GMD UPFRONT MESSAGE

 

THERE ARE TWO SIDES TO EVERY STORY

Over a year has passed since the pandemic first started making sweeping changes to our way of life and to industry and businesses in general. Without question, COVID-19 has triggered devastating impact to people and economies worldwide. It will likely take years for a full recovery.

In early 2020, COVID-19 put a stop to the manufacturing sector in China when factories had to suspend production. The ensuing global outbreak caused many countries to lock down, including main consumption ones like the United States and those in Europe. Needless to say, the global supply chain and business activities had been significantly disrupted. As volumes showed signs of slowing at the start of the pandemic, shipping lines began to use active measures to manage capacity, including an increasing number of blank sailings.

However, what was perceived as a year of disaster for shipping, where shipping lines even declared ‘force majeure’, a significant upturn in volumes began to materialize towards the third quarter of 2020. The momentum continued into the first half of this year. A portion of the goods which propped up demand were those related to health, such as personal protective equipment, as well as e-commerce and consumer goods.

It was quickly realised that supply chains and equipment supply, such as vessels and containers, were not designed with excess buffer to handle such strong demand surges. As a result, freight rates have been driven up tremendously, to levels rarely seen in recent years. This trend will be further amplified, given the Suez Canal incident that has disrupted an already tight supply-demand situation, making it more difficult to return to equilibrium.

Ports and terminals have also become spots of congestion within the supply chain, exacerbating the instability but often beyond the complete control of terminals. Terminal operations have been impacted by disruptions to shipping schedule reliability, cargo rollovers and ineffective empty repositioning. This has affected the ability of terminals to plan for efficient operations, further affected by the supply chain’s reduced ability to effectively evacuate containers through landside hinterland networks. Terminal operators had to additionally deal with shortages of labour in the ongoing pandemic, as well as escalating costs due to extra health and safety measures that were necessary to keep working conditions safe.

2021 remains challenging and occupied with uncertainties. As the world continues to recover from the impact of the pandemic, what ends up taking hold once this is all behind us will likely look very different from before. Nevertheless, as a company, we have continued to make plans to improve our resiliency for the future. We are confident that we are well placed to grow our business, in part by devoting more efforts towards complementary logistics projects which we expect will create synergies with our port network.

 

Eric Ip
Group Managing Director
Hutchison Ports