Commentary – Fallout of the Pandemic on Global Shipping

Cornona Virus: Outbreak and impact on the Global Shipping sector

In this contribution to LogisticsGulf.com, Adv. Joy Thattil, Managing Partner, Callidus Legal and leading maritime lawyer, examines the knock-on effects of the ravaging CoronaVirus (Covid-19) on the international shipping industry. Adv. Joy Thattil focuses on key geographical regions on the legal implications and aspects related to berthing, discharge and loading of container ships as also medical measures to combat the virus at ports—Editor.

CoronaViruses are a group of viruses that cause diseases in mammals and birds. The name CoronaVirus is derived from the Latin corona, meaning ‘crown’ or ‘halo’, which refers to the characteristic appearance of the virus particles (virions).

They have a fringe reminiscent of a crown or of a solar corona. In humans, CoronaViruses cause respiratory tract infections that are typically mild, such as the common cold, though rarer forms such as SARS, MERS, and COVID-19 can be lethal.

The ongoing novel CoronaVirus outbreak has rapidly spread from its origin in Wuhan City, a commercial hub and capital of Hubei Province in Central China and has now been detected in other countries in Asia as well as in Australia, Europe, North America and Northern Africa—in virtually every continent except Antarctica.

Virus impact on Container Shipping:

Shipping companies that carry goods from China to the rest of the world say they are reducing the number of seaborne vessels, as measures to stop the spread of the CoronaVirus crimp demand for their services and threaten to disrupt global supply chains.

About 80% of world goods trade by volume is carried by sea and China is home to seven of the world’s 10 busiest container ports, according to the United Nations Conference on Trade and Development. Nearby Singapore and South Korea (Busan) each have a mega port too.

Everything from cars and machinery to apparel and other consumer staples are shipped in containers, and disruption to the industry could reverberate far beyond China as the country seeks to contain the CoronaVirus outbreak by keeping factories shut and workers at home.

Prolonged crises

The longer the health crisis lasts, the harder it will be to move goods around the world. The CoronaVirus outbreak has killed more than 43,300 people and infected at least 875,000 (and rapidly counting at the time of publication of this report on 1 April 2020) — mainly in China, where close to 100 million people are living in cities on lockdown.

Still more vessels are idling in ‘floating quarantined zones’, as countries such as Australia refuse to allow ships that have called at Chinese ports to enter their own until the crew has been declared virus-free.

Giant shipping companies such as Maersk, MSC (Mediterranean Shipping Company), Hapag-Lloyd and CMA-CGM have said that they have reduced the number of vessels on routes connecting China and Hong Kong with India, Canada, the United States and West Africa.

BIMCO* members, which include 1,900 shipowners, operators, managers, brokers and agents, report limited or no demand from Chinese buyers of seaborne commodities, such as coal, crude oil and iron ore and other minerals. The lack of activity is reflected in oil prices, which have crashed into a bear market.

Decline in shipping frequency / cancellations

The CoronaVirus outbreak has led to a decline in the number of ships calling on Chinese ports including Shanghai and Yangshan in January 2020, as factories across the country remain closed or operating at low capacity. The number of port calls at Shanghai and Yangshang declined by 17% in January 2020, compared to the same period in the previous year.

Carriers have blanked 21 sailings on the US-Asia Pacific trade route with the primary reason being weak demand in China. The cancellations are in addition to 66 cancellations that took place during the Chinese Lunar New Year resulting in 199,000 TEUs (twenty tonne equivalent) units of reduced capacity.

On the Asia-Europe trade route, a total of 61 cancelled sailings have been announced, representing a 151,000 TEU capacity reduction.

The biggest impact of the cancellations is expected to be on Maersk due to its wide exposure to container shipping and port terminals. The company’s operations in China represent 30% of its annual shipping volume. Hapag Lloyd is another company that is expected to witness a weak first quarter as its operations in China account for 25% of group revenue.

CoronaVirus impact on regional Ports:

China:

According to local sources, no Chinese seaports have officially announced a lockdown, except for the inland river port of Wuhan, though domestic traffic seems to be operating there. Ports have implemented strict prevention and control measures, such as declarations of crews’ health condition prior to ships’ entry, monitoring of crewmembers’ body temperature, gangway checks of people attending from ashore, restrictions on crew change, restricting shore leaves, requirement for crew to wear masks, and Personal Protective Equipment (PPE).

Few container depots in Shanghai, which is the busiest port in the world according to United Nations Conference on Trade and Development, are closed until 10 February. Vessels with crew from Wuhan or the Hubei province are restricted to berth at the Putian (Fujian Province) and Quanzhou ports. At the Ningbo port, such vessels will be placed under isolation for 14 days before berthing.

