Although China is gradually recovering from the epidemic, Europe is still struggling with its effects. The current conditions for Eurasian transport are extremely stressful. According to analyses of leading international institutions, this article attempts to diagnose the current impact of the pandemic on the disruption of supply chains in European ports, including those of Central and Eastern Europe. According to AIIB data in January and February 2020, China’s industrial production dropped by 13.5%, compared to the same period in 2019. The investments in fixed assets fell by 24.5 per cent, with the greatest impact on production and transport.
Due to the high dependence of European ports on production in China, most port authorities in Europe cannot yet determine exactly how big the losses this year will be, but they will be inevitable. The epidemic is influencing levels of loading and/or cancellations in container shipping. The reasons for this include, inter alia, a slowdown in the pace and/or total stoppage of industrial production in various countries, including a limited number of port (transport) workers. Crews in some ports are not exchanged and ships do not pick up and load goods while in ports. Ports on the Eurasian transport route at different times show varying degrees of sensitivity to the effects of the epidemic. According to the findings, the impact of COVID-19 will be noticeable, for example, in the port of Koper, as the epidemic has already paralysed certain services, including smaller transhipments. Miloš Prislan, head of the Slovenian consulate in Shanghai, where many Slovenian companies are active, says that in the long term, everyone will be affected by the disruption of supply and that the companies with production facilities in China (about 40 Slovenian companies are active there) suffer the most. Almost 12 600 Slovenian companies also import from China. If COVID-19 continues to spread, this will soon be reflected in higher prices. The example of Slovenia shows that the effects of the pandemic can be felt at various levels. Slovenia imports a lot from China, so it has access to the goods received at the lowest price. These are mainly half-finished products used by the chemical industry. The good news, however, is that these products are also available in other European markets, but of course, new suppliers may be more expensive. Another issue is how much the decline in delivery in China will ultimately limit potential supplies to Slovenian companies working for French, German or English customers. The key is the extent to which this negative effect will be present.
In addition, some of the logistics companies have already closed their distribution centres in China and some have cancelled their shipping lines. There have never been similar situations in which production in one country has been stopped on such a large scale. Under normal circumstances, direct shipping links between the port of Koper and Asia usually last between 25 and 27 days. The expected repercussions, especially for containers and transport, will, therefore, be real in Koper in the coming months. Covid19 also negatively affects supply chains in Romania. Roxana Popescu, director of KeysFin, reports that there is a clear need to diversify business partners in Romania, because too many companies in their supply chain now rely solely on partners from China. However, according to more recent data the German ports are carried out on a regular basis, without interruption. There are absolutely no restrictions on the availability of intermodal infrastructure and port services that are necessary for the handling or transport of goods to and from the ports. There is also no evidence of any current or foreseeable problems with the traffic of supply vessels to the ports. Full access is possible by land, rail and inland waterway.
In contrast, the situation is already quite different in most of the Mediterranean regions. At present, the Western Balkans and Croatia experience a lack of supply continuity, as well as delays in deliveries and refusal to provide transport services by some transport companies (TIRs) towards Italy and other “risk” countries. Strong trade links of the WB6 countries with Italy mean that the Italian crisis will negatively affect the development of most of the Balkan countries. Albania is a good example of this connection. Italy is it’s main trading partner. In 2019, 48% of Albanian exports went to Italy. Moreover, at the beginning of the crisis some industrial factories ceased to operate, including clothing factories (trading with Italy and China). It is also worth adding that China is the third largest destination of Albanian imports. Also Greek is among those whose maritime economy is strongly associated with Chinese investors, who are responsible for 80% of transactions. Hence, the potential impact of COVID-19 on European ports, including Central and Eastern Europe, will vary. The losses currently observed are mainly due to the reduced activity of Chinese ports in the 1st quarter of 2020. The number of so-called empty voyages from Chinese ports reached an unprecedented level during this period. According to Sea Intelligence, carriers incurred a loss of USD 2 billion as a result of a volume decrease of 1.9 million TEU. Between January and February this year, Cosco Shipping’s ports recorded declines. There was a huge drop in the number of port calls after the COVID-19 break-out. According to Port Economics, if the crisis would result in an 8% drop in the volume of Chinese containers in European ports in 2020, Hamburg would lose 2.3 percentage points of growth potential and Rotterdam would lose 2 percentage points. Other ports are less likely to lose their growth potential – 0.8 to 1 percentage point. Of course, the negative effects could be much greater if we assume the worst-case scenario of a 25% annual decrease in Chinese container volumes. In this case, Hamburg’s TEU growth could be reduced by 7.1 percentage points in 2020, while Rotterdam would face a decrease. For the other ports, these values range from 2.5 to 3.1 percentage points. However, these are still only scenarios. Only the following months will allow us to analyse the real impact of the epidemic on ports in China and affected regions of Europe. It can be predicted that the above potential situations will also apply to most CEE ports. Diversification of production, supply and the search for alternative markets are perhaps sort of solution.
According to AIIB, many developing economies, including those in Asia, are already facing serious infrastructure problems. Given the apparent disruption of supply chains, it can also be assumed that the Belt and Road infrastructure projects will be delayed in 2020. Because of Covi19, Republika Srpska suspends projects carried out by Chinese entities. Milorad Dodik reported that Bosnian authorities decided to suspend the construction of infrastructure projects. On the other hand, Chinese investors may also take advantage of the decline in the value of foreign companies and their difficulties in financing infrastructure projects to promote their own projects under the Belt and Road Initiative. Recently, China’s support and commitment to such countries as Serbia, Montenegro, Albania and Northern Macedonia have been very noticeable.
Patrycja Zając, Coordinating Secretariat for Maritime Issue