20 countries sign agreement to keep ports open for unimpeded maritime trade

Port authorities in 20 countries across three continents have signed an agreement to keep ports open for trade amid the coronavirus outbreak, in a move initiated by Singapore.

From Los Angeles to Antwerp, Abu Dhabi to Shanghai, the countries recognised, in a virtual roundtable, that the maritime sector plays a critical role in keeping trade flows open in this period.

The port authorities committed to working together to ensure merchant ships can still berth at ports to carry out cargo operations and keep the global supply chain going, the Maritime and Port Authority of Singapore (MPA) said on Friday (April 24).

Ms Quah Ley Hoon, chief executive of MPA, said the industry is facing new challenges in this unprecedented period, making the joint declaration all the more important.

“Shipping is chartering into many unknowns and new challenges (during the coronavirus outbreak).

“Port authorities have to take enhanced precautions for their ports and on ships, as well as manage the stress faced by our seafarers and maritime personnel.

“We came out of the session gaining more valuable knowledge to ensure that necessities and essential medical supplies continue to be transported seamlessly across the world and into our respective countries,” she added.

The joint declaration also commits signatories to continue to share experiences in combating Covid-19 while safeguarding “unimpeded maritime trade” and to ensure that best practices are adopted in areas such as the safe handling of cargoes according to national circumstances.

The agreement is the first by the Port Authorities Roundtable (PAR), a by-invitation event of leading port authorities in its sixth edition this year.

World largest containership makes maiden voyage from Qingdao port

The world’s largest containership, the 24,000 teu HMM Algeciras, has made its maiden voyage from the Chinese port of Qingdao.

The boxship, 399.9 m length, 61.03 m beam and 33.2 m depth, has a deck area of over 24,000 sq m and has taken the crown of the world’s largest vessel of its kind.

The ship is headed to Busan carrying chemical, mechanical and electrical and non-staple food products after departing from Qingdao. Its port rotation also includes Ningbo, Shanghai, Yantian, Suez Canal, Rotterdam, Hamburg, Antwerp and London.

Qingdao, is one of the biggest ports in North China, posted 5.04m teu container volume and 131.7m tons cargo throughput in the first quarter of this year, an increase of 2.1% and 2.5% year-on-year respectively.

Container fleet to shrink with prices and rates on slow recovery from COVID-19

The novel coronavirus (COVID-19) pandemic will lead to a contraction in the shipping container fleet and keep prices and lease rates under pressure in 2020, according to analyst Drewry.

With container supply chains around the world disrupted and depressed demand for vessels and boxes, the container shipping market will be under pressure this year, although better than in 2019.

Drewry’s data showed that first quarter newbuild prices and lease rates for all the main categories of containers were up compared to the fourth quarter of 2019 and 2019 as a whole.

“Primarily, this was the result of improving levels of optimism regarding the outlook for world trade. The US and China signed Phase One of a new trade agreement and the Brexit withdrawal deal was concluded,” wrote Martin Dixon, director, head of research products, Drewry.

“From the container manufacturing perspective, it appeared as if efforts by China’s main box builders to secure minimum prices for their equipment was having some success. Lease rates also hardened, rising between 15% and 20% compared with Q4 2019 for dry freight (20ft, 40ft and 40ft high-cube) equipment,” Dixon said.

But these increases masked “intense volatility” in the market during the period, he observed.

At the beginning of this year, the price of a 20ft standard container stood at about $1,750. By end-February the price rose to as much as $2,150, before a sharp drop to approximately $1,900 in late-March.

The severity of COVID-19 and the lockdown in China and subsequently in many parts of the rest of the world was the cause of the price drop, Dixon said.

“Total box output (dry freight and reefer) in Q1 2020 was one of the lowest in a quarterly period; 33% lower than Q4 2019 and 35% below that of the corresponding period of 2019. The dry box sector was the worst affected with a year-on-year decline in production of 40%. This compared with a 4% increase in the output of reefer containers as the shift of cargo from specialized reefer and air freight services to liner services and containers continued,” he said.

The remainder of the year is expected to be challenging with orders dominated by ocean carriers’ and lessors’ needs to replace ageing inventories.

