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Shipping Industry during COVID-19: What happened?
Shipping Industry during COVID-19: What happened?
COVID-19 came as a surprise, and its effects were both unprecedented and unknown. No expert could detect the impact and repercussions of the virus and all of the damage it could do.
Countries, one after another, had to close their borders and abide to international laws of protection to fend off the, at the time, still unknown virus.
This halted all signs of life and activities. Despite the critical health implications it created, the worldwide import/export operations were the ones who were hit the hardest because of closed borders and halted operations.
Let us check out how the import/export and shipping industry survived during this period of time and what is expected for the future as we are more and more progressing into a post-covid era.
What happened during the pandemic?
Against all expectations, a strong change in consumption patterns was observed as people started shopping online as soon as supermarkets and retail shops closed their doors. This automatically sounded the alarms of importers as they witnessed an extraordinary increase in demand for consumable electronics and other retail items, increasing the demand for shipping containers and sea shipments.
Plus, the strong demand for PPE (Personal Protective Equipment) and vaccines increased the demand of ships and delivery in the whole world.
This sharp increase in ship demand blew off the supply-and-demand equation for container ships, resulting in a massive shortage of available ships.
No governing body placed a contingency plan to mitigate the lack of availability of empty ships to make the problem worse.
This, combined with limited numbers of on-site workers, people working online, and strict border and port restrictions, didn't make the situation easier:
A limited number of workers on-site means not enough people to operate the machines to empty carriages and ships. There is no one to remove empty or full containers from ships.
This leads to surprising and never before seen situations where:
You would see ports stacked with container ships, ships having containers full of goods that have been sitting there for a while and vessels full of empty containers waiting to be filled and sent to another destination.
This unusual sight created delays, losses and a well explained raise in freight charges.
Supply chains and big companies were surely affected by this situation but none has suffered more than SMBs:
Small and medium businesses (SMBs) were the ones who suffered the most from these rates, as costs grew higher and the lack of ships forcibly created delays.
What will the future hold for the shipping industry?
With the mass vaccination campaigns happening worldwide, lockdown restrictions are slowly easing up and international borders are slowly opening up again.
However, not all countries are at the same level: Some countries are still going through an insurgence of new covid variants as death tolls continue rising, while others are returning to an almost normal way of life.
Despite the growth of nationalism and protectionist policies worldwide, the shipping industry is still holding on despite the global economic recession the world is experiencing.
And because economies take time to recover and protectionist policies are still imposed, the chances for progress are slim. But of course, the pandemic should not result in a complete rejection of the multilateral trade system's rules-based structure.
As long as a few countries worldwide are still struggling with COVID – related issues, no one is safe and normal business cannot resume and we are still going through a shipping crisis.
The shipping crisis is the result of the world's largest importing and exporting countries' inconsistent post-Covid-19 economic recoveries. Multiple waves and new variants of covid have swept the globe.
However, the degree and depth of its influence on each country meant that everyone around the world experienced lockdowns and subsequent relaxation of restrictions at various times.
Despite everything, experts remain optimistic and hope that the recovery period will not linger anymore: Some developing and third world countries are not economically able to withstand any more restrictions and the opening of borders should become a necessity.
As for the shipping industry, demand will continue to grow: While increased demand for retail items is helping container markets, a reviving global economy is also running through more raw materials, boosting the income of bulk carriers. Earnings in that industry just touched an 11-year high and show no signs of slowing down, with consumer demand predicted to continue strong for the rest of the year.
Concerning the supply and demand of container ships:
As soon as worldwide ports return to full functionality, container ships will no longer remain parked at one port. The on-site workers will return to their usual operations and deliveries will go back to their normal schedule without any delays, and operations will run smoothly again.