Coronavirus Trade Update

Here comes another fantastic wrap-up (from Freight and Trade Alliance) on how the coronavirus is affecting the shipping industry:

China – Update

Our sources from China have provided us with the following updates 

  • As of June 16 China is suffering the beginning of a second COVID-19 wave. Total case numbers have risen to 256 national wide. Beijing has two large local breakouts at moment. In last 72 hrs, Beijing has recorded 107 cases. Chinese government is trying to control spreading to other provinces and cities. Beijing’s education authority, on June 15, ordered schools to re implement closed-off management of campus, and allowed students to opt stay-at-home study mode amid ramped up epidemic control efforts.
  • According to Xinhua News Agency, China’s cargo transport industry reported growth last month as business activities further resumed.
  • On June 1, Chinese authorities released a master plan for the Hainan free trade port, which aims to build the southern island province into a globally-influential high-level free trade port by the middle of the century. A free trade port system focusing on trade and investment liberalization and facilitation will be “basically established” in Hainan by 2025 and become “more mature” by 2035.
  • More and more Import & Export Fairs in China will be held online. The 127th China Import and Export Fair, popularly known as Canton Fair, kicked off online Monday June 15. This year’s online fair, which will last for 10 days, has attracted around 25,000 enterprises in 16 categories with 1.8 million products.
    The 102nd China Food and Drinks Fair will be held online from July 28 to 30 after a postponement due to COVID-19, according to the event’s organizing committee.
  • According to Deutsche Bank’s chief economist and head of research for Asia Pacific Michael Spencer, China’s recovery “is going to look very impressive” with a growth of 5 to 6 percent in April-June, quarter to quarter, following a contraction in the first quarter. The domestic demand part of the Chinese economy has recovered well. And most of the world’s main economies are easing strict lockdown measures, it will help China’s recovery.
  • China’s rail freight volume, an indicator of broad economic activity, rose 3.9 percent year-on-year in May, a sign of recovery from the COVID-19 shock after continuous efforts to contain the epidemic. During the January-May 2020 period, the railways transported a total of 1.39 billion tons of cargo, an increase of 2.7 percent from the same period last year. The China-Europe Freight train service launched 2020 is experiencing great support with 20 routes now linking Hefei, around 5 hours rail travel time from Shanghai, to countries including Netherlands, Germany, Poland, Finland and Russia.  
  • According to China Daily’s report, Over 95% of migrant workers (rural workers in urban areas) have resumed work. More than 26 million rural residents had arrived at workplaces, old and new, at the end of April. Meanwhile, another two million people wanting to leave villages across the country to earn more money work still looking for opportunities.The central authorities have expanded the coverage of State benefits and other relief packages to assist vulnerable families through these difficult times. ,l
  • As reported in the China Daily report, China’s foreign trade is expected to show a stable recovery in the second half of the year on the back of a notable improvement in the industrial, supply and service chains as well as from major trade events like the upcoming Canton Fair and the third China International Import Expo.  Affected by the COVID-19 outbreak, China’s foreign trade volume fell to 9.07 trillion yuan in the first four months of this year, declining 4.9 percent year-on-year. However, the country’s imports and exports recovered in April, according to the General Administration of Customs.

Seafreight commentary
Whilst Fremantle was not seeing any impact to loaded import volumes during the first 3 months of the year as against east coast ports, in fact showing loaded imports higher than 2019. The month of May saw a 10% decrease, in TEUs, of loaded imports against May 2019.
In discussions with shipping lines the commentary was that the downturn may have been due to businesses supplying from the east coast, using rail, and also the fact that orders may have been delayed / deferred due to uncertainty with consumer consumption and were not able to be shipped in time to meet the unexpected retail demand. This is supported by the fact that most lines have indicated steady / strong bookings moving into the next 6-8 weeks. 
Whilst capacity is still being managed the trade lanes to Australia have not been as impacted as have the Asia – UK / USA trade lanes. We still have some blank sailings / service removal and smaller vessels and one can expect these may not change too much until a clearer view of increased / steady volumes can be guaranteed.

Airfreight Update
Whether it be through the IFAM scheme, respective State government support or Freight Forwarders just working together to arrange space and flights for exporters . importers we are certainly seeing an increase in both charter and ghost passenger flights to support cargo needs.

Commentary we have received from market participants is whilst rates are still high they have started to stabilise and come done from the initial sky rocketed prices. No doubt the IFAM scheme has played a role here.

However the IFAM scheme is not everlasting and in a recent webinar it was suggested that over half of the $110 million had already been allocated. We understand the government is currently reviewing what  impact the scheme has had in supporting our exporters and trust they consider ongoing support at least whilst our borders are closed to traditional cargo space available in the belly of passenger flights.