NO: DELENG / 2017 / 70663
official media partner of national maritime foundation
Murat Bakal
By Sea and Coast | 08/11/2020
Recently, many concerns about the effects of the new type of Covid19 virus, which has spread around the world and cannot be prevented, on the labor markets, society and the global economy, have been raised and this anxiety environment has formed the necessary groundwork to deeply injured the economy.
How has our economy been affected by the virus entering our lives? Currently, people all over the world want to shop from a concrete and real store. The dynamic economy suffered considerably when people were not on the street as a result of out-going bans or suggestions to stay home to minimize the risk of contamination. Shops, markets, shopping malls have almost come to a close and people try to shop online. This situation negatively affected the live money flow and product circulation. Production of unsold products also stopped accordingly. This cycle will result in a decrease in production volume, a decrease in employment rates and naturally the inevitable end unemployment. Generally, when a crisis occurs, measures such as interest rate cuts and tax cuts are taken to create an atmosphere of relaxation. If these measures are not sufficient, a bubble and a good market atmosphere are created to keep the markets alive. If these are not enough, money can be minted as a last resort in order to expand the money volume. Of course, although it is temporarily beneficial in overcoming difficult periods in printing money, it creates the infrastructure of other crises in the long term and causes inflation. The existence of artificial money in people will not solve the problem, because after a while, when the production cannot meet the increasing demands, a vicious circle will occur and the economy will suffer. The most natural method to prevent all of these from happening is the self-improvement of the markets, but since this will not always happen, the process is tried to be managed with additional resources such as external borrowing, but in case of production and consumption imbalance, the economic crisis and unemployment will come back to the agenda after a while.
Undoubtedly, one of the most intense effects of the COVID-19 pandemic was first on Chinese production. Although there has been some improvement from the first time of the epidemic and its intensity on China to now, this decrease has contributed significantly to the decrease in shipping demand worldwide. As the Chinese economy is highly integrated into the global economy, the pandemic is likely to have a wide impact on the global maritime industry and supply chains as well. COVID-19 will affect the global economy in three main ways. Developments will occur by directly affecting production, creating supply chain and market disruptions, and depending on the impact this has on firms and financial markets. China is not only the world's largest exporter, but also home to seven of the world's ten busiest ports and a large container shipping line.
As the coronavirus continues to spread, its effects on the maritime industry will continue. Coronavirus, unfortunately, is developing day by day not only in China but also in all of Europe and America, and it is getting even more frightening. However, the overall impact of the coronavirus on the shipping industry cycle has been to deepen, if not complete, its cyclical decline in 2020. Basically, we expected to see a significant recovery in the freight markets in 2020 as the OECD countries and the newly industrialized nations of Asia enter this year, but this recovery could be delayed by half a year due to the impact of the coronavirus. There are sectoral differences such as container transport, dry cargo transport, oil and gas transport or geographical differences. But shipping is an international industry and when it is affected somewhere in the world, it is often affected globally. All these developments also affect the debt levels of the virus in the shipping industry. We will also see more rate cuts as governments and central banks are doing their best to counterbalance the economic slowdown effectively.
Our best forecast of improvement is that any productivity loss in China will be recovered later in the year with simple productivity gains such as overtime and night shifts in factories and shipyards. If the epidemic stops in Europe, because the consumption will increase, people will tend to dress up and shop again, and all of these products will enter these countries via ships, but it was already expected that container transportation will be a bit difficult in 2020, so with the biggest impact, I think it will face its carrier. As is known for tankers, a significant amount of the world's oil goes to China by tankers. So much so that when production stopped due to the epidemic that started in China, oil prices started to decrease suddenly due to lack of demand and excess production. Tanker markets have also been affected by this process. Although dry cargo is most affected by the Chinese market, the decline in production worldwide causes shipowners who operate their ships worldwide to have some difficulties in finding cargo, but serious dynamism is expected in the freight markets after the pandemic. Although Chinese numbers are still low, we can see that capesize freight rates have improved towards the end of March, driven by the recovery in demand from Japan and South Korea.
Finally, the most important formula to get out of such crisis is to eliminate the problem, but since this seems unlikely for now, an active and reliable policy must be followed for all segments. Increasing the environment of respect and trust between the parties is among the important measures in combating such crises. An atmosphere of fear, tension and insecurity will do nothing but deepen the already existing crisis. I hope that if we leave these bad days behind as soon as possible, the Global Economy and Maritime Sector will heal its wounds very quickly and it will probably accelerate and start a rapid rise.