Who could have predicted that the global economy would be shut down by a virus? Nonetheless, here we are, and companies around the world are wondering what the impact of COVID-19 will be on shipping, both in the short and long term.
The truth is that we’re still guessing.
As some parts of the world lessen restrictions, the rollout of “normal” standards could be, well, rolling. And according to at least one source, the coronavirus pandemic will permanently change ocean shipping.
What Will the Impact of COVID-19 Be?
Basil Karatzas, founder of Manhattan-based Karatzas Marine Advisors & Co., believes one big impact of COVID-19 will be, what he calls, stress tests. Thankfully, Karatzas also believes that the potential of a catastrophic situation is slim, and he foresees a rebound near the end of 2020 and into 2021.
For now, though, impediments to global shipping remain. In some countries, port access has been restricted or locked down completely. That’s not the only cause of port backups, however. A reduced workforce and closed stores and offices mean that cargo can be left unclaimed or its movement severely hindered.
And some reductions have come from the shipping companies themselves. Sea-Intelligence, a leading provider of innovative objective analysis within the container shipping industry, estimates a 25% drop in shipping for the first half of 2020, and a 10% overall drop for the year.
Fiscal Losses Could Continue
While there’s definitely a monetary loss associated with reduced shipments, shippers as a whole have not lowered prices. But if they are forced to do so, the industry could see a loss of nearly $20 billion.
That’s exactly what happened in the last global recession of 2008. And as we all remember, that took a few years to bounce back from. Naturally, companies and the industry as a whole are hoping 2020 doesn’t repeat that—or get worse.
But it all depends on what governments do moving forward and when they lift restrictions, as well as how quickly normal operations will resume.
Increases in Insurance Are Another Issue
As if challenges with changes in logistics weren’t enough, there’s also an increase in insurance to contend with. Insurance rates increased as a result of fear of a war between the US and Iran. And the same situation is happening due to the impact of COVID-19. The reason for increases in insurance are disruption in shipping and logistics. As we have seen, a number of crises can affect these fees.
A limited workforce, due to more employees suffering from COVID-19 and being unable to work, affects shipping logistics. The delays, in addition to a potential for perishable goods going bad, results in increased insurance premiums. Typically, cargo insurance is $.60 per $100 of a shipment’s insured value. Potential increases could be 2.5% or higher.
The Impact of COVID-19 at Cyclone Shipping
At Cyclone Shipping, we always plan at least a quarter ahead. We were forecasting these issues months before they were shared in the press. And we were making adjustments then. We always have backup plans on our calendar. Plans a, b, and c were set up by the time COVID-19 made its debut. And because of our forward thinking, our customers have had minimal to no disturbance in their shipping needs.
If you have concerns about global shipping schedules, trust Cyclone Shipping to give you the answers you need. Contact us to learn more.