Coronavirus hits shipping sector, spreads global economic strain
LONDON: Sea freight transport, the lifeblood of trade and a bellwether of the global economy, has been blown off course by the new coronavirus, sparking general alarm.
As analysts pore over charts to gauge just how badly Chinese mega-factories have been hit, figures provided by cargo ship traffic paint a gloomy picture.
The Baltic Dry Index (BDI) reflects the daily price of moving goods such as coal, rice and wheat along routes deemed representative of the global market.
Some call it the canary in the coal mine for the economic world.
The BDI has now reached lows last seen in early 2016, when the shipping sector was suffering a supply and demand imbalance in the wake of the 2008-09 global economic crisis. Its “capesize” index for the largest category of ships – ones that cannot even squeeze through the Suez or Panama Canals – is at historic lows.
“The latest slump is directly related to the coronavirus epidemic in China and the subsequent restrictions on activity,” London’s Capital Economics consultancy said in a research note.
“Given that China accounts for about 40% of global seaborne trade, it is not so surprising that freight rates have tanked.”
Lars Bastian Ostereng, an analyst with Norway’s Arctic Securities, said the outbreak “basically led to full stops in many ports in China”.
Louis Dreyfus Armateurs, a global merchant based in France, is one of many shipping giants approaching China with caution.
“The coronavirus epidemic is a very serious event for the market,” Antoine Person, a top executive at the firm, told AFP.
China does not just produce goods but is also a major consumer with a booming middle class and the world’s largest population. It accounts for “about 35$% of all seaborne dry bulk imports in the world”, Ostereng of Arctic Securities said.
Denmark’s AP Moller-Maersk said on Thursday that the outbreak has “significantly lowered visibility on what to expect in 2020”.
“We expect a weak start to the year,” it warned. – AFP