• UNCTAD: Impact of Covid-19 reduces global shipping and transforms industry

    Report fully reveals the impact of the pandemic on the sector globally during 2020

    https://www.mundomaritimo.cl/ – Global shipping will fall by 4.1% by 2020, due to unprecedented disruption caused by the impact of Covid-19, estimates UNCTAD in its Maritime Transport Report 2020. The report warns that the new waves of the pandemic affecting supply chains and economies could cause an even more marked decline. According to the agency, the pandemic has shaken supply chains, shipping networks and ports, leading to the collapse of cargo volumes and frustrating growth prospects.

    According to the report, the short-term outlook for shipping is discouraging, and forecasts about the long-term impact of the pandemic, as well as the timing and scope of industrial revival dominate uncertainty.

    ‘The global maritime transport industry is at the forefront of efforts to achieve sustainable recovery as a vital enabler in the smooth functioning of international supply chains’, said UNCTAD Secretary-General Mukhisa Kituyi. «The industry must be a key player in adapting the efficiency of logistics, just-in-time», added Kituyi.

    UNCTAD estimates that maritime trade growth will return to positive territory and grow by 4.8 per cent by 2021, if the performance of the world economy will recover. However, this highlights the need for the shipping industry to support change and prepare for a post-Covid-19 world, ultimately different.

    Responses to the pandemic

    At the peak of the crisis, when the contraction in cargo volumes accentuated the structural imbalance of the market, the report highlights, shipping lines adopted greater discipline, reducing load capacity and reducing costs to maintain profitability rather than prioritizing its share in market share.

    As a result, freight rates remained stable despite falling demand. From the point of view of exporters, these strategies mean severe limitations of space for the transport of goods and delays in delivery dates.

    To address the disruptions related to the pandemic, the actors of the maritime sector adapted their operations, finances, health and security protocols, as well as their work processes and practices. In addition, several Governments, through their border agencies, port authorities and customs administrations, introduced reforms to maintain the flow of trade while safeguarding the safety of people.

    ‘Border agents, port workers and customs officials play an essential role in keeping trade going, helping to better navigate this crisis’, Kituyi said: It will be important to assess the best practices emerging from their experiences to strengthen trade facilitation in the years to come.

     Globalization and decarbonization

    Covid-19, according to the report, has also raised existential questions about globalization, giving more weight to adverse reactions to distance outsourcing: The pandemic focused on shortening the supply chain, through nearshoring and reshoring,” the report says. It also highlighted the debate on the diversification of production, manufacturing sites and suppliers, he adds.

    The report also highlights the world’s lack of preparedness for crises such as these, underlining the urgent need to invest in risk management and preparedness for transport and logistics emergencies.

    UNCTAD’s Director of Technology and Logistics, Shamika N. Sirimanne, clarified that the pandemic should not hold back actions to combat climate change in shipping. The momentum for ongoing efforts to reduce carbon emissions from shipping and the energy transition to fossil fuel removal must be maintained,” he said.

     Digital transformation and crew crisis

    The pandemic has also strengthened the trend towards digitalization and the elimination of paperwork in the shipping industry, including ports, the report notes, reinforcing the need for standards and interoperability of electronic documentation. On the other hand, it has also highlighted that digitalization carries greater cybersecurity risks that can paralyze supply chains and services linked to global maritime trade.

    On the other hand, the report condemns the humanitarian and security crisis caused by the pandemic as more than 300,000 sailors were stranded at sea beyond the deadline of their contract, an unsustainable situation both from the perspective of the safety and welfare of seafarers and of safety in shipping operations. In this regard, UNCTAD reiterated its call on the authorities to designate crew members as workers to be exempted from travel restrictions imposed by Covid-19.

    Prior to the pandemic

    In addition to focusing heavily on the impact of the pandemic during 2020, the report provides detailed in-depth coverage of global maritime trade in 2019, which lost momentum due to tensions between China and the United States, uncertainty about Brexit, tariffs imposed by India, the trade dispute between Japan and South Korea and the advance of protectionism. The report estimates that additional tariff rates stemming from tensions between China and the United States reduced the volume of maritime trade by 0.5% in 2019.

    Some of the main aspects of 2019 highlighted by the report are:

    -The iron trade fell for the first time in 20 years by 1.5%, due to events such as the collapse of the Vale dam in Brazil and the Veronica cyclone in Australia.

    -Brazil surpassed the United States as the largest exporter of grain by sea.

    -As of March 2020, it was estimated that 20% of world trade in intermediate manufactured goods originated in China, a significant increase compared to the 4% that this indicator represented in 2002.

    -Container capacity increased by 10.9%, mainly benefiting shipping lines through economies of scale resulting from the use of larger vessels.

    -Ports strengthen connections with inland areas (hinterland) to get closer to exporters and ‘anchor’ cargo volumes.

    -China, Greece and Japan remain the 3 largest powers in the ship ownership business, accounting for 40.3% of the world’s tonnage in freight capacity and 30% from the perspective of the value of the global fleet.

    –Liberia, the Marshall Islands and Panama maintain their leadership as the three registration flags, in terms of cargo capacity and registered freight value. Until January 1, 2020, they accounted for 42% of cargo capacity and 33.6% of fleet value.

    It is worth mentioning that Mundo Marítimo, through its next editions, will deliver several notes with summaries of the main aspects of this report.

    See original article at: https://www.mundomaritimo.cl/

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