The rapid spread of coronavirus has put operations in numerous industries on hold following the safety measures and lockdowns. And the shipping sector is one that has been greatly affected, impacting the entire global economy.
The covid-pandemic has sent shockwaves to the major shipping routes used for global trade, especially the east-west shipping route where China, the largest exporter of goods and the first country to have the first case of covid, is located. The drop in commodity demand in China significantly impacted the supply chain and global trading.
And here in this article, we will talk about how the effects of the covid-pandemic are changing global shipping. But first, let’s have a quick recap of what happened in the maritime sector by going back to 2020, the year when everyone’s lives started to change.
The Impact of Global Pandemic in 2020
In January 2020, the coronavirus brought shock to the Chinese Maritime sector. As the virus continued to spread across the country, a marginal impact happened with a slight decline in demand as ports and the surrounding nations began to operate at a reduced capacity.
After a passenger on a Princess Cruises ship off the coast of Japan tested positive for Covid-19, ports began restricting and finally banning cruise traffic at their terminals. Chinese crews were placed under quarantine, while ports in Asian nations like South Korea, Taiwan, and Singapore began implementing screening procedures to stop the virus’ spread. This incident has caused setbacks in the shipping sector, leading to increased shipping costs and a drop in trading opportunities.
It wasn’t until February that the international shipping industry felt the impact of the covid-19 pandemic. Based on the global trade data, the demand for Chinese crude tankers has drastically decreased, dropping from an average of 3.4 billion tonne miles per day in 2019 to nearly zero.
In March, the coronavirus outbreak escalated with an increased number of cases in Europe, causing Italy, Spain, and France to have a lockdown. At the end of the month, the UK and some US states have also undergone lockdown. This incident has slowed down global trading even more, following the reduction in maritime mobility.
From those crucial months until today, in the year 2022, changes have happened in global shipping, and here are some of them:
Diversifying Supply Chains
China’s rising covid-cases and lockdowns brought the global shipping sector to the worst-case scenario in 2020, causing reduced to zero trading. It underscored the supply chain rigidity on a worldwide scale. And since most regions in China produced numerous raw and intermediate goods, such as steel, hi-tech components, and car parts, businesses that needed swift deliveries from China have also mainly been impacted.
In addition, since most countries in the west depend on China’s production of goods and services, they were greatly affected when China struggled. That incident has made supply chain leaders into thinking of supply chain diversification. They started to shift the production from China to other Southeast Asian countries like Japan, knowing that this shift would also require different logistics strategies.
Shifting Towards Near-shore Productions
Many businesses have also considered near-shore productions, relating to the diversification in the supply chain. Countries have tried partnering with neighboring countries that can handle the production of goods, first for medical supplies and, later, anything essential. This strategy has helped lessen the shipping duration since the production location is closer.
The outcome of the pandemic has led to redesigning supply chains, making more extended contracts, and partnering with multiple suppliers. This concept helped stabilize the supply chain and build resilience against possible disruptions. The only struggle in having near-shore productions is covid-related restrictions where companies must lessen or stop their operations.
Having an Increase in Freight Technologies
Another change in the global shipping industry due to the covid-pandemic is that it triggered an extraordinary expansion in digitalization and e-commerce, increasing the number of freight technologies. Many businesses have invested in freight technologies that provide data analysis, artificial intelligence software, and an entire end-to-end supply chain management.
This step is believed to increase resilience since having more data or information will bring more extraordinary ability to manage your inventories and even track the rates and voyage time in shipping. Moreover, the present industry will surely benefit from investment in freight technology corporations by connecting all the various participants, including shippers, brokers, and carriers in the marine base, to optimize current operations.
The Bottom Line
The covid-19 pandemic has brought changes, not just in the shipping industry but also in the entire world. National efforts to limit and lessen covid’s consequences severely influenced seafarers and international shipping, which caused the downward slope of the global economy in 2020.
In light of this, we can say that the global shipping industry will need better international coordination between the national government, international organizations, and other stakeholders to address the situation adequately and make wiser decisions. In other words, there should be better global and cross-border collaboration and a coherent framework to manage business operations during a pandemic and other similar crises.
