Impact of the pandemic on long-haul shipping

The pandemic caused by the new coronavirus brought many changes to the market. The confinement of most people, sometimes completely paralyzing services (as in the lockdowns in China, Italy and Spain), has caused demand to change sharply in various sectors. Looking specifically at the logistics chain, it is clear that the demand for transport was affected by the pandemic in practically all modes. Including the waterway modal, which took a little longer to feel the effects in Brazil, especially in long-haul navigation.

Figure 1 – Comparison of long-haul container handling between 2019 and 2020. Source: ANTAQ; ILOS analysis

As shown in the figure above, we see that demand was reasonably controlled compared to 2019, but with a clear downward trend, with March closing 4% lower than the same month last year, and with an 8% drop in compared to the month of February. This first drop in demand has a lot to do with the stoppage in China, where there were roadblocks, quarantines and factory closures, which made it very difficult for goods to arrive at ports, causing the cancellation of trips to Chinese ports by customers. shipowners, and messing up navigation services.

As some services from China can last up to a month, there was a late effect of the drop in demand, felt mainly in March. As a result, there was also an imbalance of containers in the ports, as the services were not making all the scheduled stops, causing an accumulation of containers in China and a shortage in the rest of the world, including Brazil. According to Maersk, three of the largest Chinese ports (Shanghai, Ningbo and Xingang) accumulated refrigerated containers loaded with fruits, vegetables and meats, containers that would be important for transporting Brazilian meat production.

In mid-March and throughout April, the situation began to return to normal, with the control of the disease in China and the consequent resumption of travel, not only with loaded containers, but also with empty containers to balance navigation services. However, the covid-19 situation in Europe worsened and more obstacles appeared, leading some countries to adopt the quarantine, causing a further drop in demand, this time in services from Europe.

To complicate matters, Brazil also became the focus of the covid-19 pandemic, causing the population to adopt the quarantine, aggravating the demand of many companies, closing industries and retailers, and consequently, reducing imports to the country. At the same time, the dollar exchange rate reached record levels, which also contributed to the drop in the volume of imports. As a result, there was an accumulation of full containers in Brazil, as many importers began to delay the nationalization of cargo due to the exchange rate of the US currency, in addition to many of these products having their demand completely reduced, since the focus of consumption ended up changing drastically. The retraction of imports in Brazil has already led shipowners to cancel 12 shipments to the country in the next three months, with two shipments canceled in May, seven in June and three in July.

On the other hand, there was a growth in the last quarter of exports, driven mainly by the level of the dollar, which led, according to data from the Ministry of Agriculture, to a 9,4% increase in meat exports, compared to the same quarter of the year. past, totaling 1,68 million tons. In addition, for bulk cargo, we had a record grain harvest that also boosted exports..

Despite this, already in the month of April, the imbalance of containers proved to be a bottleneck in the flow of domestic production, which led Maersk to transfer 1,8 refrigerated containers to Brazil, in order to meet export demand. of meats, fruits and vegetables. Even with this help, as previously mentioned, after April the situation worsened for some countries, and with that the cancellation of 12 trips to Brazil has already been announced, which makes it expected that there will also be a drop in container exports for the coming months.

The problems reported above are not exclusive to Brazil, in the rest of America and Europe the situation is very similar, with the paralysis of the economy and products without demand, we have ports full of containers that, according to the International Association of Ports (IAHP) , today we already have places without any space for storage. Given this situation, imports in the world have already fallen by approximately 15%, and a 30% drop is still expected for the coming months.

It is necessary for navigation to try its best to mitigate the reported problems, as a healthy flow of maritime transport is of paramount importance to ensure availability of essential consumer goods around the globe, in addition to helping in the recovery of the economy. Possible actions such as facilitating the storage of consumer goods or even speeding up the process of receiving refrigerated cargo, make containers available for circulation more quickly, which can help keep maritime transport at a healthier level.

References:

Economic value - Ports maintain operation and assess bottlenecks

Economic value - Coronavirus causes new drop in activity in ports in Brazil

Economic value - BTP postpones price increases and renegotiates with customers

Economic value - China cancels 12 shipments to Brazil until July

The State of S. Paulo – Ports around the world feel the Chinese parade

JOC – Threat container cargo imbalance covid-19 build

Fresh Fruit Portal – Container imbalance worsened by covid-19

Fresh Fruit Portal –  Global container shipments set to fall 30% in the next few months

Inside Logistics – Fiata urges attention to container imbalance

Globorural – Company sends 18 containers to Brazil to export meat and fruit