The economic damage done in the wake of the coronavirus (COVID-19) pandemic is undeniable: layoffs, shortages, unemployment and widespread business closures are just a few all-too-familiar signs of this. The United Nations Conference on Trade and Development (UNCTAD) has begun studying this damage on a global scale, and recently published a technical note entitled Global trade impact of the coronavirus (COVID-19) Epidemic, which noted the most affected international economies.
As both the world’s largest exporter and ground zero for the outbreak, China was covered extensively in the publication. It reports how China’s national manufacturing Purchasing Manager’s Index (PMI) is at its lowest since 2004, which corresponds to a 2% (or $50 billion-dollar) reduction in national output annually, as caused directly by the spread of the virus. The resulting world-wide economic disruption is widespread: sectors affected most by COVID-19-related Chinese supply disruptions will include: the precision instrument, machinery, automotive, and communication equipment industries within the European Union, the U.S., Japan, South Korea, Taiwan, and Vietnam. In the export industry, container vessel departures from Shanghai also were reported to decrease substantially in February and thereafter. The Shanghai Containerized Freight Index is in decline as well, which indicates underutilized shipping capacity and overall lower demand for container vessels.
In another UNCTAD publication titled Short-term effects of the coronavirus outbreak: what does the shipping data say? written by Abudi Zein, CEO of ClipperData, the author notes further how and why this ebb in shipping demand is occurring worldwide, not just in China alone. “The centrality of China to the movement of goods around the world explains this [slow in global demand for cargo capacity]: if Chinese ports are not loading or discharging containers, there is no reason to stop at the port where the shipment is supposed to go to or come from. The move towards bigger container ships is another important factor at play: a missed port call now has a more profound impact on available capacity.”
Zein goes on to emphasize how profoundly this downturn has affected shipping and trade for the long-term. “The epidemic has yet to run its course, but even after the spread subsides and China starts to return to normal business activity, it will take a long time to unwind the stresses inflicted on the world’s trading system. A return to medium and long-term trends in shipping and trade is unlikely before the second half or even fourth quarter of 2020.”
