COVID-19: IMPACT AND ADVICE

The good news is that things are still working, albeit under severe pressure in certain locations as the coronavirus pandemic exerts its influence. There are a lot of immediate problems to deal with along the supply chain.

While the situation in China does appear to be improving it is widely forecast that recovery from the shut-down of manufacturing outlets in China will still take some months to achieve.

There is also the view that things will now not entirely go back the way they were – that COVID-19 will be the trigger for substantial structural changes over and above the hopefully short-term impact factors.

Notably, there is expected to be a significant reversal in foreign investment in manufacturing capacity in China, a process that had already started as a result of the recent tariff wars.

This is now expected to accelerate with companies looking to establish production capacity outside of China including more local solutions. Other select short and long-term impact factors are discussed below – with particular reference to the ports sector by way of providing a cross-section of views to identify key ‘challenge factors’ for our industry.

In addition to these impact highlights practical guidance is provided to the ports sector about the port related measures that can be implemented to slow the spread of the virus and to promote safe working.

Halt the spread

For the time being, the main challenge is to halt the spread of the virus – we urge all PS readers to heed the advice given to them by their respective government authorities and other agencies.

Together we can not only beat this pandemic but with good management, both in business and at a personal level, we can come out the other side strong and ready to adapt to the changed trading circumstances this challenging experience promises to leave in its wake.

Looking to the future we should bear in mind the message from the IMF which sates on the one hand that the impact of COVID-19 will be quite severe but on the other there is confidence that a long expansionary period and high employment rates will enable the global economy to weather the shock.

Key views on impact of COVID-19

Trade, Cost and Demand

UNITED NATIONS CONFERENCE FOR TRADE AND DEVELOPMENT (UNCTAD)

China’s National Bureau of statistics calculates a 13.5% year-on-year decline in industrial output for the first two months of 2020, the biggest downturn on record. The overall cost of the coronavirus is put at US$2 trillion, a figure which other parties suggest will climb even higher. (Source: Braemar)

CLIPPER DATA
The epidemic has yet to run its course, but even after the spread subsides and China starts to return to normal business activity, Clipper Data underlines that it will take a long time to unwind the stresses inflicted on the world’s trading system. A return to medium and long-term trends in shipping and trade is unlikely before the second half or even fourth quarter of 2020.”

FREIGHTOS
Freightos emphasises that there is not only cause for concern about the supply of goods from China – although there is acknowledgement that this situation is improving – but also as a result of a ‘second hit’ from falling demand in Europe, the USA and elsewhere as a result of COVID-19 hitting hard there.

Commodity Focus
ALPHALINER – Container
Market analyst Alphaliner estimated, in early February, that the Coronavirus could cut global container throughput growth in 2020 by as much as 0.7 per cent.

BIMCO – Dry Bulks
“Chinese imports of dry bulk commodities are the main driver for the dry bulk market and with a slowdown of industrial production in the short-term, the outlook for Q1-2020 is not shaping up particularly well. Freight rates will stay low, until Chinese merchants get back into the market for the usual commodities, such as grain, coal and iron ore. “The traditional dry bulk low season is usually in Q1, and the market tends to rebound post-CNY. Yet, with the coronavirus not under control yet, the slump will inevitably be more protracted,” says BIMCO.”

INTERNATIONAL ENERGY AGENCY (IEA) – Energy Fuels
The IEA forecasts global oil demand is expected to decline in 2020 as the impact of the new coronavirus (COVID spreads around the world, constricting travel and broader economic activity, according to the International Energy Agency’s latest oil market forecast.

“The coronavirus crisis is affecting a wide range of energy markets – including coal, gas and renewables – but its impact on oil markets is particularly severe because it is stopping people and goods from moving around, dealing a heavy blow to demand for transport fuels,” says Dr Fatih Birol, the IEA’s Executive Director. “This is especially true in China, the largest energy consumer in the world, which accounted for more than 80% of global oil demand growth last year. While the repercussions of the virus are spreading to other parts of the world, what happens in China will have major implications for global energy and oil markets.”

Container Positioning/Imbalances
SEA INTELLIGENCE, ALPHALINER AND CONTAINER XCHANGE
Sea Intelligence highlights container positioning problems as a result of cancelled sailings to China – now leaving empty containers in competition with backhaul cargo to Asia, in turn, pushing up rates for loaded backhaul container movements. In the daily indices compiled by Freightos, which tracks the price to ship 40ft container. The rate from Northern Europe to China (SONAR: FBXD. NAEC) is up 55% since Feb. 18, and the rate from the Mediterranean to China (SONAR: FBXD.MEDC) is up 70% (rates from the U.S. have not materially increased).

Alphaliner also identifies a shortage of containers on the US West Coast. It points out that MSC, which as a rule deploys 13,000TEU vessels in the trans-Pacific is now scheduling the 23,756-TEU MSC Mia (the world’s largest box ship), the 23,656-TEU MSC Nela, 19,224-TEU MSCO Oscar and 19,368-TEU MSC Anna. This, Alphaliner suggests, will enable a normal service load to be carried and around an additional 6000 TEU of empty containers to America.”

The container-repositioning equation is dependent on how quickly Asian manufacturing returns to normal but also by how import demand in Europe and the USA is affected by coronavirus. Container Xchange reports companies beginning to experience severe equipment shortages in several areas in the USA and in Europe.

Port Actions
SHIPPING AUSTRALIA LIMITED
The industry representative body Shipping Australia Limited reports an easing at the port of Brisbane of the 14-day ban on ships calling at Queensland ports since their departure from a previous port. The policy, implemented by Maritime Safety Queensland continues to be the subject of significant criticism – not least because it led to cancellation to vessel calls and thus, in turn, problems for importers and exporters in Queensland.

While the ban has been relaxed at Brisbane by way of various exemptions it still remains in place at the other 20 Queensland ports. There have been suggestions that such a ban might be imposed elsewhere – in certain regions of China – but so far this has not materialised.

Practical advice for ports

Generally speaking, the major ports around the world have moved quickly around the world to put in place measures to negate the negative impact of the coronavirus, to keep trade moving and to maximise protection for all personnel involved. For all categories of port, however, there remains significant scope to learn from each other and with this in mind PS features below a range of links from select industry bodies and key organisations which detail the practical arrangements that can be made.

https://www.gov.uk/government/publications/covid-19-shipping-and-seaports-guidance/guidance-for-shipping-andsea-ports-on-coronavirus-covid-19

BRITISH PORTS ASSOCIATION
Download BPA guidance note circulated to members.
The latest advice for the maritime sector from officials is below.
Public Health England guidance for staff in the transport sector
Public Health England guidance for port staff
Advice posters for England, Scotland, Wales and Northern Ireland

EUROPEAN COMMISSION
Transport Measures:
https://ec.europa.eu/ transport/coronavirus-response_en

INTERNATIONAL MARITIME ORGANISATION
http://www.imo.org/en/MediaCentre/ HotTopics/Pages/Coronavirus.aspx

WORLD HEALTH ORGANISATION
Operational considerations for managing COVID-19 cases and outbreaks on board ships. Dated 24 February 2020