How Singapore’s port fared during the pandemic

Hello from Singapore, where the pandemic seems to be under control and life has returned to a semblance of normality (apologies in advance to readers in lockdown).

Today’s main piece examines a vital part of this island nation: its commercial ports. We look at how Singapore has navigated the pandemic as distancing measures and national lockdowns hit shipping lines worldwide, while a Covid-19 outbreak in the city’s migrant worker dormitories last year squeezed workforce capacity in the ports that represent a node in global trade.

Policy watch delves into the implications of Germany’s supply chain law, while our chart of the day covers the consequences of North Korea’s decision to shut its borders to contain Covid-19 — a move that led to a slump in trade with China.

Singapore port proves its resilience

Singapore’s port is the beating heart of the city state.

This island of 5.7m people, which sits at the core of a web of trade links with connections to 600 ports, has one of the highest trade to gross domestic products ratios in the world at about 300 per cent in 2019, according to World Bank data.

So when the pandemic squeezed global trade flows, Singapore was hit hard. The country’s economy contracted 5.4 per cent last year and the port itself was pummelled when the country’s most severe Covid-19 outbreak hit dormitories housing more than 300,000 labourers, where there can be up to 20 people sleeping on bunk beds in a single room. Those workers, essential to the running of the port, are mostly from countries including India, Bangladesh and China and today account for about 90 per cent of the country’s approximately 60,000 coronavirus cases.

Yet the port registered only a slight dip in the quantity of cargo it handled in 2020. The Maritime and Port Authority of Singapore told the Financial Times the island nation’s port remained “resilient” despite the pandemic, with container throughput dropping just 0.9 per cent to 36.87m TEUs — or standard 20ft containers — in 2020 compared with 2019. Vessel tonnage arrival in Singapore, the world’s second-largest container hub, even hit a record high in 2020 while bunkering volumes last year reached 49.8m tonnes, up 5 per cent from 2019, the MPA added.

That reflects not only the sharp recovery in global trade in the second half of the year, but factors unique to the island state.

A centre for both transshipment and bunkering, Singapore was in a better position to navigate the pandemic than less diversified hubs, said Peter Sand, chief shipping analyst at Bimco. It was, Sands said, less affected than by the overload of ships and cargo witnessed in final destination ports. In Los Angeles, for instance, congested terminals meant vessels have been forced to wait to berth at key ports, leading some shipping lines to divert ships or cancel orders.

Singapore has not been immune to growing rollover ratios — the proportion of cargo arriving at a port that is shipped on a different vessel than originally scheduled — which in October 2020 reached 31 per cent, up from 21 per cent the year before, according to data provider Ocean Insights. And the total number of vessel arrivals in Singapore in 2020 fell 30 per cent year on year to about 97,000, with the estimate for February 2021 down 36 per cent compared with the same month last year.

It nonetheless represents a bellwether of resilience for ports, not least because the city state has now contained the virus in dormitories, with authorities reporting zero or single-digit new daily cases for months. “Local and foreign workers work together to keep operations going at the Port of Singapore,” the MPA said.

This success has, however, meant imposing harsh quarantines and tighter restrictions on movement of migrant workers versus the rest of the population, which authorities said were necessary given a “real and significant” risk of Covid-19 re-emerging in dormitories. As part of the latest acceleration in its vaccine drive, Singapore will vaccinate 10,000 migrant workers and progressively extend jabs to other labourers. Authorities have also pledged to build more dormitories and improve workers’ living standards.

The fortunes of Singapore’s port are set to improve in the coming decade — it is building what it claims will become the world’s largest container terminal in a single location, relocating its main port to a new facility called Tuas on the island’s western tip, at an estimated cost of S$20bn ($14.9bn).

The MPA said the construction of the port was “on track”, with the first phase of land reclamation to be completed by the end of 2021. By the time Tuas is set for completion in the 2040s, Trade Secrets hopes that the conditions in which the port’s migrant workers live improve too.

Charted waters

South Korea warned late last month of the risk of a worsening humanitarian crisis north of its border. One cause of that crisis is a complete collapse in trade with China.

Despite Pyongyang’s insistence that it has had no cases of the coronavirus, food shortages have beset North Korea as a result of the pandemic. One of the reasons why the economic hit has been so severe is that the country’s leader Kim Jong-Un opted to close all border with the outside world, which effectively curtailed all activity with China too.

Without those Chinese imports, which include goods such as food and fertiliser, officials in Seoul believe North Korea is now facing its most severe crisis since the mid-1990s, when the withdrawal of Soviet support and drought led to widespread famine.

Policy watch

European officials have led the way in forcing business to take environmental, social and governance goals seriously. In few places is this as noticeable as in Germany, where Chancellor Angela Merkel’s cabinet earlier this month backed a law to enforce the protection of human rights and environmental standards along global supply chains. But what does it mean in practice? According to Baker McKenzie partner Anahita Thoms, rather a lot.

Thoms told Trade Secrets that, under the terms of the German law, companies must introduce an appropriate risk management system and ensure its effective implementation. “This includes the obligation to assign a responsible person within the management, for example a human rights officer, and to create an effective complaint procedure for any person possibly affected by a breach of human rights or environmental obligations,” she said. “It is also crucial that decision makers within the businesses are aware of the results of the risk assessment and take them into account in their actions.”

That means, she says, taking preventive measures, such as corresponding contract clauses, training of employees or the issuance of a policy statement concerning its human rights compliance strategy. No easy task if you’re, say, a major automaker with complex and abundant global supply chains. Indeed, Thoms notes, Germany’s status as one of the world’s biggest exporters means it is greatly affected by a law such as this.

However, others will almost certainly follow Berlin’s lead here — the EU is considering similar measures, as Trade Secrets has covered here. This might offer an advantage to German companies that act early. It could also lead to more manufacturing activity being moved closer to home.

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Source: Economy - ft.com