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Thursday, 25 September 2014

Ebola is devastating West African shipping markets - by Aidan Grange

More than 2,900 dead, over 20,000 people infected, whole communities destroyed, economic growth disrupted, political instability growing and trade thrown into chaos. These are just some of the effects of the deadly ebola virus on certain countries in West Africa with the International Crisis Group, an independent, non-profit and non-governmental organisation committed to preventing and resolving deadly conflicts, warning that years of work aimed at stabilising West Africa were unravelling.

The outbreak of the ebola began in March 2014 and has ravaged Guinea, Liberia and Sierra Leone and has also caused a few deaths in Nigeria, the second largest economy in sub-Saharan Africa and the largest in terms of trading exchanges in West Africa. Nigeria exports huge amounts of oil and its ports handle a significant number of containers, with box throughput up about 15% in H1 2014 to just short of 875,000TEU.

Ebola’s effect on the shipping industry is definitely increasing and becoming more disruptive and costly. And not only for the shipowners/operators, but for all those engaged in servicing the ships, handling, processing and transporting the imports and exports. A recent client alert issued by Nick Shaw, a partner in the law firm Reed Smith and practice group leader of the company’s global shipping group, warned: “It is unclear how the current outbreak of ebola will develop and, therefore, the extent of its effect on the shipping industry. However, it is clear that should the virus escalate and lead to stringent quarantine measures being enforced; the impact on the global shipping industry could be considerable.”

There is already evidence of this. For three days (September 19-22), for instance, the country of Sierra Leone was “shut down”. That meant its ports were closed, its people “homebound” and its trade halted.

Meanwhile, in South Africa, Transnet, the state-controlled port authority and the country’s leading operator of container terminals has put in place stricter health checks for ships arriving from parts of West Africa it considers to be high or medium-risk. The agency is also carrying out more rigorous searches for stowaways.

According to Transnet, it treats Guinea, Liberia and Sierra Leone as high risk countries and Nigeria, Kenya and Ethiopia as being in the medium-risk category.

Grain and rice imports delayed

While West Africa’s all-important exports of iron ore, oil and bauxite seem relatively unaffected by the crisis to date, the same is not true of grain and rice imports. Thailand is a major exporter of rice to West Africa, including to those nations where the ebola virus is rife, and it is facing difficulty securing ships to carry the cargo.

According to the Thai Rice Exporters Association, the main problem is shipowners finding crew prepared to serve on ships trading to the region. Meanwhile, shipowners are becoming increasingly concerned that if their vessels enter ports in countries where ebola is present, the next port may refuse to accept their ship.

While trade is continuing and cargoes are being routed through ports outside of the affected countries and then moved by road and/or rail, the supply chain costs are much higher.

The past six weeks have seen several liner shipping companies put in place a number of measures aimed at protecting their staff and employees of their various stakeholders.

The CMA CGM Group, which includes the services of Delmas and Maersk Line, which includes sister company Safmarine, have both carried out a major reorganisation of their West Africa service networks. This has not been so difficult as many of the strings calling in West Africa comprise shuttle links to/from the region and European hubs, such as Tanger Med and Algeciras.

In essence the two carriers’ services have divided between those calling at countries where there has been an outbreak of ebola and those nations free of the disease. In the case of CMA CGM, a single string now serves ports in Sierra Leone, Guinea and Liberia, thus enabling the line to maintain a strong commercial and operational presence in ports, such as Conakry and Monrovia during the crisis.

Maersk’s main changes have centred around two of its western transhipment shuttles, which use Algeciras and Tanger-Med. The Danish company has revamped schedules on its WAF 7 and WAF 13 services with the Guinean port of Conakry and Freetown, Sierra Leone, removed from WAF 13 and transferred into the WAF 7 string which also calls in Monrovia in Liberia. This means that WAF 13 is a link that now focuses on the port of Dakar in Senegal, which is ebola free, and WAF 7 serves only those nations affected by the virus.

Some liner companies have responded to the situation by imposing surcharges on cargo moving to/from West Africa. These additional fees are designed to cover the increased costs associated with the ebola virus.

According to Hamburg-based Hapag-Lloyd, the surcharge is needed to cover costs associated with increased health inspections of ship crews by local authorities as these cause delays and other operational expenses that the carrier is incurring.

Hapag-Lloyd’s inspection fee surcharge is levied at a rate of US$250/20-foot container and US$350/40-foot container and covers import and export cargo to/from Senegal, Cote d’Ivoire, Ghana, Togo, Benin, and Nigeria. It was implemented on September 21 on all of the German carrier’s services apart from those trading with the US. However, shippers/consignees in the US will be expected to pay a similar surcharge from September 29.

The London-based International Maritime Organization continues to update the shipping industry on the situation and its advice remains “that neither seafarers nor passengers who have had contact with ebola or who show any of its symptoms should not be allowed to join a ship or travel internationally”.

In addition, countries affected by ebola are expected to conduct exit screenings of all persons leaving seaports, according to a circular letter from the London-based United Nations agency.

The ebola crisis is deepening and the international shipping industry is firmly caught in its grip.

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