Global shipping logistics entering uncertain period amid nCoV crisis

China could need more coal from US, but getting it there could be a problem, noted Reuters’ Clyde Russell in an opinion piece.

Shipping is facing the odd paradox of a fall in freight rates because of a decline in global activity, but a shortage of vessels when it comes to delivering goods to China, as well as logistical problems when it comes to unloading those goods and moving them inland, wither by river or by road.

Russell observed that China’s domestic coal mines were struggling to increase production in the face of the ongoing coronavirus epidemic, but that the problem for major exporters such as Indonesia, Australia and the US was going to be one of logistics.

The death toll from the virus in mainland China jumped by 73 to 563 on Thursday February 6th, with total confirmed infections rising by more than 3,000 to above 28,000. The steady 10% to 15% daily increase in fatalities and reported infections is continuing, equal to a doubling in the number of deaths and confirmed cases every five to six days.

The challenge of shipping coal to China was illustrated by the Australian government’s decision to impose a 14-day quarantine on vessels leaving mainland China after February 1st. This meant that those vessels would face delays when they reach Australian ports, because the sailing time between China and both the east and west coasts of Australia is generally less than the now-accepted incubation period of around 14 days.

Russell said that vessel queues outside Australian coal ports were already lengthening. Argus Media reported on February 4th that the number of ships waiting outside coal export harbour Newcastle was at 20 vessels – the highest for 18 months.

The plus for the exporters ins that freight rates are plunging, in the case of coal from Australia down to about a third of the September 2019 high. Shipping companies would be losing money on every trip, just at the time that their costs are rising because of the new 2020 sulphur cap. But, said Russell, the main challenge would be securing vessels with owners prepared to send them to China.

Russell concluded with the worrying warning that “what is becoming clearer is that the efforts to contain the virus by limiting economic activity in China is going to have multiple flow-on effects through commodity supply chains”.