The Ripple Effect of Covid-19 on the Shipping Industry

Covid-19 and its Ripple Effect on Everything #Shipping

Leon Sakkal

Leon Sakkal

Marketing, The SPL Group

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The rapid spread of coronavirus has had a major impact on global shipping markets, with the slump in demand for goods from China having a ripple effect on everything from container ships to oil tankers.
Initially, everyone thought that it was China’s problem. Well – nobody thinks that anymore! The first country to be hit by Covid-19 (China, duh.) is now the only one with a recovering economy and re-emerging population. For the rest of the world, uncertainty is the only certainty.

The soon-to-be global pandemic began in late December with only a dozen cases in Wuhan, China. The coronavirus outbreak has now tightened its grip on the entire world, with Europe as its current epicenter. As of the 2nd April it has now infected almost 900,000 people and claimed nearly 50,000 lives.

With Western countries now enforcing nationwide lockdowns that could last for months if not years, world economies are in danger of bleeding out. Numerous industries are at a standstill and the shipping sector is navigating uncharted waters.

Over the past two months, Ship Technology Global has been speaking to analysts and experts – both directly and indirectly – to offer a comprehensive view of how the global pandemic is affecting the logistics industry.
Prosperity within the #shippingsector has long been strongly tied to China, a major trade partner for several countries and a key leader in shipbuilding. Throughout January, during which the virus started spreading across the rest of the country and to its neighbors, the industry seemed to experience only a marginal impact – initially witnessing only a minor fall in demand as ports in China and nearby countries started operating at limited capacity.

The situation largely deteriorated as January passed by and the CNY holidays were extended. After a passenger tested positive for Covid-19 onboard a Princess Cruises ship off the coast of Japan, ports started limiting – and eventually banning – cruise traffic at their terminals.
From the very beginning, these initiatives caused significant setbacks for both the cruise and shipping sectors, which found themselves dealing with orders and trips cancellations, spikes in costs and a drop in trade opportunities. In addition, Chinese shipping was hit by a nationwide ban on all non-essential travel, a largely reduced workforce and the closure of production and shipbuilding facilities.

According to figures from Chinese think-tank the Shanghai International Shipping Institute, this led to reduced capacity utilization – which fell between 20% and 50% at the biggest Chinese ports – and a sharp increase in the use of port storage facilities.

Though things may seem grim, let’s have a look at the importance of keeping the economy going.

As the world enters the fourth month of the coronavirus pandemic, recovery could be in the cards for the container sector, with the weekly number of large container ship journeys originating in China now going back up.
Although undoubtedly positive news, this trend is already slowing down as the pandemic takes over India and its neighbors – Bangladesh and Pakistan, which own some of the largest demolition yards in the world.
While it’s almost impossible to make short-term forecasts for the shipping sector once the pandemic has slowed, the post-coronavirus years will undoubtedly be all about digital disruption.

Demand has dropped across the board, including at ports. The trucking industry, the shipping industry – almost anywhere you look Covid-19 has slapped us all in the face, and what’s coming seems to be even more disruption; in different forms.
But disruptive doesn’t necessarily mean damaging, as the crisis could become a key catalyst for digital and technological advancements in the shipping industry.
Change in these regards could be threefold. The first step will be increasing investment in freight technologies as well as companies providing data analysis, artificial intelligence software and overall end-to-end supply chain management. This will be key as it reduces the shock, increases the resilience, [providing] more data, more information, greater ability to manage inventories to track the rates and timing of the shipping that is done.

Increased investment in these segments will be accompanied by growth in the autonomous transportation sector, paving the way for autonomous shipping. The nature of autonomous activities is one that can solve many problems, and deal with resilience in the core.
These will likely translate into the further evolution of e-commerce into a largely tech-savvy industry with cargo drones, 3D printers and robotics at its disposal. Covid-19 will have a disruptive power across all industries, but particularly in the supply chain and in the transportation sector. And it won’t just be in the short term.

Let’s try to keep positive, and remember! #WereAllInThisTogether

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