Substitution of crew at the Shanghai, Xiamen, Ningbo, Tianjin, Dalian, Qingdao and Guangzhou ports has been prohibited. Wearing facial masks and temperature checks everyday has been initiated as a preventive action for CoronaVirus.

United States of America:

The US Coast Guard issued a notice on 02 February 2020 stating that any passenger vessels or vessels carrying passengers, which have been to China or embarked passengers in China in the last 14 days, will be denied entry into the US. Any passengers who exceed the 14 day period and are symptom-free will be allowed entry into the US.

Non-passenger vessels are allowed to operate in the US with restrictions if they have been to China or embarked passengers in China within the last 14 days under the condition that there are no sick crewmembers. Any vessels with sick crew members are required to notify the nearest Coast Guard Captain of the Port.

Singapore:

The Maritime and Port Authority of Singapore (MPA) has implemented temperature screening at all sea checkpoints, including ferry and cruise terminals. Visitors having a travel history in Hubei or possessing PRC (People’s Republic of China) passports issued in Hubei, will not be allowed to enter or transit through Singapore.

Australia:

Australia initiated additional border screening and isolation measures on 01 February. Any vessels that have left China or transited through the country after 01 February and less than 14 days prior to the date will be required to meet CoronaVirus requirements set by the government.

Japan:

Diamond Princess Cruise ship owned and operated by Princess Cruises was quarantined off the coast of Yokohama after a suspected case of CoronaVirus infection was reported on 03 February. A total of 705 confirmed cases have been reported on the ship, which has 2,666 guests (a majority from Japan) and 1,045 crew on board.

The Japanese health authorities commenced the disembarking process on 19 February for those passengers who did not display any symptoms of the disease since the beginning of the quarantine period and tested negative for the virus.

Preventive measures on board:

It is very important to raise the awareness amongst crew members so that they are aware of the risks, how the virus can be spread, and precautions to be taken. The IMO (the London headquartered International Maritime Organization) has provided some advice for seafarers and shipping.

Many Flag States have also highlighted the importance of ensuring seafarers are properly informed, such as the Directorate General of Shipping in India. In general, ships’ crews are recommended to adhere to the following guidelines (not exhaustive):

• Cooperate fully with the port health authorities and make an honest disclosure of the crew health on-board.
• Practice good hygiene. Some of the good practices mentioned by the WHO are:
• Wash hands frequently and avoid touching eyes, nose and mouth.
• Practice respiratory hygiene (cover coughs and sneezes with flexed elbow or tissue, discard tissue immediately into a closed bin and wash hands).
• Maintain social distancing. Keep at least one metre (three feet) distance between yourself and other people, particularly those who are coughing, sneezing and have a fever.
• If you have a cough and fever, use a surgical mask, avoid close contact with others and seek medical help early.
• Practise food safety, such as by cooking the food items thoroughly.

Preventive measures in Ports:

Timely safety measures and preventive actions by various ports and shipping organisations are expected to limit the impact of the outbreak.

The International Chamber of Shipping (ICS) stated that by implementing certain preventive measures for CoronaVirus, ports and global shipping can continue to operate and avoid the closure of any port. The ICS recommenced exit screening at all ports in the affected areas to isolate passengers displaying symptoms of the disease and curb its spread to other Countries.

All major ports across the world have adopted a 14-day quarantine period for vessels arriving from or transiting through China. Vessels arriving from China are required to report regarding the health of the crew members and passengers prior to berthing.

As mentioned above all the Countries across the world have taken various steps to prevent the spread of CoronaVirus within their Territory.

Loss of lives and business emanating from the CoronaVirus:

• Maersk cautions of lower earnings from CoronaVirus Impact as it has taken a toll on the shipping volumes and freight rates and various factories remained closed for a whole week.
• Two passengers from the cruise ship quarantined in Japan have died after contracting the new CoronaVirus, the first deaths among the more than 600 people on board who have been infected.
• Carriers, faced with the possibility of shrinking revenue and increased losses, have opted to cut their rates with the Shanghai Containerised Freight Index on the Shanghai Shipping Exchange showing significant declines.

Conclusion:

The damage caused by CoronaVirus in all sectors has been huge and its effect has not left the Maritime industry as well. Most of the ships have restricted their entries to many countries due to the fear of being infected and causing more damage to people.

We ought to follow the national and international Governments advice and follow WHO’s guidelines in order to safeguard and protect every individual. All we can do at this stage is too hope and pray that such Global Pandemic chaos does not see the light of the day in the future.

(*BIMCO, founded under the title of ‘The Baltic and White Sea Conference in Copenhagen, Denmark in 1905, is the largest of the international shipping associations representing shipowners; its membership controls around 65 percent of the world’s tonnage and it has members in more than 120 countries, including managers, brokers and agents)