Asif Mahmud Arnob
BBA in PML 1st Batch
Bangabandhu Sheikh Mujibur Rahman Maritime University
COVID-19 impact on Shipping industry and China's Economy :
The economic impact of the outbreak will depend on its duration and severity.The rapid spread of the covid-19 worldwide has had a major impact on global markets. The World Trade Organisation predicts that “World Trade is expected to fall by between 13% and 32% in 2020 as the COVID-19 pandemic hampers regular economic activity and life around the world”.The shipping industry including international transport at the forefront on international trade enabling 90% of world trade at roughly USD 12 trillion, is facing large scale disruptions the likes of which hasn’t been seen in decades.
As the nature of the shipping industry is heavily dependent on travel and human interaction that's why it has been impacted materially both directly and indirectly from the outbreak of COVID-19 pandemic.Operations of shipping companies,terminals and ports have been affected due to personnel having been advised to stay at home and be safe from the virus by their governments.
China is in the central position in the global movement of goods as the world’s largest exporter. Eventually it is a major trade partner for numerous countries and a key leader in shipbuilding, prosperity within the shipping sector has been strongly tied to China for the past two decades.
The dependence on China’s demand and exports has driven the shipping industry and has increased risks for the entire supply chain. This can significantly slowdown not only the Chinese economy but also the global economy as China has become the central manufacturing hub of many global businesses and operations.
Again the Baltic Capesize Index (BCI) has moved into negative territory for the first time ever this year, in its almost 30-year history.
Right now we can see that commodity vessels like dry bulk and tanker vessels are in lower demand and lower freight rates.The shipbuilding and ship repair segments have collapsed as people are not interested in travelling to China and South Korea. Shipping finance and ship brokerage have also been affected as travelling, momentum and enthusiasm is now restricted.On a brighter prospect, a slow down for shipping finance and new ship building activity can be welcome news by keeping tonnage supply from expanding.The first couple months of a year are seasonally slow for Chinese iron ore imports (timing that encompasses Western holidays and Chinese New Year celebrations); however, this year’s seasonality has been compounded with a slowdown of the Chinese economy (possibly due to tariffs and trade wars with the U.S., as speculated in the Western media) and the outbreak of COVID-19, and these two factors have further exacerbated the seasonal decline.Again COVID-19 is causing shipping companies to consider relocating operations outside of China.
The world economy and shipping will be able to recover some of the losses and can start its journey again after the COVID-19 is over if governments and central banks come forward with an orchestrated effort of stimulus packages.
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