Liner shipping connectivity from Australia to the rest of the world has massively rebounded since the onset of the COVID pandemic, according to the latest data from the UN Conference on Trade and Development (UNCTAD).
UNCTAD has published a “Liner Shipping Connectivity Index” since 2006 which enables the connectivity of liner shipping can be assessed for each country over time. You can see how the LSCI for Australia has changed over the course of the pandemic in the data from UNCTAD (see the graph marked “Figure 1”).
Simples!
The more an economy attracts container shipping, then the more the index will rise. Simples!
The Index is based on six factors: the number of shipping lines servicing a country; the size in TEU of the largest vessels deployed on these services; the number of services connecting a country to other countries; the total number of vessels deployed in a country and the total capacity of those vessels.
The data shows that liner shipping connectivity increased by 10.3% in Q1 2021 compared with the onset of the pandemic in Q1 2020. That increase means that Australia has more liner shipping connectivity now than it did at the onset of the COVID pandemic. Simples!
Liner shipping resurgence
According to UNCTAD data there was a surge in liner shipping connectivity between Q2 2019 and Q4 2019. That liner connectivity surge was subsequently knocked back by the pandemic. It is however worth noting that the adverse effects of the pandemic in 2020 only took Australia’s liner shipping connectivity back to the levels seen between Q3 2018 and Q2 2019. The 2019 surge was more of a correction that took liner shipping connectivity from below-trend to a little above trend (see Figure 2).
Even though the onset of the pandemic dragged liner shipping connectivity down, connectivity started increasing again almost immediately. You can see that at work in Figure 1 as the line between Q1 2020 and Q2 2020 slopes to the right and upwards. By mid-2020 liner shipping connectivity markedly improved. You can see for yourself that there was a steep increase in liner container shipping connectivity from Q2 2020 onwards.
A massive increase over time
Today, Australia’s liner shipping connectivity is at the highest level since UNCTAD began recording data in Q1 2006. In fact, liner shipping connectivity between Australia and the rest of the world has increased by a whopping 42.6%!
Don’t just take our word for it. Once again, you can see it for yourself (see the graph below “Liner Shipping Connectivity Index (Australia) Q1 2006 – Q1 2021”, labelled as Figure 2).
Sure, while there have been ups and downs in Australian liner shipping connectivity, you can see that the overall trend over time has been for increasing connectivity (see red dotted line-of-best-fit on Figure 2).
Defining supply chain resilience
There’s a really good academic definition of supply chain resilience by Hohenstein et al in “Research on the phenomenon of supply chain resilience: a systematic review and paths for further investigation“.
Now, before anyone writes to anyone, we specifically point out that we are only adopting this study’s definitional concept of “supply chain resilience”. And, just like our previous article on this topic, we are not citing any of the data from this study. So the fact that the data in Hohenstein’s paper is from a few years ago isn’t relevant either to the current article or to our previous article because we didn’t use any of it. Simples!
On the topic of defining supply chain resilience, Hohenstein et al said: “it has been defined as the supply chain’s ability to be prepared for unexpected risk events, responding and recovering quickly to potential disruptions to return to its original situation or grow by moving to a new, more desirable state in order to increase customer service, market share and financial performance”.
So the key points of supply chain resilience are:
- Ability to be prepared for unexpected risk events
- Responding / recovering to potential disruptions
- Returning to its original situation OR growing by moving to a more desirable state
Applying the facts to the definition of supply chain resilience
Ability to prepare: the global shipping industry has the ability to prepare for expected risk events. It has been able to respond to a surge in demand because was a large volume of unused ship capacity. Prior to onset of the pandemic, there was about three million TEU’s worth of idle ship capacity. The industry also has the ability to expand by hiring non-specialist ships (even to the point of enabling dry bulk carriers to handle containers on deck!), and by expanding the world fleet by buying new container ships. Returning the idle fleet back to work, using non-specialist ships and the buying of new container ships are all acts that the global liner shipping industry has done since the onset of the pandemic. Clearly the industry has the ability to prepare for disruption.
Responding / recovering: the latest UNCTAD data demonstrably proves that the global shipping industry active in Australia responded to the supply chain disruption. At the onset of the pandemic in Q1 2020 there was a fall in connectivity and then, by the very next quarter, there was an increase in connectivity. That increase in connectivity then massively surged within another quarter. Such a change represents a massive and complete turnaround – and one that took place within six months from the onset of one of the worst (if not the worst) global supply chain disruptions in living memory.
It’s all quite obvious in the graphs.
Moving to a more desirable state: liner shipping connectivity from Australia has, since the onset of the pandemic, jumped by about 10%. Liner shipping connectivity from Australia to the world is now at its highest level ever.
Highest. Level. Ever.
Having the highest ever level of Australian liner shipping connectivity is clearly, demonstrably, and unarguably “moving to a more desirable state”.
UNCTAD data, and the facts from the industry, show that the liner shipping industry did have the ability to prepare, does have (and is) responding and has moved to a more desirable state. Every element of the “supply chain resilience” definition has been satisfied.
So it’s now just a fact: the global liner shipping industry is adaptable and resilient in the face of disruption.
Why this matters: the latest data covers the pandemic so far and proves that shipping is resilient
This data is important because it runs from before the onset of COVID in Australia (circa Q1 2020), through the pandemic to the current day (i.e. to Q1 2021). So it gives a more complete picture than any other set of data so far.
The new UNCTAD data demonstrably proves that that liner shipping is resilient. It’s yet more evidence in support of the resilience of the resilience of liners shipping and it’s line with other, previous, UNCTAD data that also separately demonstrates that shipping is highly resilient.
Any argument to the contrary is not only unsupported by evidence, it is also actually disproved by the evidence too.
Why this matters: shipping serves Australia’s vital interests
It’s important to remember that shipping of all kinds is utterly vital to Australia’s national economic interest.
Shipping accounts for 99.92% by volume of all goods and commodities imported / exported from Australia and about 84% by value. That’s, literally, many hundreds of billions of Australian dollars worth of value equating to about 45.7% of Australia’s gross domestic product.
Australia’s Merchandise Trade (i.e. goods that cross the border for the purposes of sale / re-sale) as a percentage of GDP is about 35%. Most manufactured goods are transported in ocean shipping containers, so liner shipping is particularly important to merchandise trade.
Global container shipping – despite the problems caused by the pandemic – is sailing through the COVID storm and it is doing its fundamental job: it is delivering the goods.
There is also extensive academic research showing that there is a positive correlation between shipping and trade.
As the academics Lun and Hoffmann stated: “There is a positive linkage between the shipping connectivity of a country and its trading activities. Specifically, enhancement of the shipping connectivity of a country positively influences its trade flow. Shipping connectivity is important for facilitating international trade growth”.
Shipping makes us all less poor
A higher liner shipping connectivity index indicates that Australia has higher levels of shipping connectivity. More connectivity means more shipping. More shipping means lower transportation costs of goods. Lower transportation costs lead to more trade. More mutually beneficial trade makes us all less poor.
And, as Woody Allen said, “money is better than poverty, if only for financial reasons”.
Further reading on how and why shipping is resilient against disruption:
Evidence from UNCTAD proves that the sea-borne supply chain is adaptable and resilient
Supply chain: even more new evidence that ocean shipping is handling COVID disruption
