With international transport at the forefront of trade and dependent on travel and human interaction, the Shipping industry has been impacted both directly and indirectly from the outbreak of Covid-19. The most significantly affected sectors have been the Chemical tankers, Cruise ships and Passenger ships. Meanwhile, the number of Bulk carriers, Containerships, General Cargo, Oil tankers, and Ro-Ro cargo vessels had only a small decrease (up to approximately 5%).
Also, the number of port of calls are significantly decreased on cruise and vehicle carriers. Moreover, the shipping routes from Europe to China and from Europe to the US have been affected. From March to December 2020, the ship traffic from Europe to China and the US has declined when compared to same periods in 2019. Comparing weeks 1-49 in 2019 and 2020 there is a significant decrease of 51.9% from Europe to China, while the traffic flow from China to Europe showed a decrease of 40.3%. Comparing the same period of 2019 and 2020 for the traffic between Europe to the US a decline of 32.2% was measured while for the routes between the US to Europe the decline was even more significant reaching to 38.0%.
Ships carrying passengers (Cruises, Passenger ships and RoRo/Passenger) were the ones most affected by Covid-19. cruise ships bound to EU ports and staying at ports or anchorages. The report showed that the number of Persons on Board (PoB) on cruise ships began to decrease gradually from the beginning of March (around week 10) and remained at a very low level corresponding mainly to crew members on board these ships. Every major cruise line in the world suspended departures in mid-March as the coronavirus outbreak grew, with some returning to operations in limited number of vessels and areas. As the COVID-19 pandemic continued to roll, ports have faced an unprecedented number of vessels at anchor and vessels queue up waiting for a spot to unload cargo. Since the beginning of 2020 and especially since week 13 there is an increase number of ships "at anchor" in comparison with 2019.
The cruises sector and in general the transport of passengers are the sectors most heavily impacted by the Covid-19. Other sectors were also impacted, but in general the trade didn't stop. Despite of the difficulties, commercial ship operations, ports and other maritime transport sectors continued to operate ensuring the movement of goods and proving the strategic importance of maritime for the world's livelihood.
In trade sector, some of the dynamics changed due to the Corona virus, an example being the Federal Maritime Commission (FMC or Commission) announcing its adoption of a final interpretive rule to provide the maritime community guidance on the "reasonableness" of detention and demurrage charges. The rule addresses shipper complaints of excessive and unwarranted charges by providing that charges may well be found unreasonable unless they further the prompt movement of cargo ("freight fluidity"), thus shifting the burden of delays that are beyond the control either party towards the carrier and away from the shipper. The importance of the guidance to all participants in the shipping supply chain is heightened as Covid-19 affects normal maritime movements.
While the longer-term impact of the Covid-19 outbreak is yet to be fully understood, all indicators are pointing to significant immediate challenges for the sector. These differ depending on the maritime transport segment (e.g. container, bulk, reefer, tanker) and whether the transport operation is domestic or international. They also vary by region, level of development, and the state of prior preparedness to shocks and disruptions. Countries with a high share of forward and backward global value chain participation are more vulnerable to supply chain disruptions. Countries having relatively higher shares of backward value chain participation are likely to be the most vulnerable.
To cope with the disruption and continue to link supply chains and enable smooth cargo flows, key stakeholders in the maritime supply chain of which ports and shipping are key players, have adopted a range of response and risk mitigation measures. Responses varied and covered different aspects and included
(a) operational adjustments;
(c) sanitary protocols and processes; and
(d) adjustments to working practices and organizational aspects.
Responses to the crisis and the 'back to work practices' varied in scope and type and the capacity for active and prompt interventions has proved to be crucial. Some responses by ports entailed a substantial reorganization of operations. These include:
(a) the prioritization of essential services;
(b) the reorganization of operations and working conditions due to sanitary protocols; and
(c) the advancement of digitalization and communication strategies.
Existing contingency plans have facilitated quick responses to the crisis in shipping and ports Stakeholders that lacked such plans, had to take ad hoc responses or develop plans in a short period of time during the crisis.
