Global supply chain disruptions continue as Covid-19 penetrates deep into all levels of global trade logistics…
(Silver Doctors Editors) We’ve been discussing coronavirus-related global supply chain disruptions for a couple of months, and we’ve specifically reported on Maersk’s problems before, such as in this article from February 20th:
Maersk, the world’s largest container shipping company, has warned of a “very weak” start to the year as the coronavirus keeps factories shuttered in China and dents demand for the transport of goods.
The Danish ship operator said Thursday that it has canceled more than 50 trips to and from Asia since the Lunar New Year holiday was extended because of the outbreak. Shipping rates are expected to decrease as demand slips, the company said in an earnings report.
“We estimate factories in China are operating at 50% to 60% of capacity,” CEO Søren Skou said on an earnings call.
Maersk expects production to ramp up to 90% by the first week of March, but Skou cautioned that “obviously there are still a lot of uncertainties.”
In an interview with Julia Chatterley on CNN Business’ First Move, Skou said that with 30% of the company’s business related to China, the impact from the virus is “quite substantial.” What matters most, he said, is what happens in the coming weeks.
In mid-February, we wondered whether global trade would even hold up through Spring?
Fast-forward to today, the last day of March, and what do we see?
The first case of a global shipping crew being infected with coronavirus.
Here are the details of these “first” confirmed cases aboard a cargo container ship (bold and bold added for emphasis):
The Gjertrud Maersk has become what is believed to be the first container ship in the world reported to carry the coronavirus.
Seven crew members were evacuated from the vessel in Ningbo, China, on Thursday.
“One of the seafarers has been diagnosed with COVID-19 and four seafarers are asymptomatic infected individuals. The other two tested negative. The hospitalized seafarers are all in stable condition,” Christian Kjærgaard-Winther, Maersk senior press officer in Denmark, told American Shipper on Monday.
“We can confirm that during the past week, several seafarers on board the container vessel Gjertrud Maersk were feeling unwell,” Kjærgaard-Winther said. “As per our established protocols, the seafarers were isolated on the vessel when symptoms appeared and we are providing medical treatment based on input from our medical advisers.”
The Danish-flagged Gjertrud has a capacity of 9,074 twenty-foot equivalent units. Kjærgaard-Winther said the container ship was being phased into the Maersk network and was idle in Ningbo.
“Extra precaution measures will be taken for crew replacement and sanitation will be implemented,” he said.
Maersk said on March 17 that “with the continued spread of the COVID-19 pandemic and the extraordinarily fast-paced closing of borders and cancellations of airline services,” it was immediately suspending all crew changes on its container ships until April 14 in order to “keep our crew safe while maintaining operations as normal as possible.”
Here’s a question: How much are “extra precaution measures” going to cost, and who’s going to pay for that?
Will the shipping company pay those costs?
How about the importer?
Or will it be the end consumer?
Here’s the point: Even as global shipping attempts to tread water, somebody will have to pay for the costs of “crew replacement” and “sanitation”, not even considering the cost of the medical care given to the seven evacuated crew members, five of whom are hospitalized.
On top of that, what if different nations come up with new regulations with regards to protocols and procedures for international shipping?
The bottom line: This is consumer price inflationary via the extra, added costs of simply doing business, and it’s very consumer price inflationary when considering the potential costs to comply with future myriad governmental regulations.