ICS Leadership Insights Live: Global Trade 2021 round-up
9 July 2021
Speakers at the Leadership Insights Live event on 7 July 2021 came together to discuss how global trade is shaping up for 2021 in the face of the ongoing pandemic.
Senior Minister Chee Hong Tat, Singapore’s Minister of Transport noted that while global merchandise trade fell 5.3% in 2020, the World Trade Organization (WTO) has forecast an increase of 8% in 2021, and that further boosts are expected “as the global economy recovers and international trade rebounds”.
The global trade outlook is somewhat brighter than expected. Shamika Sirimanne, Director, Division on Technology and Logistics, UNCTAD, recalled previous statements she has made predicting the global economy would be facing “a severe shock and starting in 2020 the world economy would be in very bad shape”.
While the world economy contracted by an estimated 3.6%, Sirimanne said this was “much better” than was expected. She said recovery is underway and global GDP is expected to grow by 5-6% in 2021. “This is largely down to massive stimulus packages in developed countries and China that have improved business and consumer confidence,” she said. “This is also good news for developing economies, which are also expected to grow faster in 2021 than expected.”
The trend for recovery of goods is strong, the services industry will see much less growth, noted Sirimanne. “We are taking fewer trips to get haircuts but still continue to buy our Peloton bikes. E-commerce is good, that is good for shipping”, she said,
However, the recovery is not equal in shipping, Sirimanne stressed. She pointed to the tanker trade that is yet to recover to pre-pandemic levels of business due to a drop off in oil demand that will be subject to “a return to travel and normal ways of life pre-pandemic”.
Supply chain stability
Minister Chee said that while shipping has been resilient throughout COVID-19, the recent turbulence in the shipping supply chain has provided lessons to help prepare for future disruptions.
“When a patient is suffering from COVID-19 and has difficulty breathing, doctors must first tackle the immediate threats, by providing oxygen and using the ventilator. Similarly, the shipping industry must act swiftly to tackle the disruption to global supply chains due to port congestion and shortage of containers, as well as incidents such as the Suez Canal blockage in late March this year.”
Sirimanne noted the knock-on impact of sudden boosts to exports from East Asia to the US has created “major bottle necks affecting the world economy”.
Minister Chee added that customers have been “badly affected by an inadequate supply of sea freight” due to prolonged vessel delays caused by congestion in major ports and “sky-high” freight rates.
“The shipping and port industry must take decisive actions to re-establish the reliability and cost-effectiveness of sea freight as the main mode of connectivity for global trade. The congestion must be cleared up so the world economy can breathe again.”
Minister Chee pointed to action already underway to resolve this, with carriers adding new containers and orders for containerships having risen drastically but stressed that production facilities are fully booked till at least August and additional capacity will take time to come on-stream.
Key stakeholders are playing their part too, he said. “As a major transhipment port, Singapore is playing our role as a catch-up port to keep global supply chains moving.”
The Port of Singapore has opened up more berths and is using more equipment and manpower to meet demand peaks. He added that there is scope for the port to continue to grow its position as a “preferred catch-up port” to mitigate delays, noting its digital connectivity as key to keeping trade flowing efficiently through its port.
It is not just the supply chain that has been put under greater risk as demand on container ships has risen. Randy Chen, Vice Chair, Wan Hai Lines, said the surge in demand and high freight rates has led to an increased in mis-declared and undeclared cargo. “In many cases dangerous goods are shipping without the knowledge of operators,” he said.
The key element, he stressed, is for countries to allow for the safe harbour of vessels that are subject to fires and other life-threatening situations. “We saw, however, what happened with the Express Pearl. It was delivered in February 2021 and on initial sailing it encountered a fire that was precipitated by dangerous good cargos and refused entry in several harbours and then had to be abandoned due to the level of risk to crew.”
Just in time
Speakers called into question whether the “just-in-time” supply chain model is fit for purpose in a post-pandemic world.
Governments and companies might look to strengthen them by shifting global trade patterns and shifting to more localised regional supply chains, suggested Minister Chee, moving from a “just in time” to Just in case” model.
Minister Chee raised concerns that there will be challenges for governments and companies “to make supply chains more resilient without weakening their competitiveness”. He suggested a hybrid model, balancing both “just in time” and “just in case”.
COVID-19 challenges continue
Sirimanne said that while the short-term outlook for maritime trade is positive, the downside risk of the pandemic is not yet over and new variants emerging are “quite worrying”, as is the fact that developing regions, including Latin America and Africa, are going through new surges without access to vaccines.
“The best thing for the world economy right now is the massive roll out of vaccines – USD $50 billion in investment now to vaccinate the world would generate $9 trillion additional economic growth by 2025 and stop the pandemic and we can live our lives as normal,” she said.
Guy Platten, ICS Secretary General, said the challenge in the short term for shipping is “clearly the crew change crisis, this hasn’t gone away”.
“Shipping has managed to get the 400,000 number of crew impacted by crew change down and we achieved a UN declaration calling seafarers as keyworkers but still many countries are not putting these words into action,” he said. “With the rise in variants initial progress made is getting worse. A senior ship manager I spoke to earlier today said that it has become 50% worse – we need governments to step up to the plate.”
To ensure shipping industry is resilient “we need every single crew member to be vaccinated as fast as possible”, Platten said.
Minister Chee said Singapore was one of the first countries in the world to prioritise vaccinations for frontline maritime personnel, including local and foreign seafarers residing in Singapore. It’s “next move” is to support international efforts to vaccinate seafarers around the world, to protect crew, reduce risk of exposure for port workers and shore-based personnel and to enhance global “supply chain resilience”.
Platten noted other countries that are making progress where there is an excess supply of vaccines, with 72 ports in the US now vaccinating seafarers, as well as in Cyprus, Netherlands and Belgium, but “there is a big challenge ahead to get the 1.6 million seafarers in the world vaccinated”.