Coronavirus an unwelcome extra problem for shipping

Shipping has been expecting a cyber virus related problem for some time but was not expecting a biological one. Its hard to know if the Coronavirus outbreak in China, now declared a global health emergency by WHO, will be a short lived phenomenon or whether it will last as long as the 18 months to two years of the related severe acute respiratory syndrome (SARS) outbreak that began in late 2002.

It does seem that this time around China has reacted quicker and with more transparency than it did 18 years ago but it would also appear that the fatality rate is higher. The 2002 outbreak that was declared over in late 2004, resulted in almost 800 known deaths. Ten years after SARS, another coronavirus outbreak known as MERS (Middle East Respiratory Syndrome) occurred in Saudi Arabia. It may have had less of an international impact, but more than 800 deaths were reported.

In just over a month the latest epidemic has claimed almost 200 victims. The spread of this latest disease also looks to be much more rapid with cases being reported from all corners of the globe – 15 countries to date – and more expected.

These sort of events obviously affect all manner of businesses and industries as well as shipping, but as the main artery of world trade, shipping can be both a means of spreading disease as well as a victim. Today more people travel internationally by air than by sea so the precautions taken against spreading the disease will first be concentrated on airports. Some airlines have already suspended services to affected cities and towns in China and no doubt more will follow suit. In some places, quarantine arrangements have been put in place. Britain, for example, is requiring 200 citizens evacuated from Wuhan to go into 14 days of quarantine. Elsewhere arrivals from China are being screened for signs of infection and some countries are suspending all flights.

There have also been some incidents affecting ships. In Civitavecchia on Thrusady the cruise ship Costa Smerelda was put in lockdown after a passenger recently arrived from Macau began suffering with symptoms that suggested coronavirus. No passengers were allowed to leave the vessel until the passenger received the all clear from health authorities. Another false alarm involved the container ship CMA CGM Ural which has also been given the all clear after several seafarers became ill after calling at a number of Asian ports.

It does not look as though there will be a rapid decline of the coronavirus so it can be expected that similar precautions will eventually be applied at sea ports. In an article earlier this week, ShipInsight reported on shipping law firm Hill Dickinson’s view on some of the contractual implications of coronavirus, but there are potential impacts beyond those as well. Since then, the ICS has also recommended following some WHO guidance aimed at limiting the spread of the virus. The trade body has urged all members to fully adopt the guidelines saying that doing so may help avoid the unnecessary closure of ports, that facilitate 90% of global trade, including the transportation of medicines that underpin the health industry, as well as food and fuel supplies.

The outbreak has coincided with what is traditionally a quiet time in the liner trades after the Christmas and New Year holidays and the later Chinese New Year which runs into early February. That means the hit on trade has been limited but already there are signs that less fuel is needed because of restrictions on travel and that in turn affects transport of oil and freight rates for tankers. Any port closures that might happen would be a further dampener and could impact other types of cargoes.

At the time of the 2002 SARS outbreak it was estimated by some analysts to have cost the world economy somewhere in the region of $50bn (estimates varied from $30Bn to $100Bn) with particular hits for China and Hong Kong in terms of GDP. Today the impact could be even higher especially as China has become much more important in terms of economic status and driver of trade across many sectors. In 2003 China generated 4% of global GDP but last year, it was 16%.

The US/China trade dispute has already damaged confidence and affected shipping so the coronavirus could be a heavy blow and delay a recovery. A prolonged downturn will exacerbate financial problems for shipowners caused by the need to install a ballast treatment system and also the expenses of complying with the 2020 sulphur cap. The latter may be offset to some extent if oil prices tumble and bunker prices follow suit.

Another casualty could be the Posidonia and SMM exhibitions in June and September respectively. The SARS outbreak in 2002/3 severely affected exhibitors and visitors to European trade shows with many not turning up. That would be an unfortunate development for the organisers but hardly important in the wider scheme of things.

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