Our ports have been closed for nearly a month due to public safety connected with the COVID-19 virus. Thus maritime activity at all levels has been restricted except for cargo vessels bringing in provisions and medical supplies.
Our trade is mostly with China and Europe for most of our imports. In China companies are getting back to work, more and more people are out shopping, there was a record expansion in bank lending in March and exports and imports were not as bad as expected. However, it’s too early to start celebrating with data expected to show that the economy had a historic contraction in the first quarter.
Trade with Europe and the US was hit much harder, with exports to the EU down by more than 24 per cent, and those to the US falling by almost 21 per cent from a year ago.
Companies have been cancelling export orders from early March and declines will be even worse in April, but hopefully the situation will improve in May or June.
Container lines have had to cancel almost 400 sailings to adapt capacity to the drop in demand caused by the coronavirus outbreak. In total, up till mid-April, the number of cancellations reached 384, for the three main alliances operating vessels between China to Europe and the US.
The third week of April alone saw 212 sailings being blanked for the period from April to June because of a massive drop in cargo bookings. The total number of blank sailings on the routes between Asia and Europe and in the Pacific are now at a level equivalent to three million TEU.
The sharp increase in cancellations is directly related to the coronavirus outbreak, which has stalled several of the world’s biggest economies.
These blank sailings will invariably affect the local maritime industry at all levels of the industry going forward even after COVID-19.
The maritime industry is unique in that it is made up of a range of economic activities, each specialised in its own sphere but each depending on the support of the other activities to be able to deliver a total service.
The call of a vessel in port entails not less than 12 different service providers – from pilots to stevedores, who must all interact to give a comprehensive service to the vessel. If one service fails, or is missing, the whole vessel cannot be serviced.
The uniqueness and utility of the maritime industry is acknowledged by governments worldwide because it sustains the lifeline of international trade. Hence the International Maritime Organisation in its Circular Letter No. 4204 of March 27, stated, inter alia, quote: “Governments and relevant national authorities are recommended to: identify port workers, port authority and port service personnel and … other vital ancillary personnel such as pilots, mooring tugs … and ship suppliers as “key workers” because they provide an essential service to facilitating shipping and port operations to maintain the movement of cargoes and the conduct of other vital economic activities, regardless of whether they are public or private sector employees.”
Unfortunately, the country has not stood by the industry in its hour of need
The same recommendation was made by the European Commission in its communication of March 23, on the implementation of the green lanes under the guidelines for border management measures to protect health and ensure the availability of goods and essential services. Although these guidelines are directed to the facilitation of cargo movement through the TEN-T routes, they speak specifically of the need to give special treatment to transport workers and operators of critical and essential supply chain services.
Therefore, the maritime industry must go on – the players in this industry must deliver no matter what and to do this they have to retain their professional employees who have received lifelong investment by their employers (public and private) to be able to make Malta competitive on the international maritime scene. The activities in this economic sector cannot be undertaken by teleworking because most of the services have to be delivered physically on board ships and at port terminals.
Given these ponderous considerations, one can appreciate the concern of the industry in missing out on government assistance published to date when at the same time, players in this industry have seen their whole business wiped out (e.g. Valletta Cruise Terminal) or experienced drops of 35 to 50 per cent in their market shares in a matter of a few weeks.
Although most of these entities have been experiencing negative results since the beginning of January when China closed its ports for international trade, they continued, up to the present day, to deliver the services required of them, but now they have come to the point that the income being generated is not even sufficient to cover their main fixed cost, namely the payroll.
Through the latest government package, most of the players in the maritime industry have been relegated to Annex Two with some not getting any assistance at all.
Maritime activities, by their very nature, are labour intensive with studies confirming that in Malta, 11,500 personnel are directly employed in maritime services – a figure which increases to 20,000 jobs when the secondary services (sub-contractors) are taken into account.
This is not an insignificant figure and explains the high multiplier effect that this industry generates within the economy. But it also comes at a price because the payroll accounts for the most significant part in the overall operating costs of the maritime-related service providers. As a matter of fact, this accounts for from 50 to 80 per cent of the total operating costs.
Any measure aimed at assisting this industry must necessarily have a bearing on this operating cost. The maritime industry does not expect the government to shoulder its losses, but it does need, and asks for, effective measures to help alleviate the burden that the current situation has brought about.
We believe that a burden-sharing formula where government, employers and employees share in the burden is the most equitable of solutions. If each party shoulders part of the financial burden, the industry can retain its level of service and employees are retained in gainfully occupied positions which in turn contribute towards the well-being of the national economy.
After already suffering a decline in business since the start of the year with trade coming from China, the local maritime industry is looking at a bleak few months following the further decline in business as a result of the spread of the COVID-19 virus throughout Europe and the rest of the world.
The industry has always stood up to the challenges that the country needed to face to attract new business to Malta, but unfortunately the country has not stood by the industry in its hour of need.
Michael Callus, CEO Malta Maritime Forum