Impact of pandemic on maritime transport in 2021 and projections for 2022

Date:12-31-2021

While 2020 announced the start of the COVID-19 pandemic with its first effects, 2021 was when the aftermath and secondary impacts of this mega disruption really hit global supply chains, says a report Year-end Shipping and Freight Resource.

The year 2021 was characterized by widespread disruptions in the industry globally, including severe port congestion caused by the combination of the repercussions of the COVID-19 pandemic, ineffective ports, increased demand, and of course, the brief but disturbing blockade of the Suez Canal.

There was also the extreme increases in rates on all containerized maritime transport routes; the long periods of permanence of containers in ports, both for exports and imports; the increase in the frequency of blank sailings; record volumes of containers mobilized in various ports around the world; ship and container shortages as these two vital assets remained trapped in highly congested ports.

However, the trade grew

According to the report, despite these shocks, world trade reached record highs in 2021. According to UNCTAD, world trade is expected to reach US$28 trillion as 2021 ends, representing an increase of 23% in compared to 2020.

Furthermore, world trade growth stabilized during the second half of 2021, increasing by 1% year-on-year, with trade in goods reaching record levels in the third quarter of 2021 and trade in services growing at a higher rate but staying below pre-pandemic levels.

However, trade growth has remained uneven across countries and sectors, with a broader base in the third quarter of 2021 than in the first two.

Maritime performance

While COVID-19 wreaked its havoc on the world's economies and in many sectors, the maritime industry suffered a lesser-than-feared impact in 2020. Volumes fell less dramatically than expected and recovered at the end of 2020, laying the groundwork for a significant transformation in global supply chains and new maritime trade patterns.

Maritime trade contracted 3.8% in the first half of 2020, and global volumes recovered for both container trade and bulk products at the end of 2020, laying the foundation for a strong year for 2021. The UNCTAD attributes the better-than-anticipated maritime trade performance to the COVID-19 pandemic that unfolded in phases and at different speeds, with divergent trajectories across regions and markets.

But while maritime trade received minor damage, one of its pillars received the impact more fully: "The people of the sea." The crew members undoubtedly faced a precarious situation due to the global crisis of crew turnover generated by the restrictions imposed on travel around the world. It forced hundreds of thousands of seafarers to remain aboard their ships and unable to return home for their breaks and even go unpaid at the end of their contract periods. An equivalent number was unable to board their ships and financially support their families.

Volume of containers mobilized falls

In 2020, world container trade fell 1.1% to 149 million TEUs, a better result than the 8.4% plunge in 2009 after the financial crisis. Container volumes recovered rapidly as consumer demand increased, driven by fiscal stimulus packages and revenue support measures during COVID-19.

The recovery in 2021 brought a change in consumption patterns, which moved away from services and towards goods, especially online shopping, along with healthcare and pharmaceutical products to counter COVID-19 and equipment for the home office as work-from-home increased.

However, this increased trade led to several global logistics bottlenecks and in 2021, the entire industry, including shipping, ports, shippers and land carriers struggled with shortages of containers, chassis and space on container ships.

This has added to severe port congestion in several ports worldwide and has reduced service levels and reliability of shipping lines while exponentially increasing freight rates and surcharges. In addition, the United States ports of Los Angeles and Long Beach have been experiencing severe congestion since July 2020, which shows no signs of abating.

Projections

Some consensus on how 2022 is projected, according to the report are the following:

•    COVID-19 will continue to play an essential role in global trade and supply chain behavior in 2022.
•    Continued COVID-19 outbreaks in China, the latest on December 14, may continue to affect manufacturing and production schedules, putting pressure on supply chains as critical items such as batteries, clothing, etc. may be in short supply, along with textiles, dyes and plastics. China's strict zero-tolerance policy for the COVID-19 virus, while restricting several outbreaks locally, has yet to halt the spread of the virus, leaving the supply chain vulnerable.
•    On the other hand, Brexit could affect Europe differently with some expected changes in the import of goods, including customs declarations and border controls from January 2022, many of which are not yet clear for the maritime sector.
•    The impact of the recently passed US House of Representatives Shipping Reform Act and the benefits of the Biden-Harris Action Plan for Ports and Inland Waterways are not yet known or quantified, therefore how it will affect, or help is unknown.
•     The other general consensus seems to be that the current situation will continue more or less until at least the second half of 2022, although with a less severe impact, since:
•    Many companies have adapted to the new normal of cargo delivery times and maybe changing their supply chain strategies to accommodate it.
•    Industry studies estimate that by the end of 2022, 50% of all manufacturing supply chains will see the benefits of resilience, which is expected to result in a 10% reduction in the impact of chain disruption of supply.
•    The study also estimates that by the end of 2022, chronic worker shortages will cause 75% of companies in the supply chain to prioritize investments in automation, leading to a 10% productivity improvement.
•    In 2022, the use of data and information to predict the evolution and disruptions of the supply chain, will increase, helping companies make more data-driven decisions in the day-to-day management of their businesses.