Adaptive and instantaneous response to market developments is the important part of work under pandemic

The pandemic of COVID-19 affected already challenging operation of container shipping market. Nevertheless, some companies who have a certain experience and potential are going to turn the crisis into a possibility to develop and strengthen their positions.

The CEO of AlphaCosta Ukraine LLC, Yuriy Malyshev, spoke about the situation on the container shipping market during the COVID-19 pandemic and the economic consequences for the transportation sector.

— 2020 is a year of challenges for shipping: the COVID-19 pandemic followed the implementation of new requirements to limit sulfur emissions. What do You think about the current situation on the container shipping market?

Indeed, the situation is not simple on the container market, but in any case, the business has to analyze it and adapt to the realities.

The cost of container shipping by sea increased significantly over this period of 2020 compared to 2019 due to the decision of shipping lines to use low-sulfur fuel, the price of which is much higher. Thus, a premium was added that increased the cost of sea freight by 10-20%.

The situation with the ban on imports from China was very difficult and led to the lack of imports in Ukraine. Many companies dealing mainly with import were affected. Thus, they switched to export, and competition among forwarding companies increased.

Many companies dealing with production process suspended their activity; they are waiting and assessing their possibilities.

— How did the situation with the COVID-19 pandemic affect the work of Your company?

AlphaCosta Ukraine experienced more positive than negative effect of the pandemic. We began to introduce effective teamwork tools and hold the online meetings. Our employees optionally work both in the office and remotely.

We use the opportunity to hold online training, attend webinars, which are held now by all reputable specialized organizations, we always keep up the situation, we have the opportunity to adjust our clients' plans in time and plan our work accordingly.

Considering our seven-year successful experience of transportation of oil in flexitanks and constant cooperation with all major Ukrainian producers, we are sure that the negative impact of the pandemic on our company will be minimal and insignificant.

We know our potential and intend to use this crisis as an opportunity to develop and strengthen our positions.

— What do Your company experts think about the economic consequences of the pandemic on the container shipping market?

Unfortunately, the pandemic affects all market participants. There are respites of payments, large exchange differences, failures to meet the delivery terms. There is a high probability of bankruptcy of small and medium-sized enterprises, which simply cannot cope with the financial burden. Some companies could artificially declare bankruptcy to avoid liability for large financial obligations towards the counterparties.

As to the external economic situation, since mid-April, container lines warned of the possible cancellation of certain ship calls to Ukrainian ports. Decisions will depend on demand in Europe and eastern countries. Even the world giants in container lines cannot predict accurately the situation on the container shipping market and will make the final decision as close as possible to the dates of calls.

Thus, we again consider the consequences of COVID-19 as the instability and the need to learn how to work adaptively and respond to changes instantly.

— Considering the trends on the market of agricultural container shipping in 2020, what is Your opinion regarding the results of the I quarter?

Trends in agricultural shipping are always quite stable. There is always the demand for food. This was one of the few industries that did not stumble as much as others did the during quarantine period.

We can compare the results of our company’s activity in the I quarter of 2019 and 2020. This year the volumes of shipping slumped in March compared to last year as a reaction on global situation after the growth in January and February. Fortunately, the March decline did not influence the overall picture. Generally, they share of agricultural cargos in total volume of container shipping increased slightly in the I quarter of 2020 compared the same period year ago — to 80% (about 80% in 2019). We shipped nearly 50 thsd tonnes of agricultural products in January-April.

Agricultural cargos transportation by AlphaCosta Ukraine

— What were Your expectations regarding development of the market before the pandemic began?

We expected at least 20% gain.

— What directions do You perform container shipping to? What are the peculiarities of these countries?

We operate worldwide. Some certain peculiarities depend more on client/consignee not countries. The list of documents and certificates depends on what is stated in the contracts. Some companies need the white copies of invoices printed in the CCI, or the Health Certificate that the CCI issues after sampling. Otherwise, some African countries can accept the goods under scanned documents.

— Today, many countries-importers are in the thick of the pandemic, and operating procedures in the ports were changed. What were the main difficulties You faced in the ports, while discharging containers with agricultural cargoes?

The first difficulty was the longer export of containers from ports. Now all clients ask for approval from lines for as many as possible free days in port of unloading.

The next difficulty was the utilization of flexitanks as disposable tare. All flexitanks producers over the world agreed to take them after unloading for recycling at the nearest plant to the unloading place. For example, there is no flexitank manufacturing plants in France and flexitanks were transported to Italy or Spain for recycling before the quarantine. Now borders are closed and the utilization of flexitanks after unloading of oil is a real problem.

— What can You tell about transportation of vegetable oils in flexitanks?

I can tell particularly about sunflower oil. The transportation declined sharply in March that is seen in the turnover of our company as well. There are many reasons of the decrease, including the lack of market view by both sellers and buyers due to the global quarantine, price fluctuation as well as the deficit of raw materials.

Production depend on raw materials availability. There was the deficit of sunflower in March. Farmers did not see their sunflower to processors, as they could not get the desirable price while the bid prices of sunflower oil were low.

The buyers signed contracts at attractive prices but the processors were on losing side as the prices of sunflower was increasing while its supply was limited.

As a result, several processing plants decided to postpone oil sales at all as the prices were unprofitable. The prices of sunflower oil increased sharply in April but the buyers decided to take a wait-and-see attitude, thus, the demand plumped.

So, we saw a situation when all current shipping activity is mainly a fulfilment of previously signed contracts while the new deals are almost absent.

— Were there any changes as to the regulations of loading/unloading of vegetable oils in flexitanks in the Ukrainian ports?

No, there was not. There is nothing new or special in Ukrainian ports now.

To load goods on a vessel you always need to have correctly executed documentation package. As before, a container with flexitank should enter a port in apparent good order and condition, without strains of walls, without a weep.

We always point out the cargo will be in flexitank while booking in shipping line. As a vessel loading plan is made beforehand, the containers with flexitanks are loaded separately in the certain places in the same part of the vessel. It is done to avoid the damage of near container with valuable cargo in case of a leaking.

— What are Your forecasts as for the further development of container shipping in the agricultural transportation?

There are many on-line conferences now. We follow the developments in logistics, business, and forecasts. For example, farmers worry more about the lack of precipitations, dry soil and May storms than the quarantine.

No one can predict the development of international transportation now. There was a polling on this matter at one on-line webinar of The Association of International Freight Forwarders of Ukraine (AIFFU). 41% of responders suppose that many participants of delivery chain will be affected and 32% consider that no one can predict the development of the situation.

So, we surely will hope for stable markets of both container shipping and agriculture.

I wish each business to get out of crisis with minimal losses and new opportunities.

Interviewed by Anna Platonova, APK-Inform Agency