Afternoon Coffee: Hong Kong security law may impact regional business; Germany faces 9-16 month economic rebound; Rail companies see drastic volume loss

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Hong Kong’s status as a global business hub could be in peril after a new national security law places the region under tighter control of the Chinese government, according to The Associated Press. The law was approved in Beijing on Thursday after 11 months of protests in Hong Kong, which began with a proposed extradition bill between the region and mainland China.

The new restrictions could potentially cause a wide range of unforeseen disruptions, such as if companies reclassified Hong Kong as an “emerging sector” like several other Chinese cities, instead of being an already developed market. Compounded with uncertainties regarding the coronavirus pandemic, rising regional costs and the U.S. announcing that Washington will no longer treat Hong Kong as autonomous from China, global companies housed there could see supply chain disruptions as the region adjusts to the effects of the new law.

German businesses face 9-16 month recovery

The Ifo Institute for Economic Research has announced that businesses in Germany shouldn't expect a return to normal operations for at least nine months following restrictions caused by the coronavirus pandemic, Reuters reports. Certain industries face a steeper period to rebound — travel, hospitality, aviation and automotive manufacturing could take up to 16 months to see normalization.

In the meantime, nearly all German industries, including healthcare and construction, are expected to see revenues fall over the remainder of 2020. Ifo predicts Germany’s economy to shrink by about 6.6% this year before growing by about 10.2% in 2021 as business rebounds.

Rail companies face drastic volume loss

Volume loss has caused rail companies to cut capacity due to ongoing disruptions from the coronavirus, Supply Chain Dive reports. Overall rail volume has fallen 21% compared to last year since the start of the pandemic. This has forced rail companies to find ways to cut costs, but also maintain enough volume to meet increased demand once markets recover from the crisis.

Union Pacific, for example, has reduced train starts by 30% and overall volume decreased by 23% so far this quarter. The company noted that auto volume was down 85% this quarter, even though it is expected to make a gradual return to normalcy.

Expeditors International acquires Fleet Logistics

Freight forwarder Expeditors International has acquired the digital platform Fleet Logistics, Supply Chain Dive reports. Fleet Logistics digital-forwarding platform will be integrated into Expeditors’ current less-than-truckload (LTL) platform, Koho, to help small shippers.

The companies had worked together on an eight month Koho pilot prior to the acquisition. The new integration is expected to help streamline the amount of labor required for small shippers and improve digital booking for customers.

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