Commentary

Supply Chain Disruption Due to Coronavirus Outbreak- Impacting the Shipping Industry

By Amit Kumar

A new novel Coronavirus, a severe infection with no known cure, is rapidly spread in various cities across the planet. An initial outbreak, found within the now-quarantined epicenter of Wuhan in China, isn’t only disrupted the health security of millions but also negatively impacted travel and business. Wuhan is additionally a awfully important hub for global companies within the province of Hubei which holds an entire of 1,016 in Bloomberg’s supply chain database. Many plants are within the auto and transportation industries, including PepsiCo Inc. and Siemens AG. However, companies are now scaling back their operations in China and other Asian countries like land. At the identical time, airlines halt flights and a near total travel ban to China imposed by largescale trading partners slightly like the us and Australia takes effect.

As the price rises from the illness and cases are reported in over across the planet, the economic impact of the coronavirus is wide-ranging, especially on supply chain and also the freight transportation industry.

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Slower Production and Fewer Transportation Options

The impact of the coronavirus on supply chain is already felt across the planet. due to the Lunar year season, the ocean shipping industry is already slow as factories close for up to four weeks and workers travel home to trip their families. Now that the coronavirus has emerged at one in every of the foremost effective travel periods within the year, factories have extended the quantity due to travel restrictions, affecting production. Companies like Apple, who have supplier within the Wuhan region, are making alternative plans to mitigate any loss in production.

While the impact of the virus may be a smaller amount clear on supply sources outside of Wuhan, shipping professionals looking to maneuver goods out of PRC will see a reduction in air freight capacity. as an example, Cathay Pacific, a large-scale passenger and cargo airline, cut their capacity by a minimum of half through March. It’s expected that the pc, electrical equipment and also the machinery industries will take the foremost important hits
in business. With alternative and fewer transportation options available during the travel ban, manufacturing delays, increased blank sailings and fair cancellation or postponements will plague the freight transportation industry within the short-term. If matters worsens, factories will should delay production even further and miss delivery dates for several importers. The Chinese yr has already extended its holiday until February 10th in Shanghai, Jiangsu, Zhejiang and also the Guangdong provinces.

Precautions in Maritime Shipping

The other week, the us Coast Guard released a bulletin explaining that vessel owners, operators and native stakeholders are to review all arrivals with current policies and report on the sick/deceased crew or passengers on their vessels. Some shipping lines are announcing blank sailings for week seven and week eight due to anticipated delays in production. If matters continues, it’ll end in fewer service openings. Some lines are creating continuity plans, so workers have remote access to work. Of course, precautions are slowing port operations. Ports in China and throughout Asia did remain open during the SARS outbreak, but priority are visiting run to vessels that carry aid supplies for the coronavirus outbreak.

Shipments that were returned to terminals before the Chinese yr holiday with planned sailings are continuing to be loaded. However, if matters escalates, port operations could even be disrupted as they implement further safety precautions. Already, some vessels and barge operators are stopped at the Yangtze to forestall entry into Wuhan. A risk of quarantines at ports could happen in extreme cases, but which could stop port operations altogether.

The Long-Term Effects of the Coronavirus on Freight Transportation

If the coronavirus isn’t contained within the subsequent two months, it’ll negatively impact the contract season. Longer manufacturing closures indicate weakened demand, which is ready to cause a weak rate market. Carriers who normally negotiate for higher rate contracts within the approaching season will have difficulty if the outbreak continues. Not to mention, we’d see major revenue losses. A plummeting transpacific container volumes during the year’s could extend into quarter two. Steamship lines will confront major challenges since they’ve already been struggling to die additional costs that occurred with the IMO 2020 regulation. For some, higher operation costs may come from a push for sailings without full space utilization since the downturn will affect carriers’ revenues.

Update to the article

India’s Lockdown Phase

The Government of India is being very pre-emptive in approach to deal with deadly virus COVID-19 , so in that direction India had come up with 21 days lock down in a first phase on March 24 , which had come into action on the same day without any delays and later in second phase it has been extended till 3rd of may. India has a population of about 1.3 billion which is one fifth of the world’s population and having so large coastline it has very extensive transportation through seas . In past ,Maritime Industry is majorly hit by trade wars , high tariffs and the natural disaster that blown up Kerala coast in 2019.

SUPPLY CHAIN DISRUPTION 

India is vastly a source of many essential commodities in which few of them are wheat and medicines and due to immense pressure of crisis their was a surge in demand side globally . The continuous lock-downs have uprooted the global supply chain .According to the census reports when the lock-downs had been carried out at that time about 543 ships with about 100000 seafarers were stranded in the middle of their voyages .Inventory Management system that fully depends upon the timely arrival of ships has been now jammed without keeping the costs minimized further.

SHIP BREAKING AND LABOR SUPPLY 

India and it neighbors are most favorable destination for recruiting the labors for ship breaking industry but due covid19 no activities are taking place and moreover labors are merely going out of their places as a result whole process got halted. India is also significantly impacted in crew management area , due which shipowners are grappling with input output cost variance whose impact can be clearly seen over box type ships.

PORT CLOSURES 

India is a major epicenter for the delivery of goods through big name companies such as Maersk and Hapang-Lloyd which is known for their logistics and shipping . As per the report there was plummeting drop in cargo volumes of Hapang-Lloyd at Indian Ports from February due to drastically decrease in turnaround times .India’s sea trade in a such a grim situation had totally averted the situation for which the disturbances in domestic and supply lines is a major reason. Government of India stringently put the detention charges for all the arriving shipments during this period of uncertainty due which shipping companies had to further bear the brunt with loading and unloading issues looming. This along with the combination of labor shortages has led to further delays with spurring voyage time.

Oil Crash Impact 

Covid19 outbreak has put the demand of oil in severe strain due to which Indian Oil Corporation had reduced its oil processing by 30%, but India’s stance to taken an advantage of plummeting oil prices is very weak as it has limited storage capacity .As per the reports of S&P there is a negative growth for India’ oil demand in 2020.

What will be the Future ?

Shipping Ecosystem as a whole got disrupted and the way out of it is only be possible if the containment of this deadly virus got positively achieved but till that time as a force majeure declared by all the Indian ports with only essential services can take place through that India needs to slowly revive its supply chain. As the government has planned to eased the restriction from April 20 the ports can load and unload cargoes and goods across any ports in India, even working very actively India has come up with SOP for the sign on /signoff. Authorities and Ministry of shipping by putting their utmost care and expertise, can expect other operations will also resume very soon . At last we will definitely win against this pandemic by putting the best practices in place. 

(The opinions and views expressed are those of the author’s)

Author’s Profile

Amit Kumar, an ex Merchant Mariner is founder and CEO of Sea and Coast Maritime Magazine. Following the career at sea, he went on to become a maritime journalist and aced it. He has acted as a liaison between stakeholders, dignitaries, navy veterans, shipping professionals and maritime fraternity through his popular exclusive columns in monthly publication of the magazine. He presides the content, marketing and distribution team of the magazine which exclusively covers maritime affairs and has strived continuously for maintaining apex standard in educating world of complex and rapid changing shipping industry and global supply chain.

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