The most long-lasting impact of Covid-19 might be digitalization in maritime. Digitalization of interactions and information sharing have been critical to the continuity of maritime transport operations during the pandemic. Digitalization has emerged as a key component of transport and supply chain resilience building efforts. Working and operational adjustment measures that helped the sector adapt have been transformational for the maritime supply chain stakeholders. Digitalization of processes and the use of technology by much of the workforce have triggered the need to revisit operations and upgrade knowledge and skills. Adjustments of working practices were used to limit personnel shortages Ports were able to diffuse several risks when they allowed for telecommuting, implemented sanitary protocols including social distancing, rearranged working shifts, limited meetings and travelling, took advantage of relevant social policies, and made greater use of technology. Similar adjustments were adopted by shipping lines. Most ports managed to avoid significant disruptions of cargo handling operations. This was facilitated by the reduced number of ship port calls and the reduced maritime trade flows.
For ports, the financial implications of the crisis are manifold and more pronounced in the case of fully privatized ports. These include:
(i) the difficulties of ports themselves to continue their financing,
(ii) the limited financial capacities of several port providers that are constrained by lockdowns and suppressed demand, and
(iii) the challenges imposed on ports users. The capacity of ports to adopt urgent and compensatory measures, by for example, taking advantage of cash flows for early payment of providers, or delay of payments by some of their users, have contributed to mitigate the negative effects of the crisis.
The revision of capacity management plans and changes in shipping schedules have been a key feature of the adjustment measures introduced by shipping lines in the face of lower demand. The consolidation that marked the industry in the recent past has seemingly worked in favour of the carriers on this occasion.
Container freight rates have not collapsed. They remained relatively strong as carriers closely managed capacity. Challenges to 'crew changes' highlighted the need for orchestrating an integrated approach by all. Crew changes have been one of the major issues faced by the maritime supply chain. This is largely due to difficulties related to third parties (i.e. airports, and public policies imposing restrictions to travelling, etc.).
Developing guidelines to ensure a safe interface between ship and shore-based personnel has been critical, not least due to the nature of the crisis. This has taken place both at local and at international level and with support from relevant industry associations and international organizations. Maintaining landside operations has been difficult, especially in developing regions. Long queues at borders have highlighted the importance of reliable chains to navigate through crises and disruptions. These difficulties did not affect maritime countries only. Land-locked and transit countries need to maintain their access to seaports as well.
Shippers and ports have worked to address land-side operations, but the ability to adapt has not been always effective. Like shipping and ports, the main instruments used to address these issues have been digitalization and enhanced communications and coordination with other stakeholders and public authorities.
Responding to the Covid-19 challenges required collaboration and coordination among all stakeholders. When established, collective actions have been more effective in combating risks and improving resilience. The capacity to coordinate with national and/or local authorities and communicate with other actors along the chain was critical. Adjustments to governance and communication strategies of parties involved have been equally instrumental.
The implications of a crisis like the Covid-19 could be long lasting for SIDS (small Island Developing States). Although their levels of connectivity did not deteriorate, a case-study analysing the Pacific SIDS revealed that the decision to divert a single ship from some countries, the absence of a ship call, or even a single operator due to the reduction in cargo available at a destination on key export markets, have put to test the ability of maritime transport to deliver essential goods. There has also been an increase in shipping costs for SIDS (small Island Developing States). These small island countries need to develop their risk mitigation capabilities and resilience building.
In supporting the recovery and facilitating going back to business, public policy initiatives are important. Already, there has been a flurry of stimulus packages introduced in developed and developing countries, albeit with variations in magnitude and focus. While each country adopted some type of measure, there were large variations in response actions across regions and among supranational and regional institutions.
These initiatives include both economic and operational measures adopted at national level, with the challenge in some countries being the need to align federal and state level initiatives. Supranational institutions and international organizations have also adopted a long list of initiatives.
Transport service providers and cargo owners have called for better forecast predictions and tools to anticipate disruptions and enhance supply chain transparency and flexibility. It was also acknowledged that ports should be aware of new trade patterns to prepare and adapt infrastructure and operations accordingly. Anticipating and preparing to face future disruptions are key to improving risk management and resilience building.
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