Ports have always been the backbone of the development of coastal nations. Since ancient times, port economies have allowed countries to encounter new cultures, expand trade, acquire new resources and manufactured goods and improve the overall efficiency of their productive systems. And, above all, ports and maritime transport inaugurated global trade and the creation of international value chains.
The decrease in maritime transport and the new trends
As the global pandemic broke out in March 2020, the uninterrupted growth of maritime transport and trade was hit by a sudden stop. Even the rising trade tensions of 2019 did not interrupt this growth, but only caused a deceleration, with a marginal growth rate of 0.5%. But in 2020 it fell sharply by 4.1% according to the latest UNCTAD data.
The pandemic initially blocked the flows of some manufactured goods from China to other countries and, when the disease spread across the world, the delays and stops in deliveries increased in number and the pandemic rapidly became a game changer in maritime trade flows. Amid supply-chain disruptions, falling global demand and global economic uncertainty caused by the pandemic, the global economy has suffered dislocation, first at the supply end, then at the demand end, in particular due to restrictive pandemic containment measures. Considering that about 80% of world merchandise is carried by sea, the impact of the pandemic on the maritime sector can easily be estimated. The pandemic has boosted the tendency towards re-shoring and near-shoring to the advanced economies and to their neighbouring countries, in particular for the strategic products deemed essential, like pharmaceuticals . These tendencies have been strengthened by the sudden increase in freight transport costs, which have made long-term transport costs less affordable (just consider that shipping one 20-foot container from China to Europe now costs over 5 times more than in 2019). This has led to a new record high for the number of trains carrying goods on the China-Europe route and vice-versa (10,180 trains in 2020 equal to 927,000 TEU vs 8,825 trains in 2019 equal to 725,000 TEU). And, if the process of regionalization of trade and value chains continues, the impact on maritime transport and ports could become structural. This could push shipping lines to rationalize services on the main east-west trade routes while strengthening intra-regional shipping networks.
The reaction of the shipping sector: what’s ahead?
Carriers resorted to capacity management to mitigate the negative effects triggered by the pandemic. In particular, the combination of strong market consolidation, particularly the 2014-2017 M&A wave, improved capacity management, and a fast bounce-back in demand has limited the short-term impact of Covid-19 on carrier results. Despite the pandemic, shipping lines and their alliances (i.e. The Alliance, Ocean Alliance, and 2M) maintained network integrity and resorted to blank sailings to deal with declining demand. As a consequence, the average vessel utilization rate did not plunge. For some ports, the blank sailings implied 20% to even 50% fewer vessel calls between April and June 2020, although, for most ports, the impact was mainly visible on the main trade routes (e.g. Far East - Europe) and not so much on other trade routes. Indeed, the rebound was rapid: the share of idle vessels in total fleet capacity decreased from 11.6% in May 2020 to only 1.8% in October 2020.
When it comes to ports, the latest data of Port Economics indicate that the biggest ports in the world (i.e. those handling more than 10 million TEUs per year) registered – in the first half of 2020 – a smaller decline (-4%) than ports handling 3-10 million TEUs per year. Ports, during lockdown, were declared essential services and fast lanes were established to remove bottlenecks and ensure a smooth delivery of essential goods to citizens, industries, and governments.
The shipping industry could be viewed as a workshop of the new tendencies. The pandemic has accelerated some already existing trends: 1) alliances between the major companies to reduce inefficiencies and increase economies of scale; 2) gigantism, with very large ships that can carry an increasing number of containers; 3) vertical integration, since shipping companies have created divisions operating in terminal movements, logistics, rail and truck transportation. Finally, to cope with the disruption and continue to link supply chains and enable smooth cargo flows, ports and shipping have adopted a range of response and risk mitigation measures. Responses varied and covered different aspects and included operational adjustments; financial/economic adjustments; health protocols and processes; and adjustments to work practices and organizational aspects.
The new rebound and the role of technology
In the aftermath of the pandemic, according to UNCTAD, international maritime trade is projected to recover and expand by 4.8% in 2021. Other sources, such as the Italian SRM on IMF data, estimate an increase of 4.7% in 2021 and a further expansion of 3.6% in 2022. But some structural changes will change the landscape of ports and maritime transport. The main outcome will be an accelerated shift in globalization patterns and supply-chain design, considering that regionalization is gaining momentum.
Technology will play an even pivotal role, permeating supply chains and their distribution networks. The pandemic and its disruptions have shown that first movers in terms of technological uptake are better able to weather the storm, in particular when it comes to e-commerce and online platforms, blockchain solutions and information technology-enabled third-party logistics. Furthermore, changes in consumer behaviours will probably affect production and transport requirements. A further rise in online shopping in the post-Covid future will promote shorter supply chains though the use of three-dimensional printing and robotics. Shipping and ports will need to reassess business strategies and investment plans, including in terms of port capacity, shipping network configuration, vessels and capacity deployment. This is extremely important, the more so when it comes to strategic products and goods, whose distribution will be completely reconfigured. Port and logistics capacity in countries receiving new businesses that have moved out of China should be upgraded and expanded as needed. Finally, resilience-building should be promoted, especially through new investment in risk assessment and preparedness.
In Europe the impact of Covid-19 in the second quarter of 2020 meant a decrease of 9.6% of the gross weight of goods handled in European ports, and of -17% vis-à-vis Q2 2019, with a substantially similar decrease in both incoming and outgoing movements of goods. Also, in terms of cargo types, the pandemic has caused a fairly symmetrical shock, with data of all categories indicating a sharp decline from Q1 2020. When looking at the different countries, however, different patterns emerged. The two main decreases compared to Q2 2019 were reported in Malta (-50.8%) and Italy (-40.5%); while most EU countries reported a fall equal to or greater than 9%; Croatia was the exception, signaling an increase (+10,2%).
In the European Union, ports and maritime transport will benefit from the funds provided by Next Generation EU devoted to digitalization and sustainable transition. In particular, the EU Smart and Sustainable Mobility Strategy aims at boosting the uptake in zero-emission vessels, also creating zero-emission ports by 2030, above all through alternative marine fuels. The Commission has also announced the deployment of the first market-ready marine vessels by 2030. And other countries could follow in the scale-up of investments in the maritime and port sector to reach their carbon neutrality targets. Furthermore, the investments included in the new Connecting Europe Facility 2021-2027 aim at adapting the Trans-European core network corridor to ensure the better connectivity of core ports and cross-border projects. The path is clear but now new investment must follow.