With few companies expected to expand their fleet this year, Drewry expects the ocean-borne fleet of containers to decrease marginally, though it could be worse depending on the recovery in trade volumes.

“This would represent the first reduction since the financial crisis of 2009 when the pool of equipment declined by 4%,” Dixon said.

“Even though the COVID-19 pandemic will result in a decline in the size of the container equipment fleet in 2020, newbuild prices and leasing rates are expected to firm. A strong recovery in trading volumes in 2021 will reinforce this situation,” he said.

A ‘new normal’ for US ports

In the States COVID-19 has impacted maritime ports which find themselves at the intersection of the maelstrom of reduced economic activity, changes in work practices, and disrupted and rejigged supply chains.

As April was ending, six weeks after abrupt shutdowns across the country, there were glimmers of “re-opening” on the horizon, though most commentators were looking ahead to an economic rebound in 2021 with many having already discounted 2020. The liner and tanker sectors offer insights into the new normal.

On the West Coast, the twin behemoths at Los Angeles and Long Beach, sometimes abbreviated as LA/ LB, have seen dramatic reductions in throughputs as carriers have blanked sailings.

Container shipping blank sailings reaching peak pandemic

The container shipping sector has now reached the peak impact of the COVID-19 in terms of blanked sailings according to analyst Sea Intelligence.

SeaIntel said that the week 17, saw the peak of blank sailings on the Asia – North Europe trade with some 38% cancelled. In week 19 the Mediterranean to North America East Coast has 33% blank capacity and Asia to East Coast South America seeing a 59% capacity cut week 20. However, while the weeks in late April – May see the peak in terms of cancelled services there will be a continued impact on the market.

“For Asia-North Europe the market will experience more than 20% capacity withdrawal for 7 consecutive weeks, hereof three weeks in excess of 35%. For both Asia-Mediterranean and Asia-East Coast South America the shippers will have to navigate around 4 weeks where the cancelled capacity exceeds 30%,” said Alan Murphy ceo of SeaIntel.

The large-scale blanking of sailings is also set to cause problems on the backhaul for export volumes and empty container repositioning.

“In the coming 6-8 weeks we could very well see a period where the export cargo and empty flow combined exceeds the total capacity available in the market. Historically this has led the carriers to favour empty container evacuation and curb booking intake with rising freight rates as a result,” Murphy said.

Port of Santos records best ever Q1 container volume

The Port of Santos, in Brazil, has seen its best first quarter in history with a 15.4% jump in container volumes to surpass the 1m teu mark.

Santos saw March container operations increase by 7.6% to 336,250 teu leading to an accumulated of 1.02m teu during the January-March period, up 15.4% compared to the same period a year ago.

Santos' share of container cargo in the country, based on the latest data released by the National Water Transportation Agency (Antaq) in February, reached 39%, up two percentage points over 2019.

The second-best placed port was Itajaí (SC), that accounted for 12% of Brazil's container handling share.

The first impacts of COVID-19 on the movement of these cargoes began to be felt in the last two weeks of March, since, on average, the travel time on the Asia/Santos route is 45 days. They are expected to become more intense from April onwards, especially in trade with Asia and possibly Europe.

The challenge of mapping out prospects for the movement of containerized cargo in the coming months is extremely high, given the high degree of uncertainty about the economic and social impacts of the pandemic on a global scale, depending on the severity and duration of the quarantines imposed in Brazil and in various parts of the world.

Vietnam: Textile and garment exports down

The domestic textile and garment industry faced an export value reduction in the first four months of this year due to difficulties in production due to the COVID-19 pandemic.

Statistics showed Việt Nam's textile and garment exports in April decreased by 20 per cent compared to March, Trương Văn Cẩm, vice chairman of the Việt Nam Textile and Apparel Association (Vitas), said at an online seminar held by the association on Monday.

The total textile and garment export value in the first four months of this year dropped by 6.6 per cent to US$10.64 billion year-on-year. Meanwhile, the total import value was $6.39 billion, down 8.76 per cent compared to the same period last year.

"Việt Nam's textile and apparel industry has never faced negative growth in both imports and exports like that," Cẩm said.

