Calm After The Storm

after the storm

Neil Godfrey, Group Commercial Director - Shipping, GAC Group, considers recent activity in the shipping industry and how to implement lessons learned from 2020.

The COVID-19 pandemic has had an immediate and lasting impact on us all. For the global shipping industry, it has been sharply felt with the dry cargo sector becoming caught up in the midst of disruption caused by restrictions against the virus and labour shortages. The impact looks set to echo through to the sector’s short and long-term future.

Disruption to global supply and demand

The pandemic is still negatively affecting global industrial production. Mining activities and raw materials supply chains have been disrupted, global energy demand has slumped leading to commodity trailing, and mining companies are looking to divest carbon-related assets.

This was exacerbated by other factors, such as China’s unoffi cial ban on imported Australian coal that left several bulk carriers waiting at anchor outside Chinese ports late last year.

As 2Q21 is entered, with the global rollout of vaccines and government initiatives aimed at increasing production coming into play, the outlook for shipping and the global economy is looking more positive. However, the hardlearned lessons that 2020 taught us should not be forgotten.

It was a year that presented the global shipping community with many challenges which demanded a rapid response. The result was a number of extremely valuable and innovative solutions the industry should take forward.

Turbulent start, promising future

No year in GAC’s more than fi ve decades of handling dry bulk commodities and vessels can compare with 2020. Dry bulk is not just reeling from the shock of COVID-19, but also events such as the US-China trade war, tariffs, Asian swine fever, and the Vale dam collapse in Brazil that preceded it.

But it is not all bad news. China’s imposition of bans or restrictions on Australian coal imports signalled a trade shift, with opportunities opening up for cargoes from alternative suppliers such as the US, South Africa, and Russia. Meanwhile, in India, demand remains strong for now with coal cargoes from South Africa to India continuing to be signifi cant operations for GAC in both countries. Coal movements into India from Australia and China’s imports from South Africa and Indonesia have been driving rates higher. Vietnam is also pulling in thermal coal, and coking coal imports will rise because of increasing steel production.

Meanwhile, China needs iron ore to feed its ambition to remain one of the world’s top steel producers. It continues to import from countries like Australia and India, where China-bound iron ore exports rocketed 88% in 2020. Records indicate that in 2019, 23.8 million t moved from India to China. In 2020, that fi gure was 44.8 million t – the most in nine years.

China’s demand for grains also remains buoyant, as evidenced by a recent record-breaking order for 5.8 million t of US corn. The US Department of Agriculture now forecasts that Chinese corn imports between October 2020 and September 2021 will set a new record of approximately 24 million t – up 16.4 million t from the previous 12 months. GAC operations at both ends of the deal are standing ready to assist vessels in loading and discharging.

In light of renewed optimism and disruption to supply chains, container markets are skyrocketing and equipment is being prioritised for higher-paying cargoes. The surge in container rates will drive more general cargo to be shipped in bulk carriers. 2020 was a tough year for anyone in dry bulk. However, with burgeoning commodity demand looking unlikely to end soon, and after six months of dramatic losses and impairments, the future for bulkers is now looking promising as the markets rebound. Ship agents must be ready to support this growth.

Seafarers: key workers and unsung heroes of the pandemic

In a tough year for shipping, none have had it tougher than the world’s seafarers, whose plight during the pandemic

has been recognised as a humanitarian crisis. Thousands have been stranded at sea far beyond the end of their contracts as restrictions or outright bans on disembarkation came into force. Thousands more have been unable to sign on to ships for their tours of duty.

Through its network around the world, GAC has experienced this aspect of the pandemic fi rst-hand and – where possible – has worked to enable crew changes to take place. Nearly 3000 Indian seafarers from Holland America Line, Princess Cruises, and Seabourn ships were reunited with their families after being successfully signed off from their vessels, guided through all COVID-19 procedures, and safely delivered to their hometowns by GAC India.

Elsewhere, GAC agents on the ground have used their local knowledge to assist with the introduction of crew change corridors. Such corridors provide a controlled environment through which crew are disembarked into a dedicated quarantine centre, then taken in COVID-compliant transportation to the airport to fly home.

The push for seafarers to have key worker status to facilitate easier crew changes – which at least 45 IMO member states have now designated to them – could not come soon enough.

GAC has signed the Neptune Declaration calling for urgent action to resolve the crew change crisis. The maritime community must learn from the experience to build a more resilient industry for all involved.

Unlocking the potential of digitalisation in shipping

Digitalisation really came to the fore in 2020 as more and more professionals were forced to work remotely. Even the traditionally conservative shipping sector has had to embrace digital solutions, for example with Western Bulk’s state-of-the-art, cloud-based data infrastructure used to inform decision making and simplify work processes in chartering and operations.

Maritime business leaders are now looking to digitalisation to solve the pressing immediate challenges facing the sector and facilitate a safe return to pre-COVID practices.

There has been much talk about which digital solutions will offer the greatest practical value. Before getting carried away with grand plans, the shipping industry must focus on getting fundamentals right and create a strong digital culture through thorough training.

GAC is following a four-step process to digital transformation. The fi rst three steps are: initially framing the digital challenge; identifying the solution and focusing investment; and mobilising training to ensure its staff know how to use the new technologies. The last step of the process requires a longer-term drive to sustain the digital transformation over time. Such a transformation can only succeed if it includes measuring and monitoring the use of technology, onboarding customers, and building and maintaining foundational skills. GAC will undertake that through its training arm, the GAC Corporate Academy.

Education about digitalisation must start with those who will use the technology. Only then can the uptake of new digital solutions be accelerated and enable businesses to take full advantage of what they have to offer. Experience has already taught the industry, for example, that greater data sharing between corporations worldwide would have mitigated some of the pandemic’s initial challenges and prevented incorrect and outdated information from wreaking havoc globally.

Cyber security is vital. As the uptake of news tools have grown, so too have opportunities for would-be hackers and digital imposters, as witnessed by several high-profi le cyberattacks on large shipping organisations. The sharp increase in attacks and the resulting substantial risk to businesses should sound the alarm and highlight the need to treat the cyber threat as one of the main challenges it faces. Off the shelf security solutions – although simplistic and easy to understand and sell – cannot always solve the problem. More integrated, tailored solutions that go further may therefore be needed.

Figure 1. Considering Asia-Pacifi c’s crucial strategic position for international trade, the future is looking bright for bulkers in this geography.

Calm after the storm

Looking back at the storms the maritime industry has weathered during 2020, the indispensable role of dry bulk shipping in modern life has been underlined. In the months to come, the sector will see a resurgence on the back of growing demand for commodities as consumption rises and raw materials are restocked.

As the world leaves behind the pandemic, the dry bulk sector must take the lessons learned on board to build resilience for the future. The human lesson of concern for seafarers’ wellbeing and status as key workers, in tandem with technological considerations related to the digital transformation of the industry and the vital role cyber security must play, must pave the way through 2021 and beyond.

The Asia-Pacifi c region is increasingly contributing to the world economy, and the dry bulk sector in the area can expect to achieve even greater traction in the coming months. Considering the Asia-Pacifi c’s crucial strategic position for international trade, the future is looking bright for bulkers in this geography amid a rebound in the markets.