Impact of Covid19 on the Commercial Shipping Industry

If somebody types the alphabets “C” and “O” in the search engine of the word CORONA pops up.

One name that got all the trend, all the news, all the popularity and became famous in a very small period of time in this time-bound and Hi-Tech human era.

One microscopic living creature that has brought the entire planet on lockdown, this has seriously been the biggest threat to mankind from microbial beings to date.

Having its connections deep-rooted from mainland China in Wuhan city where it first emerged, this virus has traveled to every corner of this planet and has encompassed the entire globe within a period of 3 months.

Global trade slowing down, economies struggling to sustain levels, travel and tourism all coming to a halt, citizens being hospitalized, and those who have to save themselves are quarantined in their own houses. This life is now not less than a prison to the ever-developing human race.

Coronavirus COVID-19 has had its impact on every human activity. I would like to share my views on its impact on shipping trade and the commercial shipping economy.

About the Virus

Just for your information, the Coronavirus is an enveloped, non-segmented, single-stranded positive-sense RNA virus. It is named Corona because of its crown-like projections on the surface. It has never been identified previously and came into the picture only after one’s detection after the outbreak in China.


Why entire trade is concentrated in China, how trade is impacted,


China the name itself is emblematic of global import and export dominance. The only country which continuously processes raw materials into finished goods and exports them in a timely manner with proper quality is today on a standstill. Earlier China was an exporter of coal but after the industrial revolution China took special permission and has brought up several production units, packing and transportation companies, outsourcing and sales companies to ramp up its economy. It is harnessed the public potential of manufacturing the most quality and cost-effective products in the world; it is known as the hub for the export of cost-effective fully furnished consumer goods. Dominating the Asian market, African and Arabian market with its container trade finished goods, China has created a massive impact on consumer goods price hike in recent months because of slow down in shipping. The entire inward moment of massive quantities of coal and raw materials like Steel and other chemicals has stopped. Capesize vessel owners are suffering the most in this market as the Baltic dry index for Capesize has already gone below zero. Fuel oil and other chemical trade have slowed down as bunker consumption is already affected by the IMO 2020 regulation and also due to the slow sound of container trade.

Comparison of BDI from November till date


Parameter Before Corona Outbreak After Corona Outbreak BDI Functioning normally as per the yearly seasonal rate and about to soar with the upcoming Chinese New year.Drastic fall and no relapse since the outbreak to date. Especially the Capesize market which has touched the zero and fell further negative to mark this historical tragic business.Coal trade Massive inflow prior corona in all major Chinese Coal ports. Bulk quantities (Capesize) moving across oceans and continents.Impacted in the far-east, due to closure of major Chinese ports. Supramax and Panamax owners demanded an extra premium along with surging prices to carry cargo in Corona prone areas.Port Earnings Normal and regular in almost all tropical belt ports and those around the equator.Shut-down and reduction of the task force and working hours of localities to avoid infusion and spread.Volatile momentum of Money Similar and tremendous as the new year was coming up and consumption of lifestyle products and other items increase world-wide Liquidity has reduced, banks and Global reserves accounting for the total assets available to stock up materials of urgent needs. The present and future assumptions What would a COVID-19-Induced Recession Look Like? (Scroll till then end for references) Though market sentiment can be misleading, the recessionary risk is real. The vulnerability of major economies, including the U.S. economy, has risen as growth has slowed and the expansions of various countries are now less able to absorb shocks. In fact, an exogenous shock hitting the U.S. economy at a time of vulnerability has been the most plausible recessionary scenario for some time. Recessions typically fall into one of three categories:

  • Real recession. Classically, this is a CapEx boom cycle that turns to bust and derails the expansion. But severe exogenous demand and supply shocks — such as wars, disasters, or other disruptions — can also push the real economy into a contraction. It’s here that Covid-19 has the greatest chance to infect its host.

