Effects of Covid-19 on the Asia – Europe trade & container shipping

Efforts to stop the spread of the coronavirus (Covid-19) across the globe have disrupted normal trade patterns, with container shipping being affected too of course, causing delays and contributing to higher freight rates from Asia.

Let’s take one fact at a time to examine how we got in the situation that the above statement is unfortunately correct.

China was at the spotlight of the Covid-19 pandemic for the first three months of 2020 and rapidly shutdown the country to contain the disease. This had a dramatic impact on the Chinese economy in Q1, but China made progress to contain the virus. In April, it was noted that cargo miles had recovered and started to follow a similar pattern to last year. Demand declined shortly after this however, as throughout May, intensity of the container trade weakened again. This decline correlated with the increase in Covid-19 cases in the Western world, as the impacts of the virus were felt later in the West and demand for goods lessened due to lockdowns.

In Europe, countries emerging from lockdown put measures in place to safely receive cargo and ports began to clear. Things took a positive turn at the start of June and demand for space in container vessels had risen as economies reopened after lockdown measures.

We come to the present when increase in cargo volume imported from the Far East countries led to very tight space in container vessels and prices have more than DOUBLED in recent months. Container shipping wasn’t ready for this outburst of exports from the Far East countries and equipment shortage is spreading across China-Europe routes.

On the other hand, prices from Europe to Asia has shown only a very small increase, meaning that shipping companies are struggling to return empty boxes to China.

Worth referring at this point that the official industrial production growth in China in August 2020 was up 5.6% compared to August 2019 and China’s GDP is now forecast to grow by 1% in 2020, which does not seem all that remarkable until it is compared with global growth, which is forecast to slump by 4.9% in 2020. Looking ahead, GPD growth in China is forecast at 8.2% next year, versus a global GDP growth forecast of 5.4% in 2021. (source : imf.org).

And the question is, what does the future hold for the Far East – Europe trade concerning the container shipping?

Prices are looking well sustainable at the moment and show no signs of declining. This is projected to go on until the Chinese New Year holiday, which ends by the end of February. This means that we are having at least 3 months ahead of us of sustainable high rates, tight space on container vessels and equipment shortage in the Far East – Europe trade.

So the only thing an importer from Asia’s market has to do is to book their shipments in advance and let us handle the rest!