The GTA dnata cargo warehouse at Pearson Airport is operating at about 20 per cent of its normal capacity, and the cargo freight company has had to lay off about 80 per cent of its workforce.Melissa Tait
Antonio Alvarez, chief executive of GTA dnata, has laid off more than four-fifths of his nearly 800 workers, and parked three-quarters of the company’s motorized vehicles. His business handles ground cargo for major airlines at Toronto Pearson International Airport. The remaining workers now deal with far less perishable goods, pharmaceuticals, clothing and general cargo than usual – but lots of alcohol swabs, hand sanitizer, surgical goods and ventilators.
The company’s quiet warehouses are a microcosm of upheaval in global transportation networks, induced by the COVID-19 pandemic. Law firm Baker McKenzie recently estimated global trade fell 4 per cent during the first quarter of this year – only the second time it has plunged so deeply since the mid-1980s. The IMF predicts imports and exports in advanced economies will each fall by more than 11 per cent this year, “far worse” than the 2008-09 financial crisis.
So far, weekly data published by Canada’s major railroads betray few hints of this trade deep-freeze. Many goods are still moving by rail in volumes comparable with those observed in normal times. Air cargo is a striking contrast: Passenger airlines – GTA dnata’s customers – have grounded their fleets, so the cargo in their holds has stopped arriving.
Activity at Canada’s busiest
airport has plummeted
Number of flights at Toronto’s Pearson
International, seven-day average
1,750
1,500
1,250
1,000
2019
750
2020
500
250
0
Jan.
Feb.
March
April
May
June
JOHN SOPINSKI/THE GLOBE AND MAIL
soURCE: radarbox.com
Activity at Canada’s busiest
airport has plummeted
Number of flights at Toronto’s Pearson
International, seven-day average
1,750
1,500
1,250
1,000
2019
750
2020
500
250
0
Jan.
Feb.
March
April
May
June
JOHN SOPINSKI/THE GLOBE AND MAIL
soURCE: radarbox.com
Activity at Canada’s busiest airport has plummeted
Number of flights at Toronto’s Pearson International, seven-day average
1,750
1,500
1,250
1,000
2019
750
2020
500
250
0
Jan.
Feb.
March
April
May
June
JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE: radarbox.com
“We’re basically at a standstill,” Mr. Alvarez said. “We were doing an average of 25 to 30 flights a day,” he said. “Now we’re doing less than one.”
An idled economy needs far less transportation capacity, and a massive idling of ships, trucks and airplanes is already under way. But modern countries still require fertilizers, grains and food. They still need disinfectants to treat drinking water. The products still wanted and needed by consumers is moving through transportation networks that have become far more unpredictable and unreliable – leading to logistical nightmares and increased costs.
Railways
Canada’s railways were the country’s weakest transportation link earlier this year, clogged by blockades coast to coast as Indigenous groups and their supporters engaged in mass protests. No longer. In the U.S., the Association of American Railroads reported that total carloads across all cargo classes has already fallen by nearly 17 per cent. But weekly carload data from Canada’s Class 1 railways, CN and CP, show volumes of commodities such as coal, containers, farm products and chemicals largely within historical norms. Grain shipments remain high, likely a lingering effect from the blockades.
Motor vehicles and petroleum products have been the most glaring exceptions. For the week ended March 15th, CN shipped more than 5,600 carloads of vehicles. For the week ended Apr. 8th, it shipped barely 600 – mainly because major automakers idled their plants.
During an analyst call with Citigroup Research earlier this month, CN CEO JJ Ruest said much depends on how long large cities like New York remain shut down. Preparing for a slowdown, CN had already identified which locomotives and railcars it will park, and where, should it become necessary to control costs. He said he expected business to drop this month, and further still in May.
The continued uncertainty around railways has actually become an inconvenience for some. Retailers, for example, have closed stores – and in many cases, also warehouses. “So where does that freight go?” said Julia Kuzeljevich, spokeswoman for the Canadian International Freight Forwarders Association. “If it’s a non-essential service, that freight might be stuck somewhere accumulating demurrage or storage charges.” She says railways are currently charging about $200 a day for each container parked in their yards.
PPE arrived from China on a chartered cargo flight.Melissa Tait
Shipping
One reason railways are still moving goods is because they’re still flowing through Canada’s ports. The shipping industry moves about 90 per cent of world trade, according to the International Chamber of Shipping.
Canada’s ports release little real-time data that sheds light on the cargo volumes. Michael Broad, president of the Shipping Federation of Canada, said overall tonnage volumes entering Canadian ports appear to be holding up surprisingly well. “There is a lot of activity, still, in the international shipping business,” he said. “I’m concerned that will see a slowdown from June on.”
“In the early stages of the outbreak, we saw reduced cargo flow from manufacturing centres in China because of factory and port closures there,” said Port of Halifax spokesman Lane Farguson. “Now, China is in recovery but demand for goods across North America has dropped, and manufacturing centres across North America are affected due to the outbreak here.”
Globally, the shipping industry was already coping with a trade war between the U.S. and China. COVID-19 has idled huge numbers of container ships, more than during the entire 2008-09 financial crisis, according to BIMCO, a global shipping association.
“The worst is yet to come, I’m afraid,” said Peter Sand, its chief shipping analyst, during a webinar on Tuesday. Alan Murphy, CEO of container shipping research firm Sea-Intelligence, said the outlook for container traffic was “dire and depressing.”
Perhaps the most telling early indicator is “blank sailings,” which are cancellations of regularly scheduled stops at ports. They’re a common occurrence in the shipping industry, but Mr. Murphy said they’ve skyrocketed during the COVID-19 crisis. Earlier this year, they were caused mainly by plummeting manufacturing in China. “Now we’re seeing the impact of a decrease in demand in the destination regions” in North America and Europe, he said.
The upshot: Schedule reliability is at an all-time low. So unreliable, in fact, that logistics consultancy Drewry Supply Chain Advisors launched a new service this month to keep track of the mounting cancellations as they occur.
Westjet passenger planes parked with covers on the engines at Pearson airport on April 17, 2020.Melissa Tait/The Globe and Mail
Air Cargo
Of all the major modes of transport, air cargo seems to have been most affected. That’s because passenger aircraft carry large volumes in their holds.
“Take Air Transat, Lufthansa, Emirates, Philippine Airlines, China Southern, Korean Air,” Mr. Alvarez said. “All of these carriers brought airplanes to Toronto, with passengers and cargo in their bellies. They’re all gone. Not one of them is flying.”
One consequence is that freight-only airlines, such as Canada’s Cargojet, are doing brisk business. Another is that passenger airlines are increasingly flying cargo-only flights as a means of replacing at least a fraction of their typical revenues. Air Canada recently announced it would remove hundreds of passenger seats from the cabins of three of its Boeing 777 passenger planes, and will fly as many as 20 cargo flights weekly.
Even with arrival of these “passenger freighters”, Mr. Alvarez said, the environment for flight scheduling is positively chaotic.
“Airplane flights are being programmed and cancelled in real time, all the time, and that’s not something we’re used to. People are just programming stuff and then giving you 12 to 24 hours’ notice saying, ‘we won’t do the flight.’ ”
Freight forwarders, which facilitate the movements of goods worldwide, are among the many parties grappling with this logistical whiplash. Ms. Kuzeljevich said members of her organization have complained of skyrocketing rates and frequent last-minute cancellations, forcing them to search for alternative ways to ship goods. Previously agreed shipments frequently must be renegotiated, often at higher rates.
“Everybody's impacted worldwide,” she said. “So you don't know where the next impact is going to come from. You can't really plan around it.”
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Matthew McClearn