Export value reduced by about 6 per cent to $8.27 billion for garment products, 0.3 per cent to $664 million for fabric products, 11.5 per cent to $1.19 billion yarn products and 6 per cent to $354 billion for textile materials.

Meanwhile, import value also declined by about 8 per cent to $893 million for cotton, 2.5 per cent to $758 million for yarn products, 11 per cent to $3.63 billion for fabric products and 5.8 per cent to $1.11 billion for textile materials.

The reduction reflected the industry's lack of export orders, said Cẩm, adding that those figures are forecast to drop further in May and June because most export orders for those months have been cancelled.

Many enterprises in the industry have bad debts, he said. Many export garment enterprises are operating at reduced capacity because they do not have new orders.

The association reported the cancellation of contracts and lack of new contracts was due to the reduction of demand for textile and garment in the US and EU during the pandemic. Meanwhile, China also has less demand for importing yarn from Việt Nam due to the suspension of production during the outbreak.

With a lack of new export orders leading to fewer jobs and pressure in wage payment, the association has proposed many solutions to support enterprises. However, those solutions could not help them maintain production until the end of this year.

Trần Thanh Hải, Deputy Director of Ministry of Industry and Trade’s Import-Export Department, said the COVID-19 pandemic had affected exports of many products, including textiles and garments. Many enterprises had shifted to producing cloth face masks to meet domestic demand and exports.

However, the export value at $63 million from face masks from January 1 to April 19 was too small compared to the total export value of textile and garment at $10 billion in the first four months of the year, according to Vitas.

The textile and garment industry is predicted to have a strong reduction in total export value for this year. In the most positive scenario, its export value will reach about $35 billion this year, down 10 per cent year-on-year.

In a realistic scenario, the industry's export value is estimated to reach about $33.5 billion. In a bad case, the export value will only reach $30-31 billion in 2020

Foreign groups step up plans to enter or expand in Vietnam

While China is struggling with the pandemic and is losing the confidence of foreign investors, proven resilience is pushing Vietnam to the fore as an ideal investment and manufacturing hub for Southeast Asia.

Vietnam has been chosen as the ideal destination for the “China+1” policy of HZO, a US-based company producing protective nano-coatings with an announcement on opening its very first manufacturing facility in Vietnam at Yen Phong Industrial Park in the northern province of Bac Ninh.

The country is also rumoured to be the next destination for Apple, the iconic US multinational tech titan of consumer electronics, computer software, and online services. Recently, the giant listed recruitment notices in Vietnam on LinkedIn, including a position of operations manager based in Hanoi and test engineers in Ho Chi Minh City.

These recruitment notices add credence to reports that Apple could increase outsourcing its manufacturing to Vietnam, while Foxconn, the world’s biggest electronics contract manufacturer and a key supplier of Apple, also has a facility in Bac Ninh to produce for the tech giant.

Sharing the same trend, other US giants of Google, Microsoft, HP, and Dell have also announced their plans to settle in Vietnam. While Google has asked suppliers to calculate expenses for moving some equipment from China to Vietnam via road, sea, and air after considering the impact of coronavirus to its operations, Microsoft aims to launch its latest Surface computer and laptop models in the country.

HP and Dell are also said to be moving up to 30 per cent of their notebook production to Vietnam.

As China is gradually losing its priority in global production, large-scale international manufacturers are rolling out China+1 expansion policies – with Vietnam emerging as a clear alternative in many evaluations.

China dominance dwindles

In a report released last week, global manufacturing consulting firm Kearney pointed out that China is increasingly losing share from US companies during the Trump administration, and the main beneficiaries of this are the smaller Southeast Asian nations. Along with the US companies, the move has also happened to enterprises coming from other big economies.

The coronavirus has stalled manufacturing and logistics around the world, especially exposing the vulnerabilities of Japanese companies which rely on China for more than 20 per cent of their parts and materials needs. Japan has already prepared ¥240 billion ($2.23 billion) in subsidies for the 2020 fiscal year for companies moving production out of China. Consumer products maker Iris Ohyama is set to become the first Japanese company to receive a government subsidy to shift production out of China as part of an effort to build more resilient supply chains.

