By Oluwabukola Orasakin
Nations of the world are currently faced with the ravaging COVID-19 pandemic, which in history, no pandemic of such has ever affected the world system and successfully brought every activity in the world to a halt.
The lock down procedure has a significant impact on international and domestic trade. Many sectors were and are still affected by the current circumstances and the activities of some of the sectors are retrogressing of which the maritime industry is also at the receiving end.
The implications of COVID-19 on the maritime sector with respect to manpower, navigation and financial profits are so enormous making us wonder if the shipping sector is becoming a shadow of itself considering the following:
Covid-19 has tampered with the logistics and operations of maritime workforce especially seafarers. During this adverse time, many workers are being trapped on board the vessels due to being in quarantine or for other prescribed safety.
The virus impacts greatly on the Safety of seafarers, their ability to join their vessels, return home and the future of their jobs. An initial assessment shows the pandemic will push lots of maritime manpower into unemployment and working poverty.
Worried by the lack of concern towards seafarers, the International Maritime Organization has called on port to consider seafarers as key workers in the face of the corona virus pandemic.
Ship owners, ports and logistics companies are faced with challenge of remaining in operation during and after the pandemic and has led to laying off of staffs as the essential staffs are the once working from home, leading to less demand for office space, and increase in older vessels being scrapped.
Navigation entails travel by vessel through a charting course. A number of marine vessels have been banned from entering certain ports which has demanded such vessels to be on water, change navigation and not having a destination port to disengage.
The shipping sector is navigating uncharted waters and there’s standstill of all kinds of cargos. Analysts have warned that a fall in demand for transporting goods will impact shipping industry. For instance, the capsize index, which reflect the costs of freight of bulk carries turned negative for the first time since 1999.
One of the consequences of no navigation is Time Charter party disputes. Charter party contract governs the transportation of goods by vessels. In this type of contract, a vessel owner agrees to hire out his vessel to a charterer for a period specified. Due to port closures and no navigation, a charterer cannot redeliver the vessel to the owner at the specified time. So, no navigation tells on the business of a vessel charterers who need to redeliver the vessels on time charter back to the owners.
Frontiers in the maritime industry have gone bankrupt due to less demand and inability to handle the finances of the company during this period of less demand of cargos and shipping. This has resulted in shutting down of various companies engaged in this sector. Covid-19 is expected to heavily damage demands for oil cargo and negatively affect oil freight rates.
On April 20th, 2020, the price of the West Texas Intermediate (WTI) crude oil slumped into negative for the first time in history, falling to negative 37.63 US dollars per barrel. The U.S WTI lost about 0.66%, to trade at $40.46 a barrel after surging as high as $40.36 in its intra-day trading session. Brent crude oil also lost about 0.63%.
In the Nigeria, the federal government in 2019 generated #1.341trillion, exceeding its target of #937 trillion but the outbreak of the pandemic has seriously affected the #2trillion revenue target for year 2020 because the shipping industry has sided into recessions.
Recently, ports have started quarantining vessels for up to 14 days before they enter the destination port; vessels are being held for 14 days before exchanging goods leading to low profit generation. Covid-19 caused demand to fall lower and remain at lower levels for much longer than in a usual year. There is a sudden drop in the maritime trade opportunities, orders cancellations, spikes in costs and financial profits are bleeding out.
The significance of the maritime sector globally is enormous but the pandemic has made it to become a shadow of itself among the thriving sectors of the economy.
Oluwabukola Orasakin is a 400 level law Student of Obafemi Awolowo University. She is a member of the Maritime Law Students’ Society, Obafemi Awolowo University.