Industry Blog

Understanding the Current State of Chaos in the Shipping Industry

What impact does a new year and a new administration have on US sanctions?

The COVID-19 crisis has had a significant impact across all major industries, and global shipping is no exception. As a result of movement restrictions, shipping has been among the hardest-hit sectors, and it was not prepared for the large-scale lockdowns and closed borders that the pandemic presented. However, several other issues have plagued the industry’s workings, and this blog analyzes the key factors driving the current state of chaos within the shipping sector. It also reviews the fundamental reasons for the lower demand for international goods.

Sign up

Key Factors Responsible for the Chaos

Intermittent Lockdowns

The first and foremost factor that has dented the shipping industry’s progress has been the implementation of intermittent lockdowns around the world. These lockdowns have resulted in economic activity declining sharply in most parts of the world. In addition to this, such lockdowns have also caused restrictions in the movement of labor. These conditions have made it extremely hard for the industry to find the workforce needed to load and unload goods. Similarly, numerous international warehouses have closed, leading to a shortage of raw materials. 

Cross-Border Demand

The ongoing pandemic has had a majorly negative impact on the cross-border demand for goods and services. This decline has caused significant damage to the shipping industry as vessels had to be docked for months, as they did not have permission to transport goods. 

Border Closures

There has been a significant rise in nationalist sentiment, and several countries have closed their borders to protect the interest of their people. Others have decided to increase the number of checks undertaken to clamp down on the spread of the virus within their country. At the same time, vessels that continued to sail were unable to utilize their maximum capacity due to lower demand for international goods. The nature of this pandemic is such that customers are now hesitant about purchasing products from unknown overseas manufacturers.

Ongoing Trade War

Another factor that has caused damage to the prospects of the shipping industry is that certain countries are in the middle of a trade war. For instance, the U.S. and China are in ongoing tariff disputes, which has resulted in large-scale tariffs on imports from each other. Similarly, Australia and China have also announced new tariffs on certain products sourced from each other. Other countries such as the UK also continue to face significant trade challenges in the current post-Brexit environment. These trade issues have resulted in a situation where the shipping industry cannot realize its true potential. 

Conclusion

In conclusion, the current chaos in the global shipping industry is driven by factors such as intermittent lockdowns, increased border checks, as well as compliance challenges. However, whilst there are still significant challenges to navigate, the industry is expected to bounce back during the second half of 2021, opening up more trading opportunities.

If you need external assistance related to your trade compliance program, OCR’s global trade management software ensures that your business is fully compliant with all trade regulations. For more information, please contact us.