HOW COVID-19 IS AFFECTING SHIPPING?
Hardly any segment is left untouched by the Covid-19 Pandemic. Ever-since the virus emerged, uncertainty has been the only certainty. The unabated Covid-19 rage is taking a toll on lives, businesses, industries, and individuals, all alike.
With the international labor organization’s prediction of a 25 million job-wipeout, the recession is inevitable. Markets are in a slump, which is pretty much evident with slower product demand. Global shipping markets have suffered much, and there is little to no evidence of improvement any time soon.
The pandemic has unleashed havoc on the already struggling global shipping industry, and it is another beginning of the survival crisis. Declared a global pandemic in late December 2019, the global lockdown has bled the shipping industry to the maximum with no respite. What was initially a two week to four-week estimate, the lockdown has been going on for months, and the shipping industry is navigating in the unchartered waters.
Coronavirus and its impact on Global shipping
What started as a marginal impact, China has been one of the first countries to be at the receiving end. In January, China started witnessing minor fall in exports, since the Chinese New Year is slow business time for shipping companies, who had planned a simple and short demand slowdown eased out with methods, including the container shipping industry going for blanking sailings.
The condition deteriorated quickly afterward when CNY holidays got an extension, and a passenger tested positive on the Princess Cruises Ship off the Japan coast. This eventually led to cruise traffic being banned.
This is where the screening procedures caught pace, Chinese crews were put under quarantine, and work was disrupted. Many of these initiatives triggered huge setbacks for the shipping sector, with orders being canceled and eventually led to a drop in the trading opportunities. By the end of February, exports dropped significantly, hit by slow demand for goods’ production, oil, and other exports. The container sector has been witnessing a reduction in values and rates ever since.
Preventive measure leading to delays and cancellations
The strict containment recommendations by the government around the globe have substantially lowered the demand for the movement of goods. With at least 80% global goods trade being operated via sea, and China being the to the major ten busiest container ports of the world, the disruptions are not hard to guess.
The Shanghai and Yangshang ports served a 43.3m TEU (twenty-foot equivalent unit) back in 2018, and the same declined by as much as 17 percent in January itself. Cargo volumes have been declining, and February witnessed a 25% drop at the largest container port in the US – The port of Los Angeles. Preventive measures are posing a direct effect on the shipping, and as rapidly as the virus is spreading, the global market is expecting further decline for a longer period, as markets are witnessed more strict constraints, and the segment is becoming increasingly tight.
A bigger concern – Keep the globalization alive
Since March, Europe has been the worst-hit area and is now the epicenter of the current viral spread. Western markets are trying to keep the spark ignited by reiterating the need to keep the economy going. This is paramount, not just to the countries, but to the overall globalization conditioned shipping sector.
Companies are trying to cope with all the while making strategies for a future independent of such huge blows. More and more companies are trying to make the terminals and ports operational to keep the necessities flowing for now.
The long-term impact of Covid-19 on the shipping industry
There is no possible remedy for the pandemic insight, at least for now. It is equally difficult to gain insight into the short-term forecasts even when the pandemic slows down. Post-coronavirus, the effect is yet to be evaluated. The disruption cannot only mean damage. We might be able to see something more efficient and reliable in the future as the crisis could serve as a key catalyst to drive better technological advancements in the shipping industry.
Investments in new technologies
The first noticeable effect might be increased investment in freight technologies. Companies that provide data analysis can surge like never before. Artificial intelligence can be the next big thing in demand, and the current supply chain management might look at a complete overhaul. All of this can make the shipping industry a little more shockproof and increase the information quotient as well as the ability to manage the inventories to track rates.
Automation will prevail
The transportation sector can pitch for more autonomous shipping. The reason being that autonomous activities can help solve many problems and can help deal with the resilience in the core. All of this means one thing. The e-commerce, which is already a tech-savvy industry, can further evolve into an establishment, categorically emphasizing on the cargo drones and robotics.
The industry will explore and expand, in new ways
The effect cannot be calculated as short-term, instead, this crisis can lead the investment into the tech freight companies connecting them to different players including carriers, brokers, and shippers, on a maritime basis to optimize the operations.
It is to be seen whether the coronavirus crisis expands, and demand takes a further plunge, or the situation is contained, and demand volumes surge, the time taken by the carriers to adapt to the new scenario can mean a prolonged disruption, and it is going to take a while before everything returns to a sense of normalcy.
We, at Pedraza Customhouse brokers, are continuously monitoring the situation and we have been constructively working with our partners to minimize the pandemic effect by optimizing the supply chain.
How can we help?
We have always emphasized on shipping insurance coverage to help you stay ready during unexpected situations. We have been continuously introducing alternative shipping solutions for urgent orders. Our wide network of partners has been trying to make deliveries on priority and we will continue to restore the glory just like it existed.
If you have a freight shipping that needs to be taken care of, we can help you out. Contact us at (915) 791-5500, or you can request a quote and we will get back to you. Meanwhile, Stay safe.