The shipping industry is central to our globalized world. Just one of these containers carries enough goods to fill an average house. The enormous ships that transport goods around the world often carry tens of thousands of container boxes at a time. In recent times, there has been a challenge of container shortage and rising freight cost.
The short term impacts of the coronavirus on trade around the globe might tell us something much deeper about the long-term future of the world’s shipping industry.
At the beginning of 2020, the coronavirus hit Chinese shipping hard. Fast forward a few months and a flow of ships from Asia to the West has come under intense pressure. That pressure is falling particularly on the ships that carry goods to consumers in Europe and the US. This is because the ships setting off in the East depend on shops in the West. Some parts of Europe, including Italy and Spain, have shut down completely as there’s no opportunity for purchase. The department stores in the US have also curtailed their hours. Hence, this has been one of the biggest driving factors of reduced shipping activities.
Even though China has transformed itself into the world’s manufacturing hub, much of its production is still consumed by the West. This arrangement consolidated the east-west shipping routes as the most important artery of world trade. One of the best indicators of the health of the world economy is the prospect of a deep recession in the West looms over the industry. The indications are now crystal clear. The world’s biggest container shipping company, Maersk says its east-west trade has been the worst affected part of its business.
However, the fall is not as steep as you might expect. The container shipping industry plays a central role in the smooth function of the globalized economy. This means that for the most part cranes are still operating and ships are still sailing. In May 2020, around 40 sailings from East Asia to the west coast of America were cancelled unexpectedly. The action of pulling ships is not unprecedented. It happens year-round and it happens spontaneously when they find that they are being underutilized and will not hesitate to pull a service or a vessel.
What’s concerning is that it’s the first time the shipping industry has seen a drop of 12%. Its decline may not appear to be huge in our eyes. However, a drop such low has never been experienced before. Empty containers and idle ships are the short-term effects of the pandemic. The long-distance routes have suffered the worst. While the pandemic has put pressure on consumption in the West, there are other longer-term threats to long-distance shipping. The most obvious is the trade tensions between the US and China which have escalated over the lock down and are likely set to outlive the coronavirus pandemic.
Beyond this, changes to the structure of manufacturing including the rise of automation and the competitiveness of Chinese labour markets could also disrupt the flow of ships globally. A deeper insight indicates the transformation of the shipping industry and logistics. Pandemic and trade war might just have accelerated far more significant and long-lasting changes.
We are living in uncertain times but with challenges come opportunities. The application of advanced technology like automation and blockchain would enable a more transparent and efficient system. It would eliminate the need for manpower for routine and other operational tasks while creating new jobs simultaneously. In turn, this would benefit the shipping industry as one of the reasons for container shortage is the lack of manpower.