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2020 February 13

Corona move

Coronaviral infection exerts a significant impact on cargo traffic, ports and shipping. The problem has touched the container flow from China and LNG transportation. Not only do stevedoring and shipping companies face difficulties, it is also a tough time for forwarders who run the risk of “holding the bag” due to delayed deliveries.

The virus hits the box

The outbreak of coronavirus has lead to service interruption at the country’s ports which are to a great extent the core of the international trade.

As for the impact on Russia's port industry, the situation in China can cause the reduction of container throughput in domestic ports.

In his interview with IAA PortNews>>>> , Aleksey Shukletsov, Executive Director of OOO Fenix (operator of Multipurpose Sea Cargo Complex Bronka in Saint-Petersburg), said that the situation with the virus can have a negative impact on the container market of Saint-Petersburg in the nearest months.

“Coronavirus causes the market turbulence which can entail the fall of container flow on the Chinese lines in the coming month or two.  Then everything will depend on how fast China succeeds with the problem localization and production recovery”, said Aleksey Shukletsov.

For example, Nissan management says it may temporarily halt assembling cars at its plant in St. Petersburg due to coronavirus-related shortages of Chinese-made components.

According to Baltic Sea Ports Administration, container turnover in Saint-Petersburg has not been affected yet: in January it grew by 5%, year-on-year, to 186,200 TEUs.
 
Delayed deliveries may create problems for logistics service providers, forwarders and other companies responsible for timely supply of cargo. TT Club says restrictions due to labour shortages at ports and cancellations of inland transport links within China, constraints in the supply of goods due to factory closures and reduced schedules of air, ocean and rail carriers may expose forwarders to claims arising from delivery delays and cargo deterioration. According to TT Club, forwarders should identify any "force majeure" clauses in their agreements and preemptively send notices to customers setting out the problems in China and invoking their force majeure right to be discharged from their obligations to perform.

The international rating agency Fitch Ratings said coronavirus outbreak in China could put the global natural gas market under stress. According to open sources, some Chinese importers of LNG have declared 'force majeure' on their contracts, which may cancel up to 70% of seaborne imports in February.

“Clean hands” operation

Coronavirus causes a special problem for ferry and cruise ship operators: Thailand denied entry to the Westerdam luxury liner amid coronavirus fears despite no passengers testing positive for the coronavirus; South Korea has imposed a temporary entry ban on international cruise ships that have recently visited countries with confirmed cases of the infection, while all direct ferry services connecting Taiwan with the Chinese provinces of Fujian and Zhejiang are temporarily suspended from February 10.

The most telling story is that of the cruise ship Diamond Princess which has actually turned into a quarantine prison for 3,700 tourists off the port city of Yokohama in Japan. Mildly speaking, that does not make cruises attractive in the midst of coronavirus hysteria. The risk of being confined together with the infected people on board a ship with a general system of ventilation and catering is very high.

Cruise operators worldwide are undertaking additional protection measures.

Tallink, Baltic Sea ferry operator, told IAA PortNews it had toughened hygienic requirements several weeks ago with a focus on cleaning, disinfection and monitoring of possible symptoms among the passengers and crewmembers.

“The governments of the Scandinavian and Baltic states have not yet issued their lists of requirements necessary actions but we are ready to follow any instructions of the authorities”, says Tallink.

According to the company, “the number of passengers from Asia decreases in the beginning of the year and the first quarter is not a high season. Therefore, we see a normal reduction of Chinese passengers’ flow. The bulk of Chinese groups fell on January 26-27 will all group trips booked for February and March have been postponed for later periods and ferries do not carry any groups from China. Since some countries have suspended issue of visas to Chinese citizens and Finnair has cancelled flights to China, the number of individual tourists will reduce as well. Despite the abovementioned factors, coronavirus will not affect the general financial results of the company as the share of cancelled trips makes 0.1% of the total passenger traffic”.

From our part, we emphasize that the fact of infection on cruise ships is not new: outbreaks of various infective diseases on liners are regular worldwide. They are often caused by norovirus. What matters is the lethality rate and availability of a vaccine. In this context, not everything is clear in the case of coronavirus.

Vitaly Chernov