Still Under Pressure, but Logistics and Shipping Be Better than Q2: Business Players

The transportation and logistics business will continue to be under pressure for the rest of this year, but it will be better than its performance in second quarter (Q2) 2020, which was contracted by 30.84%, according to business players.

In a webinar discussion titled “Challenges and Potencies of Logistics and Shipping Business in H2 (semester 2) 2020” conducted by Indonesia Shipping Gazette for its 24th Anniversary on August 26, speakers concluded that the business would still be under pressure in Q3, but will be better than Q2. It will be better in Q4, but it is too early to say it as a recovery start.

Some key business players from the sector took participation as speakers for the webinar, including Chairwoman of Indonesia National Shipowners’ Association (INSA) Carmelita Hartoto, Chairman of Indonesia Logistics and Forwarders’ Association (ALFI/ILFA) Yukki Nugrahawan Hanafi, President Director of Samudera Indonesia Bani M Mulia, and PT Pelindo II/IPC Senior Vice President for Business Alliance and Customer Relationship Rachmat Prayogi. Gateway Container Line President Commissioner Subagyo led the discussion as moderator and host.

On her keynote speech Carmelita Hartoto affirmed the drop of this sector has significantly contributed to the total economy growth. As reported, the Indonesia Q2 economy grew negative, (-5,32%). “In normal condition, logistics and transportation sector is always the top contributor of our GDP (gross domestic product),” she said.

The sea transportation, she said, was contracted by 17.48% in Q2. Carmelita notes two positive aspects in shipping business during the pandemic, naming the lower operating cost and lower import insurance that helped the shipping sector from further drop.

In addition, national shipping players were benefited from the potential domestic/inter-island market. She said the strong domestic market has helped domestic logistics distribution that helped both domestic logistics and shipping players.

During the covid-19 outbreak, the national shipping lines was also helped by the government ‘sea toll’ program which was getting place frequent in the last months, including for the logistics distribution for pandemic help logistics.

Since its first launch in 2015, the ‘sea toll’ has been serving as many as 26 trajectories, seven of which are operated by seven national private shipping companies. She expects the ‘sea toll’ coverage and frequencies to increase, thus giving more works to national shipping companies, especially during this hard time of pandemic outbreak that seriously hit Indonesia’s international trade of export and import.

“We expect this program (sea toll) to be optimized. In addition to cut price disparity, this will help shipping companies to get more works,” she noted.

She also expects the government to protect the cabotage since it will benefit the national shipping players, especially when the international market were down during the pandemic.

Carmelita appreciates the government on the issuance of Presidential Decree (Inpres) No/5/2020 on national logistics ecosystem. She said, the Inpres will not only support the business digitalization, but further, to build competitiveness.

 

Improve Purchasing Power, Build Collaboration

Yukki Nugrahawan Hanafi notes that the transportation and logistics sector in H2 will perform variously among its sub-sectors, some will still be contracted, some be steady, and some others will even increase.

“In general, it will still be contracted, but if we (the government) can encourage to increase purchasing power, I think will not be worsen than in Q2, even it will be better,” said Yukki.

“So, the key is how to increase the level of community consumption,” he said, echoing Carmelita’s view on the strength of domestic market.

He suggests national logistics and transportation business players to take focus on the sub-sectors that predictably to grow up in the Q3 and Q4 (H2) of this year, including the e-commerce, courier, warehousing for retail goods, as well as logistics transaction of business to costumer (B2C) and costumer to costumer (C2C).

Meanwhile, the businesses of air cargoes, containerized cargoes, trucking for export/import services as well as logistics with business to business (B2B) will continue to get impact.

Hence, he suggested logistics business players to do innovation and collaboration. “Collaboration and innovation are crucial during this hard time. We have to open ourselves, do structural reform, set new strategy, new vision and mission, and adopt new technology as well,” he said.

New Opportunity

Echoing the views, Bani M Mulia also said that the second semester will not be worsen than first half. He is confident that the transportation and logistics business both in Q3 and Q4 will be better than Q2, as far as the players can adopt an appropriate strategy.

Shipping industry, he said, always faced challenges that made the business up and down. “Pandemic Covid-19 outbreak is only one of many challenges the shipping industry face. Business up and down is normal, especially in shipping. So, don’t over be unconfident with this situation,” Bani said.

“For us (shipping business), this pandemic is a very big challenge for this year. But, any challenges always come in parallel with opportunity. The pandemic is coming with a new opportunity, I guess.” Said Bani.

Bani proves his views with facts that some big shipping lines still enjoyed a profit during the pandemic. Even, they set up a higher target (profit). “It is interesting. A global leading container shipping has just set up a higher target for the second semester of this year,” he said.

But there are three factors that can help the shipping business. First, the activity of cargo delivery was still running. “Though there was a drop in international trade, but our domestic activity is still promising,” he said, adding that this will help the national shipping in second semester.

Second, stable freight rate. During the pandemic, the freight rate, both container and liquid bulk was stable, even better than the previous years. “This will also help the shipping in second semester,” he said.

And, third, efficiency in operating cost has proven to help this industry in first half. “If this continues in H2, I think the shipping will perform better.

Incentive Support

The drop in trade volume during the pandemic has also affected in the port productivity, according to Rachmat Prayogi. This, he said, would continue in second semester. But, such like other speakers, Rachmat predicted the drop would not worsen than in Q2.

“The pandemic has impacted globally, reflected from the volume that dropped at almost all routes of our export/import,” he said.

In view of the trend at the port, Rachmat predicts the recovery will start not earlier than Q4. “It can start in Q4 or even longer to early year of 2021,” he said.

But, as an infrastructure provider in logistics and transportation, the port sector will continue to encourage both logistics and shipping performance.  IPC for example, will provide incentives. “We will give relaxation on port tariff payment,” he said, but did not elaborate in more detail.

In addition to such incentives, the port will continue its programs on improving port infrastructures and facilities.

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