  • Policy recession. When central banks leave policy rates too high relative to the economy’s “neutral” rate, they tighten financial conditions and credit intermediation, and, with a lag, choke off the expansion. This risk remains modest — outside of the U.S. rates are already rock bottoms or even negative, while the Federal Reserve has delivered a surprise cut of 50 basis points. Outside of the monetary policy response, the G7 finance ministers have also pledged fiscal support.

  • Financial crisis. Financial imbalances tend to build up slowly and over long periods of time, before rapidly unwinding, disrupting financial intermediation and then the real economy. There are some marked differences globally, yet in the critical U.S. economy, financial crisis risks are difficult to point to. Some commentators point to the bubble in corporate credit, as seen in significant issuance and tight spreads. Yet, we struggle with the subprime analogy of the last recession, as corporate credit neither funds a real economy boom (as subprime did with housing), nor is the debt held on banks’ balance sheets. Both factors limit the systemic risk of a potential shakeout in credit, though this risk can’t be dismissed entirely. It’s difficult to see Covid-19 contributing to financial imbalances, but stress could arise from cash flow strains, particular in small and medium enterprises (SMEs).

Looking at this taxonomy, and again at history, there is some good news in the “real economy” classification. Though idiosyncratic, real recessions tend to be more benign than either policy recessions or those induced by the financial crisis, as they represent potentially severe but essentially transient demand (or supply) shocks. Policy recessions, by contrast, can be, depending on the size of the error, severe. In fact, the Great Depression was induced by perhaps the largest policy error ever. And financial crises are the most pernicious kind since they introduce structural problems into the economy that can take a long time to be corrected.


With all the shutdown of major production companies units outsourcing and internet marketing, China has come to a complete halt by the end of February.

With the confusing global outspread of the Corona and no research or invention of resources to stop the outbreak, this situation has led to the complete shutdown of global trade.

Several companies or countries I should say have imported machines that produce finished goods of daily needs from China as there is no targeted date or time of the Chinese trade ramping up.

Several containers of container cargo owners have been locked in various Korean Chinese and Japanese sports and will be soon shifted to other countries once things come back to normal and fall in place.

Few countries like India, Turkey, Brazil and Russia are trying to exchange goods in containers hence avoiding the far East and the Indonesian belt.

But due to the lack of availability of container handling machinery personal and computerized smart systems this cannot help in the long run.

This can be an amazing opportunity for new players in the Chinese Market in terms of start-ups, investments and development of the ongoing business, manufacturing and outsourcing projects on a global basis while the country ramps up the trade again.

Another amazing opportunity for the newcomers in China is the manufacturing of large scale manufacturing units. That means they can manufacture entire units that can be shipped to various countries where in the industries can be set up real quick for commodity generation. Sooner China can step in as a leading manufacturer of manufacturing units itself empowering the entire globe to manufacture finished goods out of raw materials.

Hence a revolution.

  • Impact ship owners, charterers, brokers,

Ship-owners are demanding an extremely high rate to enter Corona-prone territories. Supramax and panamax along with other small sizes are in utmost demand at present. Extra premium and alarmingly high rates by owners have let to an abrupt change and break-flow of the BDI. Vessels with the same crew from the Far-east and China zone are trading at optimum rates to recruit new crew and exchange of materials locally. Almost every Voyage Charter is now a hassle for Charterers as two major issues of bunkering and PDA with Lay-Can will create massive Demur-rages. It’s better to ask for Breather periods and settle for amounts of demur-rages if incurred rather than stopping transits. Detention of ships after positive quarantines at designated ports is one important aspect that needs to be dealt with. Capsized owners are now under a complete negative earning cycle and hence demanding leeways and breathers from EMI and P&I as there is no bulk moment of cargo in heavy quantities. Trade has shifted from commodities like coal and oil to grains, chemicals(pharmaceuticals) and items of Preventive measures. Various Governments have taken a capping on items of utmost usage and subsidized items of daily use. Asset holding and Country-wide resources in terms of Money, gold, and commodities are taken into account.

Most exporters of Foodgrains are now stocking huge piles as there is now further preventive measure taken on this Endangering epidemic. References The Harvard Business review. Link (

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