CYNTHIA NANTHALALL: Marooned seafarers pay Covid-19 shipping toll as supply chains disrupted

World Maritime Day 2021, marked on September 30 annually, honours seafarers and highlights the struggles they face in bringing us the commodities we want and need — challenges that insurers must also contend with.

It has been a brutal time for seafarers, who have faced unprecedented hardship caused by the Covid-19 pandemic. Thousands of seafarers globally have spent extended times stuck at sea, unable to go ashore, repatriate and change crews. The UN has dubbed this a “humanitarian crisis that jeopardises the safety and the future of shipping”.

Their job was hard enough before the pandemic — physically coping with shift work, varied weather conditions across different time zones, the dangers of working on board a ship and mentally coping with their living and social conditions. The pandemic brought isolation into the equation, leaving seafarers stranded and away from their families for extended periods, suffering from loneliness and anxiety about their own safety and that of their families at home.

Yet, seafarers have continued to play a pivotal role as essential workers, responsible for keeping global supply chains functioning.

The Covid-19 lockdowns have been a watershed event for traders worldwide, and SA is no exception. The global economy took a serious knock when international trade plunged, and foreign direct investment (FDI) flows fell markedly. Global FDI declined up to 40% in 2020 and further in 2021 as greenfield projects and M&As were suspended or shelved. These FDI flows are projected to recover in 2022.

During lockdowns, trade patterns were changed significantly. The abrupt halting of industry sent shock waves throughout the global supply chain and damaged the economies of some of the world’s leading nations, such as China and the US. At the outset of the pandemic, supply and demand shifted as countries stockpiled essentials such as food and medical supplies.

Port operations

Covid-19 also led to a sharp increase in business closures and job losses. SA is now regarded as the nation with the world’s highest unemployment rate at 34.4%, painting a bleak picture domestically. Lockdowns continue to hinder the movement of people and goods, as well as compulsory components in global supply chain operations. As new variants emerge that challenge vaccine efficacy and trigger a resurgence in Covid-19 cases, there may be repeated cycles of lockdown, which will deal further blows to economies and trade worldwide.

The effect of Covid-19 on port logistics has been debilitating. Port operations took devastating strain, with fewer vessels calling in port, significant delays in port turnaround times, port congestion or sometimes closures, inoperative port equipment, labour absences and ineffective crew changes. These were further aggravated by landside difficulties, including restrictions on inland transportation of non-essential goods and lengthy border queues coupled with border closures.

Shipping delays have become the norm and freight costs continue to escalate due to the global shortage of shipping containers. These containers have been stuck at ports during lockdowns, causing demand for containers at unprecedented and extraordinary prices. According to data from research company Drewry Shipping’s world container index, the composite cost of shipping a 12m container on eight major east-west routes hit $10,374.64 (R155,202) in the week to September 16, up 323% from a year ago. Is it any wonder then that the reliability and sustainability of the global supply chain in supporting lives and livelihoods is very much in the spotlight?

Lean practices

It is a concern for marine insurers when vessels aggregate at ports. The biggest challenge is the possibility of vast losses if all those vessels are affected by a natural catastrophe at the same time, when they are in proximity to one another. Another concern would be the increased risk to time-sensitive or perishable cargo that may be delayed for extended periods, or the increase in claim costs due to a spike in shipping costs such as that associated with the current global container shortage.

With time, the global supply chain has evolved to embrace best practice, such as “just-in-time” inventory management and other lean practices, but doing so has made it more vulnerable to supply chain shocks such as pandemics, severe weather events, cybercrime, blocked sea routes, trade tension or other significant events that disrupt the global supply chain. A number of shocks occurring at once makes this worse.

Now more than before, stakeholders in the supply chain need to learn from the experiences during the pandemic and start considering supplementary strategies in supply chain management that may ease the vulnerability of world trade to these systemic shocks. Due to the lockdowns, technology has been adopted more readily. In the insurance industry, it has led to new ways of working remotely, and trends show that the hybrid work model will continue long after the pandemic is over.

Strategies should be formed early to counter the threat of cybercrime that lurks around every digital advancement. Systemic shocks such as these are not easily overcome, and it will take time for global trade to return to familiar patterns. Meanwhile, we take our hats off to seafarers worldwide who — against all odds — persevere in truly difficult times.

• Nanthalall is head of marine at Hollard Insure.