The coronavirus (or COVID-19, its official name) spreading around the world from its epicenter in Wuhan, China, wasn’t even on anyone’s radar just a few weeks ago.
It now looks as if it will become the latest “black swan” to negatively affect the global economy and shipping, including inland shipping. (The term was invented by options trader and economics author Nassim Taleb to denote unpredictable, unique outlier events that have a large impact.) It comes on the heels of two recent black swans that also dinged shipping: the tariff wars, and last year’s unprecedented floods. (That last one may qualify as a “gray swan,” since flooding could return this year.)
At first, global stock markets didn’t respond to the news of the rapidly spreading virus. Reported mortality rates are supposedly 2.7 percent, higher than the .05 percent mortality of the flu according to the Centers for Disease Control, although flu has infected and killed more people so far this season. Many question Chinese official figures, though.
As new cases emerged in Italy, South Korea and Iran, containment efforts came into question and global health authorities began to raise the possibility of a global pandemic, stock markets have reacted strongly. President Donald Trump appointed Vice President Mike Pence as a coronavirus “czar” to coordinate efforts. Although the U.S. itself hasn’t been as directly affected as other countries, we are still learning about the transmission and incubation of the virus.
Global shipping has been especially sensitive to the threat posed by the virus. Quarantine measures inside China itself have shut factories and halted or frozen supply chains across the globe. Shippers are scrambling to reroute and are considering relocating future operations outside China. Smaller shippers are especially hard-hit.
The Capesize Index, which tracks shipping freight costs for the largest carriers of dry bulk commodities, fell into negative territory for the first time since its founding in 1999. The head of investor relations at Euronav, one of the world’s biggest tanker companies, said, “Coronavirus is having a large disruptive effect on the marketplace and our business.” Rates for supertankers have reportedly dropped to $23,000 per day from $140,000 per day a month earlier.
One company that tracks container shipments said that as many as two million TEU’s may have been idled worldwide. The Port of Los Angeles reports that a quarter of container shipments from China have been canceled so far. Those impacts dwarf the effects of the U.S.-China trade dispute.
There will undoubtedly be impacts to the barging industry, but at this point it’s hard to say what they will be. The inland barge industry is downstream of the blue-water shipping indicators and isn’t directly affected by all of them.
A lot will depend on what happens in the next few weeks and months. Observers are closely watching infection figures. If the infection spread remains linear, a global pandemic may still be avoided. If global efforts to contain the virus seem to be taking effect and the restrained economic forces are able to bounce back, shipping could recover.