Worldwide shipping makes the world go round. Global sales are huge business – for example, approximately $634.8 billion worth of trade of products and services occurred between the United States and China in 2019.
Without global trade of products and services, there would be no food on the table, fewer cars rolling out of the production lines, and no smartphones, among other needs and conveniences.
In short, a problem in the movement of ships across oceans and seas can disrupt the lives of people around the globe.
The COVID-19 pandemic created a backlog on top import products into the US, such as machinery, furniture, toys, plastics, sports equipment, and agricultural products. The pandemic revealed the fragility of the global supply chain and has highlighted the need for better cooperation between regions to build more resiliency into the worldwide system.
How the COVID-19 Pandemic Affected Worldwide Shipping
The global pandemic sparked in December 2019 in Wuhan, China, with a handful of initial cases. However, the virus quickly spread and eventually affected manufacturing in China, with factories closed and movements restricted.
By February 2020, the manufacturing index in China hit a record low looking back to 2004. The index dropped from 51.1 in January to 40.3 the next month. The lowest production was seen across the manufacturing sector and was attributed to factory closures, travel restrictions, and other measures to contain the virus.
Studies have also noted global changes in maritime traffic density after the World Health Organization declared the coronavirus situation as a pandemic in March 2020. The strictest measures started to take effect across the world by April 2020, during which time China started to ease restrictions.
Experts noted the changes in the density of merchant vessels and other ships traversing major shipping lines. Vessels were more dispersed compared to the previous year. The overall decrease peaked in April 2020 with 54.8 percent of observed maritime cells affected.
With roughly 60 percent of global goods moving overseas by shipping containers and a subsequent pandemic-induced shortage of container availability and workers to move the containers at the ports and to their final destinations, the resulting worldwide shipping issues caused a chain reaction of kinked supply chains, higher shipping costs, disrupted production lines, and a slowdown of available consumer goods.
COVID-19 Shockwave in the Shipping Industry and Global Economy: By the Numbers
Below is a summary of how the COVID-19 pandemic affected the shipping industry and the global economy, in general:
1. Global GDP Down 4.2 Percent
With all the implemented lockdowns and resulting worker shortages across the world, the global GDP was pushed down by 4.2 percent.
The pandemic also forced a shift in traditional trading practices and operating procedures. With the world in a state of caution, there was, and still is, a continuing of increased port congestions, personnel shortages, lower availability of key commodities, and multiple supply chain issues.
2. Seaborne Trade Down by 9.5 percent
During the first half of 2020, the trading volume across the seas went down by 9.5 percent. The total global trade dropped by 16 percent compared to the same period the previous year.
3. Containerized Port Calls Dropped by 16 Percent in China
With the affected production of offshore manufacturing companies and other factories in China, containerized port calls went down by 16 percent while the country was in strict lockdown in February 2020. However, these strict rules meant that China was poised for early recovery, with port calls returning to normal as soon as March.
4. Incidence of COVID-19 on Vessels
The COVID-19 incidents onboard ships were also high, with 20 incidents per month at its peak. This translated to more difficult operating conditions and higher safety risks in the shipping industry. With better restrictions and testing, cases subsided through Q3 and Q4 of 2020.
Current wisdom predicts the maritime industry is expected to recover in 2021, with seaborne trade estimated to grow by 6.9 percent.
The Current Picture: Economies Bouncing Back
With the vaccine rollout and easing down of restrictions, economies are starting to recover. The United States and China are among the major economies to recover with GDPs exceeding pre-pandemic levels, along with South Korea, Indonesia, and India.
During Q3 2020, shipping data compiled by the United Nations Conference on Trade and Development showed that average weekly port calls in early August were just 3 percent below the levels during the same period of 2019.
In March 2021, the manufacturing index of China hit the 51.9 mark, up from 50.6 in February. It has remained above the 50-point level for the 13th straight month. Production of offshore manufacturing products and factory operations is back to normal, as the country has curbed domestic transmissions of the virus.
During Q1 of 2021, China’s economy grew by 18.3 percent – the fastest growth since 1992. Meanwhile, the US GDP went up by 6.4 percent in Q1 of 2021, compared to the same period last year.
How Offshore Manufacturing Can Help Businesses Turn Crisis into Opportunity
The COVID-19 pandemic illustrates how unforeseen scenarios can affect global supply chains. It has highlighted why alternative sourcing strategies are critical. Business owners are assessing their existing supply strategies to be more resilient in the future. Following are some things to consider in relation to using offshore manufacturing to strengthen your supply chain:
- Diversify sources: Offshore manufacturing companies can help find the best suppliers and manufacturing partners across the globe. Brands can tap into their network of experts, suppliers, and partners to ensure that the demands of the market will be met.
- Strategic inventory level: With access to competitive labor costs and reasonable manufacturing prices, offshore manufacturing can help business owners up their level of safety stock so they have enough inventory, in case of future kinks in the supply chain.
- Avoid logistic bottlenecks: Tapping the services of offshore manufacturers also give you access to their worldwide shipping network that will help safeguard your business from potential disruptions such as pandemics, natural disasters, and other business emergencies.
Use ITI Manufacturing to Manage Your Offshore Needs
ITI Manufacturing supports your company by managing your total offshore supply chain. Offshore manufacturing has, lately, gotten more expensive and much more complicated. Take advantage of ITI’s over 40 years of offshore manufacturing expertise and experience. Let us represent you offshore. Let us handle, worry about, and mitigate the supply chain headaches brought about by pandemics and other global events.
Using ITI helps your business source the right manufacturing partners for your company with the quality standards you define.
Contact ITI Manufacturing today to learn more about our services.
