The Effect Of Corona Virus (COVID-19) On Global Container Shipping.
How Corona Virus (COVID-19) Has Affected Shipping Activities
To Begin, the short term impact of corona virus (COVID-19) health crisis is a sharp hit to global container volumes and carrier earnings, but some claim to expect that the medium term impact will be manageable provided the virus spread is contained. Corona virus (COVID-19) has really affected container shipping in the world today especially countries like Spain, China, Italy, USA, and even some African countries like Cameroon, South Africa and Nigeria.
Container shipping lines have learned the hard way to expect the unexpected. Whether it is trade wars, major port lock-downs or new viruses, dealing with such global disruptions has become the new normal. As facilitators of trade, Liner carriers are acutely exposed to events outside of their control, but there are limits to what they can do to mitigate their force.
Statistics from the Chinese port operators indicates that volumes were down by 20% – 40% in the three weeks from January 20 to February 10. Similar rates of decline have been reported by other companies using vessel tracking data, non-Chinese ports have not reported have not reported falling throughout volumes yet, but will this will become visible in the few weeks to come. Ships from Asia failed to arrive with shipping containers from China. Ocean Carriers cancelled about 105 sailings on the routes from Asia to North America and Europe and Mediterranean regions alone in February. A 30% fall in container volumes in China (which accounts for 30% global throughout) means a 30% x 30% = 90% reduction in global container volumes, unless the short fall is caught up later. But we should expect at least two months of global port volume falls.
The Cancellation of 105 sailings per month represents a short fall in revenue of roughly $1 billion (105 x $1,000), of which a portion will be made up later via full ships and extra loaders, but the short term damage to carrier profits in large. The uncertainty about how this will develop means that there are numerous possible scenarios for the global economy and therefore container shipping ranging from a fairly benign best-case where the world picks up quickly with very little after effect to a nightmarish worst-case the causes mass facilities and cripples the global economy. In this context, there is so much historical evidence from recent outbreaks such as SARS, MERS and Ebola Virus to suggest that COVID-19 can be contained fairly quickly, or at least become much better understood and that on the balance of probability the outcome will not be devastating.
Cargo owners and shipping lines are desperate for a swift resolution that will see Chinese factories resume production and start churning out the goods and ports that grease the global supply chain. It is inevitable that the world port through will suffer a large contraction of 1Q20, but the question is now whether we can expect a v-shaped recovery later this year or something else entirely. Before the recent escalation in cases outside China, economics forecasters were downgrading GDP growth already in productions to the tune of around 0.2 to 0.8 points. For example, the Economist intelligence unit (EIU) in a web-presentation on 12 February announced it was downgrading its baseline China outbreak from 5.9 to 5.4, which includes a strong rebound from 2G20 as the Chinese Government is expected to unleash a large fiscal stimulus program to kick-start the economy.
To continue, as reference from above paragraphs, so far impact of corona virus (COVID-19) on container shipping has just about been bearable, but the longer and more widespread the outbreak goes, the more damage it will cause especially in shipping. A spike cases outside of China most notably in Italy and Iran, has shattered the hope that this will be done with swiftly. While it is preferable to avoid tabloid doomsday predictions, so little is known about the corona virus COVID-19 at this juncture, other that it is highly dangerous and appears to have a much higher fatality rate than seasonal flu and currently has no vaccines. Nobody can confidently predict the outcome. Authorities have the daunting challenge of protecting public safety without overly harming the economy that if it turns sour could lead to its own health risks, all the while trying to avoid panic. The main problem as it stands is a knowledge deficit that means countries don’t know what the appropriate response should be. Short term hit container shipping is not as exposed to the corona virus problem as the airline or tourism industries, but the short term impact is very important.
However, the rapidly evolving story means that most economic and trade forecasts will quickly become redundant and have to be re-calibrated. It is therefore perhaps more information to think in terms of scenarios to get a broad idea of possible outcomes to take away this pandemic virus COVID-19.
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