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The Effect Of COVID-19 on The Industries in Which Arkas Line Operates

Performing regular maritime transportation operations on an area extending from the Mediterranean, Black Sea, North and West Africa and Europe to South Mediterranean, Arkas Line operates in several industries including automotive, chemical, white appliances, agricultural goods and general consumables. Serra Tukel, Global Customers Coordinator of Arkas Line, compiled the effects of Covid-19 on all industries with a focus on container transportation, the company’s field of business.

Marking the year 2020 and turning all the world economy upside down, Covid-19 pandemic appears in different industries with its different effects. In a period of lockdown and reshaped need and consumption habits, as the Arkas Line Global Customers department, we strive to be as close as possible to our customers in these challenging times with an industry-focused service approach and fund of knowledge. In this process, we observed that some global supply chains shifted from China, the epicentre of the pandemic, to the Mediterranean ports. On the other hand, while delays occurred on highways and country border gates, uninterrupted operation of maritime transportation and port services led the global customers to the maritime alternative between Arkas Line’s Mediterranean and Black Sea ports.

We have reviewed how the automotive, chemicals, white appliances, agricultural products, consumption goods and construction industries, as the main fields of business Arkas Lines operates for, were affected during these times.

Automotive

Production stopped completely for about five weeks in EU states and Turkey in the automotive industry, which is among the most harshly affected industries during the pandemic. Turkish Automotive industry shut down almost completely in April, and operated with a capacity of 40 percent in May. As the expert transportation agent of many automotive companies for long years, Arkas Line also suffered from this crisis and a reduction occurred in transportation services. Upon re-emergence of the demand that was postponed in Turkish automotive factories in June, increase in the demand for private vehicles following the pandemic, and facilitated access to financing with an opportunity of low interest rate loan, production boosted and capacity reached up to 65%. As a result of relaxed precautions, the target is now full capacity in September.

While world’s overall automotive market decreased at a rate of 15.4% as compared to the previous year in 2020, the highest decline was observed in Italy, Spain and France by 50.7%, 48.9% and 48.0, respectively, in the January-April 2020 as compared to the previous year in terms of all EU (26), UK and EFTA countries.

Chemical Industry

As the raw material and semi-finished product supplier of several industry segments such as automotive, white appliances, electrics-electronics, plastic, paint Chemical industry is of critical importance among Turkey’s export items and ranks second.  Under the pandemic circumstances caused by COVID-19, we see that Turkey is gaining importance in the pursuit of an alternative for countries and companies seeking new sources instead of China, which has a very large share in the global trade.  However, Turkish chemical industry maintains its substantial dependence on import in terms of both raw material and technology. During the pandemic, relatively, there wasn’t a sharp decline in chemical raw materials and other byproducts that are transported from European countries to Turkey, contrary to other industries, and we also witnessed an increasing acceleration in import of some products as compared to past years. Rather than a decline in loading capacities of world’s largest chemistry companies we have a partnership with on the routes we operate as Arkas Line, there was a 12% increase as compared to the previous year.

Construction

Mainly due to its effects on raw material supply, human sourcing and health, Covid-19 led to an extension in project terms and even cancellation of some projects in the global construction industry. Suspension of projects due to decreasing prices demonstrated itself mostly in petroleum exporting countries while an average of 4.9% contraction is expected in the export markets of important construction materials in Turkey.

Due to problems in workforce supply in construction projects we operate for (West Africa) as Arkas Line and shutdown of raw material or production factories of suppliers that provide materials for projects, a 32% year-over-year lower rate of loading occurred, and predictions are not expected to manifest a positive graph before the last quarter of 2020.

White Appliances

Along with the increasing effect of virus in April, life coming to a standstill in European countries to which 75% of Turkish white appliances are exported affected the white appliance loading of Arkas Line to a large extent. A slowdown occurred in sales and export as well as factory shutdowns in certain periods due to precautions and restrictions taken by customers. As the ninety percent consisting of Turkish export loadings, Arkas Line white appliance transportation started the first quarter strongly, however closed the second quarter with a reduction of 56% as compared to the first quarter, and 26% according to the comparison of first 6 months due to the pandemic. The increase observed in the months following April which witnessed a sharp decline confirms our expectation that the recovery will continue in the industry during the remaining months of the year for our country which is the second largest centre in production of white appliances following China.

Agricultural Products

In transportation of sugar, coffee, cotton, tobacco and packaged food products which are under the Arkas Line Global Products, there was an increase of 62% in the second quarter as compared to the first quarter during the pandemic whereas there was a decrease of 34% as compared to the first 6 months of last year. In regards to sugar loading which was among the most affected, decrease in workforce, logistics-based delays in supply of packaging products and the sharp decline in the price of petroleum decreased ethanol prices of Brazil as the largest sugar producer in the world, and global sugar prices decreased with the increase in sugar production used for manufacturing ethanol. This caused sales shift to Brazil which is out of the service network of Arkas Line.

Consumption Goods

Coronavirus changed consumption habits in favour of staple food products. Increasing concerns of health, spending longer time at home and cooking, consumers’ will to keep themselves away from crowded places led to an increase especially in consumption and accordingly transportation of staple food products and personal cleaning and care products.

In the Consumption Products unit that serves to a wide range of customers extending from personal care products to aid materials, alcoholic and non-alcoholic drinks, retail and textile, there was a decrease of 5% in the 2nd quarter of 2020 as compared to the first quarter, and an increase of 9% as compared to the first 6 months of previous year.

While retail was the industry that was affected most severely by the pandemic, the highest increase (35%) was observed in packaging products.

Having never stopped its vessel services on lines that continue in 23 countries during pandemic, Arkas Line keeps the continuity of its supply chain.

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