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September 4, 2020 Blog

COVID-19 Intensifies Global Shipping Risks

The global shipping industry, one of the most important economic sectors, is responsible for transporting as much as 90 percent of goods needed for world trade. The number of reported total shipping losses of vessels over 100 gross tons (GT) declined in 2019 to 41 – the lowest total this century and a nearly 70 percent decline over 10 years.

Although the number of vessel losses is at a record low, the Coronavirus pandemic has struck at a very difficult time for the maritime industry. Ongoing efforts at the time included IMO 2020 efforts, issues such as climate change, political risks and piracy, and ongoing problems such as fires on board large ships.

The six main problems facing the industry are outlined below:

1. Economic fallout

Arguably the largest impact of the Coronavirus on shipping is the economic fallout. They are currently disrupting production and supply chains, and damaging consumer and business confidence.

According to maritime analysis firm Sea-Intelligence, the first half of 2020 could see a 25 percent fall in shipping traffic with a 10 percent drop for the year overall.

Many of the world’s largest ports have already reported reductions in volumes to date and are expecting them to be as much as 25 percent lower throughout the end of the year.

2. Cruise ships face increased liability

As a result of the pandemic, the cruise industry, which generates more than $150 billion in global economic activity and supports over one million jobs worldwide, has gone into hibernation.

Largescale Coronavirus outbreaks on board a number of cruise ships, travel restrictions, port closures and a “No-Sail Order” from the U.S. Centers for Disease Control (CDC) has put the industry on hold.

While many operators are reporting strong demand for cruises in late 2020 and early 2021, new safety measures and new routes will forever impact the industry.

3. Laid-up cruise ships present sizable risk accumulation

According to Lloyd’s List Intelligence, some 95 percent of the global cruise fleet was in lay-up, with almost half in and around the Americas.

Recent satellite imagery shows large clusters of vessels in the seas around Florida and the Caribbean, raising concerns about accumulations of risk for ship-owners and insurers alike. The same has been seen in Manila Bay in the Philippines.

4. Floating oil storage boom brings potential exposures

As the price of oil plummeted amid growing concerns for the Coronavirus economy, demand for floating storage hit record levels, causing tanker rates to hit new highs.

According to S&P Global Platts, there was more than 200 million barrels of oil and products on floating storage in tankers, around five percent of global carrying capacity, in mid-May.

Many tankers are still idling around major oil ports and terminals in the US, Europe and Africa, with potential exposures to extreme weather, piracy and political risks.

5. Crew welfare

Over 120 ports have implemented restrictions on crew members that have impacted the 100,000 crew members that leave their ships every month.

Due to the pandemic, ship-owners will need to ensure that they take steps to avoid introducing the virus onboard. The International Maritime Organization has issued recommended protocols for crew joining or leaving a ship, ensuring safe ship crew changes and travel.

6. Cargo damage

Although cargo transportation is recognized as essential, a number of cargo handling companies have shut down operations during the outbreak while ports have been operating under restrictions. Those impacted include shippers, air freight and transport companies around the globe.

Cargo stored in high-risk areas without appropriate security controls or protective safeguards runs the risk of large losses from fire or extreme weather events, while delays may also result in cargo damage to perishable or temperature-sensitive goods.

WP_Post Object ( [ID] => 230458 [post_author] => 1 [post_date] => 2020-09-04 20:51:05 [post_date_gmt] => 2020-09-04 20:51:05 [post_content] => The global shipping industry, one of the most important economic sectors, is responsible for transporting as much as 90 percent of goods needed for world trade. The number of reported total shipping losses of vessels over 100 gross tons (GT) declined in 2019 to 41 – the lowest total this century and a nearly 70 percent decline over 10 years.

Although the number of vessel losses is at a record low, the Coronavirus pandemic has struck at a very difficult time for the maritime industry. Ongoing efforts at the time included IMO 2020 efforts, issues such as climate change, political risks and piracy, and ongoing problems such as fires on board large ships.

The six main problems facing the industry are outlined below:

1. Economic fallout

Arguably the largest impact of the Coronavirus on shipping is the economic fallout. They are currently disrupting production and supply chains, and damaging consumer and business confidence.

According to maritime analysis firm Sea-Intelligence, the first half of 2020 could see a 25 percent fall in shipping traffic with a 10 percent drop for the year overall.

Many of the world’s largest ports have already reported reductions in volumes to date and are expecting them to be as much as 25 percent lower throughout the end of the year.

2. Cruise ships face increased liability

As a result of the pandemic, the cruise industry, which generates more than $150 billion in global economic activity and supports over one million jobs worldwide, has gone into hibernation.

Largescale Coronavirus outbreaks on board a number of cruise ships, travel restrictions, port closures and a “No-Sail Order” from the U.S. Centers for Disease Control (CDC) has put the industry on hold.

While many operators are reporting strong demand for cruises in late 2020 and early 2021, new safety measures and new routes will forever impact the industry.

3. Laid-up cruise ships present sizable risk accumulation

According to Lloyd’s List Intelligence, some 95 percent of the global cruise fleet was in lay-up, with almost half in and around the Americas.

Recent satellite imagery shows large clusters of vessels in the seas around Florida and the Caribbean, raising concerns about accumulations of risk for ship-owners and insurers alike. The same has been seen in Manila Bay in the Philippines.

4. Floating oil storage boom brings potential exposures

As the price of oil plummeted amid growing concerns for the Coronavirus economy, demand for floating storage hit record levels, causing tanker rates to hit new highs.

According to S&P Global Platts, there was more than 200 million barrels of oil and products on floating storage in tankers, around five percent of global carrying capacity, in mid-May.

Many tankers are still idling around major oil ports and terminals in the US, Europe and Africa, with potential exposures to extreme weather, piracy and political risks.

5. Crew welfare

Over 120 ports have implemented restrictions on crew members that have impacted the 100,000 crew members that leave their ships every month.

Due to the pandemic, ship-owners will need to ensure that they take steps to avoid introducing the virus onboard. The International Maritime Organization has issued recommended protocols for crew joining or leaving a ship, ensuring safe ship crew changes and travel.

6. Cargo damage

Although cargo transportation is recognized as essential, a number of cargo handling companies have shut down operations during the outbreak while ports have been operating under restrictions. Those impacted include shippers, air freight and transport companies around the globe.

Cargo stored in high-risk areas without appropriate security controls or protective safeguards runs the risk of large losses from fire or extreme weather events, while delays may also result in cargo damage to perishable or temperature-sensitive goods. [post_title] => COVID-19 Intensifies Global Shipping Risks [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => open [post_password] => [post_name] => covid-19-intensifies-global-shipping-risks [to_ping] => [pinged] => [post_modified] => 2020-09-04 20:51:05 [post_modified_gmt] => 2020-09-04 20:51:05 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.clipperoil.com/?p=230458 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw )