How coronavirus is changing global shipping routes
The pandemic has put intense pressure on the flow of ships from Asia to the west. But FT Trade Secrets writer Thomas Hale says there could also be a far more long-lasting impact on the industry
Filmed and produced by Tom Griggs, additional footage by Getty.
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It's hard to imagine anything more central to our globalised world than container shipping. Just one of these steel boxes carries enough goods to fill your average house. The enormous ships that transport them around the world often carry tens of thousands at a time.
But as with almost everything else about the way the world used to work, the coronavirus has thrown a spanner into the works. From the banks of Hong Kong Island you can see plenty of idle ships. And behind the scenes the containers they might once have carried are also sitting unused.
Here, in one of the world's most iconic ports that has long symbolised the relationship between east and west, this is no coincidence. In fact, the short-term impact of the coronavirus on trade in Hong Kong today might actually tell us something much deeper about the long-term future of the world's shipping industry.
At the start of 2020 the coronavirus hit Chinese shipping hard. Fast forward a few months and the flow of ships from Asia to the west has come under intense pressure. That pressure is falling in particular on the ships that carry goods to consumers in Europe and the US. And this is because the ships setting off in the east depend on shops in the west.
Europe, Italy, and Spain, some of these places that have literally shut down completely - there's no opportunity for purchase at a store. In the US a lot of the department stores also have been curtailing their hours. So this has been one of the biggest driving factors. The other side is also, of course, the production has stopped.
After opening up in the 1970s China has transformed itself into the world's engine of manufacturing. But it's still in the west that much of its production is consumed. This arrangement consolidated the east-west shipping route as the most important artery of world trade and one of the best indicators of the health of the world economy.
As the prospects of a deep recession in the west looms over the industry, the indications are now clear. Maersk, the world's biggest container shipping company, says its east-west trade has been the worst affected part of its business. However, the fall is not as precipitous as you might expect.
The importance of the container shipping industry to the smooth function of the globalised economy means that, for the most part, cranes are still operating and ships are still sailing. In May, around 40 sailings from East Asia to the West Coast of America were cancelled unexpectedly. But they could easily come back if the economy recovers.
The action of pulling ships is not unprecedented. It happens year round. And it happens spontaneously. Whenever a shipping lane finds that they are underutilised they will not hesitate to pull one string or a service or a vessel.
I think this is probably the first time that we've seen such a big drop, 12 per cent. It's not huge, maybe, in our eyes if you think about how much volumes are still moving. But 12 per cent is something that we have not experienced before.
Cancellations, empty containers, and idle ships are, for now, short-term effects of the pandemic. It's the long-distance routes to have suffered worst. While the coronavirus has put pressure on consumption in the west, there are other longer term threats to long-distance shipping.
Most obviously, trade tensions between the US and China, which have escalated over recent weeks, look set to outlive the coronavirus pandemic. Beyond that, changes to the structure of manufacturing, including the rise of automation and the competitiveness of Chinese labour markets, could also disrupt the flow of ships globally.
So for ships the size of football fields that travel halfway around the world to bring you the phone in your hand, the pandemic might just prove to be the catalyst for far more significant and long-lasting changes.