A survey from marketing and credit reporting firm Tokyo Shoko Search Co., Ltd., said that 37 per cent of 2,600 respondent businesses want to get out of China.

Since the US-China trade war kicked off, Japanese electronics maker Sharp has planned to shift computer production from China to Vietnam for shipment to the United States. According to Japanese television channel NHK, Sharp is also considering shifting production of multi-function office equipment to Thailand instead of China.

Meanwhile, it is reported that Nintendo, one of the largest video game developers based in Japan, is also going to pull a portion of its console production from China to Vietnam.

Across the pond, European leaders and enterprises also have looked into such moves to reduce dependencies on the Chinese market. Last week, the EU’s Commissioner for Trade Phil Hogan said the bloc would seek to “reduce our trade dependencies” after the pandemic.

Meanwhile, UK Foreign Secretary Dominic Raab, standing in for Prime Minister Boris Johnson as he recovers from the coronavirus, said on economic relations with China, “There’s no doubt we can’t have business as usual after this crisis” at a recent press conference after a phone call with G7 leaders.

Raab explained that the pandemic had taught the United Kingdom about the value and importance of co-operation and that Britain could not solely depend on China.

The US-China trade war last year triggered the trend of shifting production lines from China to Southeast Asia and other markets, but the virus outbreak has reaffirmed the danger of supply chain disruption when the world’s economy depends too much on one major market.

Vietnam is currently highly appreciated by the international community for its firm and timely actions to deal with the pandemic while maintaining its economic growth momentum and ensuring social security.

In addition, the various support packages to rescue the business community, including foreign-invested enterprises, are already appearing as a new driver of foreign capital inflows into Vietnam after the pandemic ends.

Members of the European Chamber of Commerce in Vietnam (EuroCham) welcomed the government’s restrictions, including Directive No.11/CT-TTg dated March 4 directing the urgent tasks and solutions to address the difficulties of production and business establishments, extending the deadline for tax and land hiring fee payment, and suspending social insurance payments.

Around 75 per cent of businesses surveyed by EuroCham agreed that the extension on tax payments would help them overcome their difficulties during the pandemic.

Minimising damage

According to Ousmane Dione, World Bank country director for Vietnam, if the COVID-19 pandemic is gradually brought under control in the coming months, the Vietnamese economy will recover relatively quickly thanks to its solid foundations.

The World Bank also believes that the Vietnamese government was determined to curb economic losses from the crisis by taking necessary treatment and preventive measures, in addition to providing financial policies to support the majority of people and businesses to cope with the immediate burden.

In addition, global real estate services firm JLL’s latest market report showed that companies looking to diversify their manufacturing portfolio outside of China are attracted to Vietnam thanks to its proximity to China, free trade agreements, and the government’s desire to build Vietnam into a manufacturing hub in Southeast Asia. These comments are plus points in the eyes of foreign enterprises planning to relocate facilities or expand operations outside China, the report noted.

Shirakawa Satoko, head of the Japanese and English-speaking enterprises of Kizuna JV Corporation, said foreign investment inflows will be poured into Vietnam after the pandemic if the country can keep damage to a minimum. “The company has accelerated construction of ready serviced space in the Mekong Delta province of Long An’s Can Giuoc district with a scale of 80,000 square metres. The construction is expected to finish in the fourth quarter of the year to welcome foreign investment inflows,” Satoko said.

Asia Times quoted Alexander Vuving, professor at the Daniel K. Inouye Asia-Pacific Center for Security Studies in Honolulu, Hawaii, as saying that the pandemic has been a great opportunity for Vietnam to enhance its soft power, as it helped to broadcast Vietnam’s generous behaviour towards the international community.

Many analysts now expect Vietnam to receive the lion’s share of “second wave” factory relocations driven by the pandemic and growing anti-Chinese sentiment in the west fueled by perceptions that China is chiefly responsible for the outbreak.

“Vietnam is a major beneficiary of this diversification as it has proved to be friendly while still cost-effective to investors from the west,” said Vuving. “Vietnam will be, in many cases, their first choice when they look around to find a reliable alternative.”

(Source: Vncustomsnews,Vietnamnews, American Shipper, Seatrade Maritime)