The Covid-19 pandemic is wreaking havoc on global shipping, which could initiate another crisis in what is a struggling industry.
To prevent the spread of the virus, a number of ports and shipping companies have implemented measures, which is causing severe disruptions within the industry.
In addition, the strict containment measures imposed by governments around the world has resulted in substantially lower global economic growth and consequentially, lower demand for the movement of goods.
This comes following the crisis initiated by Hanjin Shipping’s collapse in 2016 and the protracted US-China Trade War, which has already tested the resilience of the industry.
The repercussions of the Covid-19 pandemic will undoubtedly have a significant impact on the global shipping industry and place increased financial pressure on a multitude of companies.
Preventative measures are leading to cancellations and delays
Approximately 80% of world goods trade by volume is carried by sea and China is home to seven of the world’s ten busiest container ports, according to the United Nations Conference on Trade and Development. As a result, disruptions have had a profound impact.
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In China, the coronavirus outbreak has led to a significant decrease in the number of ships calling at ports such as Shanghai and Yangshan, of which the former is the biggest port in the world, handling approximately 43.3m twenty-foot equivalent unit (TEU) in 2019.
The number of port calls at Shanghai and Yangshang declined by 17% in January compared to the same period in the previous year.
This has had a knock-on effect globally with a number of ports seeing cargo volumes decline. The Port of Los Angeles, the largest US container port, recently announced that it saw cargo volumes fall approximately 25% in February compared to the prior year.
Preventative measures have already had a direct impact on shipping and, as the virus continues to spread, global demand will decline further as constraints on markets vital to the industry such as manufacturing and industrial activity become tighter.
The outbreak follows the US-China Trade War, which already dampened the industry’s performance
The outbreak has come soon after the ongoing US-Trade War, which has tested the resilience of the global industry.
‘The Review of Maritime Transport 2019’ conducted by UNCTAD, found that merchandise trade between the US and China have fallen by 15% since the second round of tariff hikes in September 2018 and have affected an estimated 2% of world maritime trade volume.
In November 2019, Maersk, the world’s biggest container shipping company, highlighted key issues facing global trade, stating that trade wars and Brexit were dampening growth, warning of a tough 2020.
The additional pressures caused by the coronavirus outbreak are likely to exacerbate existing issues, which is might to hit the financial performance of global shipping companies, which could send the industry into a period of uncertainty.