional brick and mortar retailers have yet to fully normalize and people favour online transactions due to social distancing.
“More people rely on logistics companies like us to do more B2C as e-commerce rises during this time. The transactions are more B2C so the logistics companies actually end up with more business,” Yam told Asia Cargo News.
Aside from e-commerce, its pharma business also saw encouraging growth in the time of the pandemic as various companies and governments rush to procure much-needed health supplies and equipment meant to combat the coronavirus.
Yam said the company did “about 80” charters for the period from March to May to provide capacity mostly for personal protective equipment (PPEs) and also semi-finished goods to supply to various factory hubs, mostly across Asia.
“Our pharmaceuticals sector, the rush for PPE products and a lot of our other verticals like e-commerce actually improved,” Yam said, noting that Kerry Logistics’ overall performance “showed resilience against the impact” of the coronavirus.
“Supply chains are being interrupted by the virus big time and because of that the logistics service is actually in demand,” he said.
Kerry Logistics also saw shipments within Asia pick up during the lockdown period. Yam said the charters operated by Kerry Logistics out of Hong Kong went “everywhere” — including Europe, the Middle East, the US and Australia — but they provided the bulk of the capacity to customers across Asia to help them keep the supply chain moving.
“We did a lot of intra-Asia, especially Singapore, Malaysia, Thailand, Indonesia,” the Kerry Logistics executive director said.
“We are moving semi-finished goods and parts to other factories in Asia to support the supply chains of major brand names, including electronics, or fashion, or textiles, whether it is a catch-up of the orders because of the interruptions of the factories in China or whether they need to move urgent supplies to different factories in Asia,” he added.
In general, Kerry Logistics’ air freight segment in Hong Kong is “doing very well” during the pandemic, although its sea freight division dipped following an industry-wide slump triggered by blank sailings as demand disappeared due to the global pandemic.
Despite the disruptions to the global supply chain, Yam said Kerry Logistics remained resilient due to its diversified portfolio, which helped balance its overall performance.
“Despite the supply chain disruptions caused by the pandemic, Kerry Logistics’ diversified business portfolio and geographical exposure continued to allow us to maintain relatively resilient operations and performance in recent months,” Yam said.
“The relatively weak ocean freight operations were partly offset by a rise in air freight demand for ad-hoc time-sensitive deliveries and a surge in freight rates,” he added.
As belly capacity vanished from the market due to the grounding of flights worldwide, Kerry Logistics noted that it was able to provide the capacity to its customers due to pre-purchased allocations with freighter firms – allowing it to improve its performance.
‘Worst is over’
Meanwhile, Yam says the industry may have already bottomed and the recovery – depending on how quickly a Covid-19 vaccine is discovered – could begin by year-end.
“We believe the worst for China is over. The lockdown started in the week before Chinese New Year where domestic services were severely disrupted whilst there was almost no activity for international freight. Although international freight volume remains weak now, our domestic services are completely back to normal. Therefore, we are in a better position than we were a few months ago,” Yam said.
For Kerry Logistics, he said there’s an upward trend and the “company has been growing” – although, for certain sectors of the logistics industry, it may take more time.
General international trade, for example, has been moving again, but it remains to be seen when the industry will be fully back to normal.
For airfreight capacity, Yam noted that the belly space on passenger flights is “not yet coming back” and is not expected to come back “at least for another 3-4 months at least.”
“The slowdown may drag on for the year, but when things start getting back to normal then things will get back to normal gradually,” the Kerry Logistics executive said.
Outlook for the industry
Meanwhile, Yam explained that the urgency of PPE products has so far gone down as governments started setting up their own local supply chains. Customers have also started “switching back to ocean mode” as air freight costs have “doubled or tripled” due to lack of belly space.
The key factor, he said, will be the reopening of borders and the easing of lockdown globally. When it takes place, he said the industry will start recovering slowly although the possibility of a second wave of infection, may push back normalization to happen “much later this year.”
“The logistics [sector] is actually not being penalized by the Covid-19, we are helping businesses and governments to fight the Covid-19,” Yam said.
“In general, the logistics industry would perform better than the other industry – better than retail, hotel industry, better than the tourist industry,” he added, although it may be a different story for those involved in maritime logistics.
“It depends on what type of logistics you’re in, [but] I can only say that Kerry Logistics has a wide range of coverage and we are doing reasonable. We will be okay this year,” he added.
By Charlee C. Delavin
Asia Cargo News | Hong Kong