The Impact of COVID-19 Pandemic on Chemical Logistics

Pavithran M Kallada
Managing Director – India
BDP International

In this troubled time of global pandemic caused by COVID-19 outbreak, disruptions across the industrial sectors are quite evident. According to Pavithran M Kallada, the Managing Director – India, BDP International and a veteran Industry leader with over 25 years of rich experience in international logistics, shipping, and foreign trade, “According to IBEF, India employs more than 40 million people and contributes USD 200 billion to the Indian economy. This vast segment is considered to be the lifeline of the country and holds critical importance since it connects various markets, suppliers and customers. The impact will be more severe to the Indian chemical industry than to other industries”.

In India there are few chemical clusters of feed stock, intermediates, and finished products (including storage/warehousing) like those seen in China and the western world. Hence, the domestic trucking disruption and lockdown have a greater impact in connecting suppliers, customers, and markets.

In this troubled time of global lockdown and disruptions across the industrial sector caused by the COVID-19 pandemic, companies are finding it difficult to operate and manage their supply chains and logistics. The impact of this pandemic on the chemical industry is also no different. It is possible that the effect on the chemical industry supply chain is greater than in some other industry verticals, especially when the percentage of digital adoption in the chemical industry is comparatively less than in other industry segments.

Economic Fallout
Significant economic fallout due to the endemic has been creating inefficiencies across an already overburdened logistics landscape. According to IBEF, India employs more than 40 million people and contributes USD 200 billion to the Indian economy. This vast segment is considered to be the lifeline of the country and holds critical importance since it connects various markets, suppliers, and customers. The impact will be more severe to the Indian chemical industry than to any other industries viz. automotive, etc. This is largely because, in India, there are few chemical clusters of feed stock, intermediates, and finished products (including storage /warehousing) like those seen in China and the western world. Hence, the domestic trucking disruption and lockdown have a greater impact in connecting suppliers, customers, and markets.

Supply Chain Disruptions
Worldwide, logistics and shipping have been currently experiencing unprecedented disruption. As early as in January 2020, disruption began with the Chinese New Year. Then Wuhan began reporting the extent of the COVID-19 virus and a longer shutdown was declared in China, affecting Chinese exports to the world. India has seen the impact from early February. Feed stock, intermediaries, and specialty chemical supply from China started drying up causing problems in the Indian chemical sector. Further, as China started manufacturing with staged capacity, the COVID-19 virus gripped Europe, USA, and India. This led India to a complete lockdown resulting in supply chain and logistics breakdowns. India was affected not just in the import aspect of raw material, feed stock, intermediate, and specialty chemicals but also the global supply from India.

Considering the high dependency on labourers and sizeable transportation of material across the country, the impact on chemical logistics has been acute. Though the Indian government has issued directions to allow transport, international border clearances and logistics under the 'essential category', the reality on the ground is different due to: unavailability of drivers and operators already in lockdown villages, millions of stranded trucks loaded with nonessential categorized materials unable to move to their destination or off-load to warehouses, local restrictions by authorities and police, and social stigma attached to leaving home & housing preventing people from working.

Logistics Impact:
  • Capacity issues of trucks, vessels, and storage space
  • Areas of high risk or under local containment that impact regular supply of goods
  • Availability of public transportation networks affecting labourers
  • Loss of trained/skilled labours moving to new jobs including farming in their village instead of migrating to industrial areas, resulting in a shortage of skilled labours in cities post pandemic
  • Interstate movements of non-essential goods: this would still be a challenge considering the local containment process and state-wide control mechanism to curtail the spread
  • Vessel blank sailings due to insufficient cargo impacting supply chains and delaying material availability
  • Financial liquidity affecting truckers, warehouse operators, and logistics service providers
  • Consumption may not return to pre-COVID-19 levels, resulting in demand issues.
Conclusion:
State and national governments are taking steps to address these issues. However, it is important that we, in the chemical industry, consider the current challenges and possible solutions. No doubt we will encounter extended challenges even after the pandemic is over.