Last Updated on Thursday, 28 October, 2021 at 12:11 pm by Andre Camilleri
• Fees now six times higher to ship containers from China to Europe than in 2019
The COVID-19 pandemic has led to port lockdowns and container ships being taken out of service, resulting in an overall reduction in shipping capacity, amongst other factors, Marisa Xuereb, president of the Malta Chamber of Commerce, warns as the impact is felt locally.
“Unfortunately, we are already experiencing increased costs in Malta, and we can expect to see them rise within the next year.
The European Central Bank (ECB) is keeping a close eye on inflation rates to ensure things do not blow up exponentially as we emerge from the pandemic crisis. As it stands shipping costs are six times higher tha pre-Covid”
But what’s causing such a sharp rise? Xuereb explains. “In essence, if a container ship needs to be at port A, they simply are not finding themselves there at the right time. This could be due to travel restrictions or increased control measures in each country. For example, some non-European countries have adopted a zero-tolerance policy for Covid-19. If one worker falls sick in a warehouse, the whole warehouse will close. Not everyone is approaching Covid in the same way. Other countries have not even commenced a vaccination programme. These stop-start economies are having a huge impact on the supply chain globally.”
“What’s more, who we are today isn’t who we were before the pandemic. Changing consumption patterns across the globe are driving up demand for shipping and causing congestion in ports and the surrounding hinterland infrastructure. More so, sudden spikes in demand for raw materials create a bottleneck effect. Many are stockpiling, which again creates a considerable drain on the system.”
Right now, an estimated 90% of the world’s goods are transported by sea, and the average size of a container ship has doubled in the past 20 years alone, with the largest vessels sailing today capable of hauling 24,000 containers according to the World Economic Forum. But the growing size of ships has a cost, as the Ever Given incident earlier this year showed. As the Ever Given was traversing the narrow 120-mile canal, fierce wind gusts blew it to the bank, and its 200,000 tons of weight got it stuck in the mud. Around 12% of the world’s global shipping traffic passes through this canal. At one point during the blockage, at least 369 ships were stuck waiting to pass through the canal from either side, costing an estimated €8.2 billion a day. That translates to €344 million an hour, or €5.7 million a minute. Maritime shipping has grown increasingly important to global supply chains and trade, yet it was relatively invisible until the logjam and blockage of the Suez Canal. Some experts forecast that ships capable of carrying loads 50% larger than the Ever Given’s will be plying the open seas by 2030.
But, it’s not all a bleak picture; there is a silver lining, adds Xuereb. “Over the course of the pandemic, we have seen more and more European businesses who previously purchased most of their requirements from the far east and relied on trans continental shipping switch at least partially to suppliers within Europe. With the massive increase in trans continental shipping costs and the supply chain disruption risks associated with Covid outbreaks in other regions, European products are becoming more competitive for European customers. Nevertheless, raw materials remain predominantly sourced from the far east”. So shipping remains as critical – and as in-demand – as ever.