Cautious optimism – optimistically cautious!

08 June 2020
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Connecting the world: Consequences of COVID-19 for the Austrian business climate

At the time of writing this article (beginning of June 2020), we are constantly hearing from our government about measures on how, whether and in what form public, social and economic life in Austria should slowly and cautiously be restarted.

View over Vienna

Some 1.5 million (of roughly 4.4 million workers in total) are either on short-time work or unemployed. The national debt is expected to rise from approx. 70% to 76% of gross domestic product by the end of 2020. From early or mid-June, a "new normal" will be introduced in Austria, which will continue to mean major events, theatres, the opera, cinemas or sporting events and universities not operating (or only behind closed doors) until the start of October. On the other hand, limited meetings with family and close friends are again possible. From then on, restaurants must cut their capacity (social distancing) and close their doors at 1 am at the latest.

Effects of the corona crisis on the transport sector

The seaports serving Austria are reacting in different ways to the changes caused by Covid-19. Some ports are cutting their port tariffs by half until the autumn. Others are increasing their efforts on inland terminal networks. Some shipping companies are boosting their carrier haulage business, increasingly attempting to establish themselves as integrators in Austria's traditional merchant haulage market. The East Med ports, in particular, are currently benefiting from this.

However, there is also some pleasing news for Rotterdam. For example, from the beginning of May, eastern Switzerland and Wolfurt in Austria are linked to Rotterdam with an increasing number of direct rail shuttle connections. And test rail connections between Austria’s Tyrol and Rotterdam have reached an advanced stage.

What is the current economic outlook?

The current economic situation supports political considerations favouring diversification, near-sourcing and regional supply. Intermodal seaport transports by rail for containers have fallen by around 30% over recent weeks. And this has occurred at the same time as capacity in the Asia – North Europe trade had slumped by some 38%, resulting in a tense situation in empty containers and complicating a balanced utilisation of the shuttle systems, especially in Austria's highly fragmented market. In the bulk sector, the continuing drought is becoming increasingly noticeable, leading to difficult conditions and higher costs for shipments on the Danube waterway. The forecasts of various economic research institutes predict an economic rebound from the third quarter of 2020 at the earliest.

Overall, Austria has definitely proved to be robust politically, economically and also in terms of healthcare provision, thus pressing its case more effectively in the future for investment and for company head offices in Central Eastern Europe.

Austria's neighbours, including Hungary, Slovakia and Czechia, appear to have been hit at least equally hard by the current situation as Austria itself. Disproportionate dependence on, for example, the automotive sector is currently making itself felt among other things. Did you know, for example, that Slovakia leads the world in per capita production figures? Per year, 202 cars are produced there for every 1,000 residents.

After trade (i.e. for example imports of textiles and electronic goods) suffered a particular hit at the start of the crisis, Austrian exports collapsed by around 27% in April. Automotive sector suppliers were as hard hit here as, for example, food exports and the timber and paper sector.

The breakdown of export business by region over the first two months reveals that the slump was broadly based. Exports to the eurozone fell by 6.4%, with exports to France suffering the steepest decline at -35%. This may be attributed to the extreme fluctuations in pharmaceutical product exports that have frequently been observed in the past. With the exception of Spain (-18.6%), exports to other eurozone countries declined only slightly (Germany: -1.9%, Italy: -0.6%). The sharpest declines in exports to non-eurozone countries were recorded in exports to Sweden (-18.3%), the UK (-16.7%) and the USA (-6.2%). Exports to China rose by 34.2%. Broken down into product groups, the sharpest falls were to be seen in chemical products (-14.1%), processed goods (-6.7%) and machinery (-5.2%). Increases were recorded in exports of foodstuffs (+7.4%), as will as in fuels and energy (+0.2%).

The haulage and logistics sector is currently still facing huge declines in volumes. This is revealed in a statement from Alfred Wolfram, head of the Haulage and Logistics Association at the Austrian Economic Chambers: "What causes me particular concern is that only around a quarter of all the companies surveyed indicated an adequate order book. This forecast is extremely worrying and is casting a shadow into 2021."

For the Port of Rotterdam, this implies greater competition in a highly fragmented market. In this regard, the increased frequency of the container shuttle between Wolfurt (Vorarlberg) and Rotterdam, linked to an additional stop in Frenkendorf (Switzerland), deserves a positive mention.

About the author

Franz Zauner has worked for the Port of Rotterdam for the past 16 years, and for more than 30 years for Rotterdam-based logistics companies in the areas of Short Sea, Deep Sea, Inland Shipping and Rail. He has been an independent businessman for 25 of those years.

When asked about the greatest similarity between the importance of the Port of Rotterdam for Austrian shippers and forwarding agents, Franz replies: The Port of Rotterdam is regarded as a highly innovative and stable market place and partner by both Austrian industry and the logistics sector. The high number of port calls, the contemporary handling facilities, as well as the engagement of the Rotterdam business community, are highly valued.

And how can he convince a shipper from Austria to ship freight through Rotterdam rather than through other ports? As always, it is important to inform the Austrian partner swiftly and in detail about the services and options on offer. This is indeed highly appreciated.

More information? Contact:

Howard Lamb
Howard Lamb
Rotterdam Representative Austria/Switzerland