The Indian government’s decision to impose a three-week lockdown across the country is expected to have a wide-reaching impact on global shipping channels, experts warn, with potential knock-on effects in the pharmaceutical and steel industries.
Prime Minister Narendra Modi announced on March 24 that “to save India and every Indian, there will be a total ban on venturing out of your homes”, part of efforts to stem the outbreak of Covid-19 in the country. The lockdown became effective on midnight of the same day and will initially last for 21 days.
India, host to a fifth of the world’s population, is a vital channel for transporting goods by sea. Tracking software provided by Windward Maritime Analytics shows that, around the time of Modi’s announcement, there were 543 ships en route to the country, of which all but one are cargo vessels or tankers.
An immediate effect of the country’s lockdown is disruption to global supply chains for goods, according to James Valentine, a former branch chief at the US Coast Guard who worked on the agency’s response to the outbreak of ebola in West Africa between 2014 and 2016.
“We have a just-in-time delivery system and not a lot of slack in it, so what are industry and governments doing together to ensure that trade continues to flow?” he asked during a Tuesday webinar hosted by Windward. “Without that we’re going to face an ever bigger health and economic crisis down the road.”
Valentine gave the example of trade in medicines. Generic medication is “not made in individual countries worldwide”, he said. “They are centralised in certain locations, and that stuff has to get out – otherwise the health response and economic response will probably fail.”
That issue is particularly acute when it comes to India. The country leads the world’s production of generic drugs, but authorities have already this month restricted exports of certain products, including paracetamol, certain antibiotics and progesterone, used in the contraceptive pill.
That decision was taken due to concerns over potential domestic shortages, given that more than two thirds of the active ingredients used to make generic medicines are imported from China.
Jason Greenblatt, a US lawyer and former chief legal officer to the Trump administration, said during the webinar that some imported products could be replaced by equivalents manufactured domestically.
“I do think certain countries – and President Trump has said this loud and clear – will start manufacturing back in their own countries, where a failure to do so would cause a massive security or health risk to countries’ populations,” he said.
But for Valentine, reconfiguring countries’ vital trade pathways is “in many cases, simply not feasible”.
“It will take years for many countries to develop the kinds of infrastructure to do local production of the kinds of things we’re talking about,” he said. “There are massive worldwide implications of that and a quick fix of just shifting parts of your manufacturing sector, or reinvigorating it, is just not going to happen.”
Shipbreaking and labour supply
There are other concerns for shipping-related industries in India. Peter Sand, chief shipping analyst at BIMCO – an international non-governmental organisation representing shipowners – said there has already been a significant impact on companies that strip steel from decommissioned vessels so it can be reused.
“Basically the whole Indian subcontinent, including Bangladesh and Pakistan as well, is the beating heart of the shipbreaking industry. The lockdown we have seen develop over the last couple of days, peaking today, is naturally bringing yet another whole industry to a complete halt,” he said during Tuesday’s webinar.
In Pakistan, port city Karachi was placed into lockdown on Monday this week, while representatives from the World Health Organisation continue to urge officials in Bangladesh to consider a partial or full lockdown, as the number of cases in both countries continues to rise.
“At this point in time, when nobody in the industry is making money – they are losing money by the day – there is a need to keep those shipbreaking yards open for business,” Sand added, warning there could be “dire consequences” for industry participants reliant on the salvaged steel.
The global shipping industry may also be facing a potential shortage in available crew members due to the new restrictions. Guy Platten, secretary general at International Chamber of Shipping, told listeners that he had already been informed that hundreds of Indian seafarers are now seeking to return home, while others may be prevented from taking their place.
“We’ve got to remember that India is a major supply country for shipping, so this is going to have a massive impact on the supply of labour,” Platten said.
“We’ve also got a significant number of Indian seafarers looking to be repatriated home and this is proving extremely difficult as well. We need to constantly make the case for the vital role that seafarers play, having them classed as key workers, and giving exemptions to these sorts of things.”
Source: GT Review