Global maritime trade is expected to plunge by 4.1 percent in 2020 due to the unprecedented disruption caused by COVID-19 that also transformed the industry and associated supply chain, UNCTAD said in its Review of Maritime Transport 2020.
The report also warned that new waves of the pandemic that further disrupt supply chains and economies might cause steeper decline. The pandemic has sent shockwaves through supply chains, shipping networks and ports, leading to plummeting cargo volumes and foiling growth prospects, it says.
According to the report, the short-term outlook for maritime trade is grim. Predicting the pandemic’s longer-term impact as well as the timing and scale of the industry’s recovery is fraught with uncertainty.
“The global shipping industry will be at the forefront of efforts towards a sustainable recovery, as a vital enabler of the smooth functioning of international supply chains,” UNCTAD Secretary-General Mukhisa Kituyi said. “The industry must be a key stakeholder helping adapt ‘just-in-time efficiency’ logistics to ‘just-in-case’ preparedness,” he added.
UNCTAD expects maritime trade growth to return to a positive territory and expand by 4.8 percent in 2021, assuming world economic output recovers. But it highlights the need for the maritime transport industry to brace for change and be well prepared for a transformed post-COVID-19 world.
At the peak of the crisis, when the contraction of cargo volumes brought an additional challenge to structural market imbalance, the report notes, the container shipping industry adopted more discipline, cutting capacity and reducing costs to maintain profitability instead of market share.
As a result, freight rates remained at stable levels despite the depressed demand. From the perspective of shippers, these strategies meant severe space limitations to transport goods and delays in delivery dates.
To cope with pandemic-related disruptions, players in the maritime sector adjusted their operations, finances, sanitary and safety protocols as well as working practices and procedures.
In addition, several governments, through their border agencies, port authorities and customs administrations, made reforms to keep trade flowing while keeping people safe.
“Border agents, port workers and customs officials play an essential role in keeping trade moving, helping us to navigate through the crisis,” Dr. Kituyi said. “It will be important to assess the best practices that emerge from their experiences to strengthen trade facilitation in the years to come.”
While COVID-19 has underscored the global interdependency of nations, it has raised existential questions about globalization and added weight to the pushback against outsourcing from distant locations, the report says.
“The pandemic brought into sharp focus the topic of supply chain shortening, including nearshoring and reshoring, with less dependence on just-in-time and lean inventory models,” the report states. COVID-19 has also brought to the fore the debate over diversifying production and manufacturing sites and suppliers, it adds.
The pandemic has also exposed how unprepared the world seemed to be in the face of such a crisis, the report observes, underscoring the urgent need to invest in risk management and emergency response preparedness in transport and logistics.
It said future-proofing the maritime supply chain and managing risks requires greater visibility and agility of door-to-door transport operations.
UNCTAD’s director of technology and logistics, Shamika N. Sirimanne, said the pandemic should not push to the back burner action to combat climate change in shipping. Therefore, post-COVID-19 recovery policies should support further progress towards green solutions and sustainability.
“The momentum of current efforts to address carbon emissions from shipping and the ongoing energy transition away from fossil fuels should be maintained,” she said.
The pandemic has also strengthened the case for digitalization and eliminating paperwork in the shipping industry, including in ports, the report observes, reinforcing the need for standards and interoperability in electronic documentation.
Many trade facilitation measures taken during the pandemic require further investments in digitalization and automation. Accepting digital copies instead of paper originals, pre-arrival processing, electronic payments and customs automation all help speed up international trade.
On the flip side, the pandemic has also highlighted that digitalization comes with increased cyber security risks with a potential to cripple supply chains and services in global maritime trade.
The report decries the humanitarian and safety crisis caused by the pandemic, when more than 300,000 seafarers were stranded at sea for months beyond the end of their contracts – an unsustainable situation for both the safety and wellbeing of seafarers, and the safe operation of ships.
UNCTAD reiterates its call to authorities to designate seafarers as key workers exempted from COVID-19 travel restrictions.
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