05/26/20

Impact of covid-19 on the whole trade chain

Sea freight transport, the lifeblood of trade and a bellwether of the international economy, has been blown off course by the new coronavirus, sparking general alarm.

 As analytics pore charts to measure just how seriously Chinese mega-factories have been hit.

The Baltic Dry Index (BDI) show the daily price of moving goods such as rice, coal, and wheat along the routes deemed representative of the international market.

The BDI has now touched low last seen in early 2016, when the shipping sector was suffering a demand and supply imbalance in the wake of the 2008-09 international economic crisis.

Free fall

Louis Drefyus Armateurs, an international merchant based in France, is one of many shipping monsters approaching China with caution.

The 169-year old firm has banned its sailors from going on shore and stopped relieving its crews at Chinese ports, outcome in large disruptions.

With the number of reported deaths from cronavirus now above 2,400 and swatches of the country under effective lockdown for a second month, Chinese demand might suffer for month to come, Ostereng said.

This would impact exports to China from around the planet, including the Europe and the America, with accompanying political repercussions.

"power generation in China has dropped and steel mills are definitely cutting capacity utilization which, respectively, point to lower demand for iron ore and coal," Capital Economics wrote.

That, in that, decreases Chinese imports of steel and coal produced in places such as Brazil, Australia, impacting their economies.

The price of shipping both commodities is reflected in the Baltic Dry Index, which is in "free fall," capital Economics  said.

Further to importing raw materials - Chinese factories use nearly forty-percent of metals produced in the planet - the factory slowdown has forced the world's biggest shipper to brace for the year ahead.

The Baltic Exchange is the world's leading source of independent maritime data.

 


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