Pandemic Consequences: German Shipping Enters a Severe Crisis

The consequences of the Corona pandemic are increasingly affecting German shipping. A VDR survey shows drastic revenue declines. Corona could have harsher effects than the financial crisis and puts the shipping location Germany in danger.

(Hamburg) The consequences of the Corona pandemic are increasingly impacting German merchant shipping. This is the result of a survey conducted by the Association of German Shipowners (VDR) among member companies. A total of 50 shipping companies from Germany participated in the survey, including almost all of the 30 largest shipping companies. “Cruise and ferry shipping were immediately strongly affected by the consequences of the pandemic. Our current survey clearly shows: almost all areas of the industry are now being hit hard,” said Alfred Hartmann, President of the VDR. The evaluation of the survey has shown, among other things, that the revenues of companies in March and April have decreased on average by 30 to 40 percent. According to the survey, 44 percent are already reporting a significant impairment of their liquidity. German shipowners are also already feeling that charter rates for ships in all segments are dropping by up to 40 percent in some cases. Further declines are expected in the coming months. The number of laid-up ships, meaning ships that are unemployed, is already at almost 500 worldwide, the highest level ever. This particularly affects container traffic, in which German shipping companies are particularly present as liner operators, but especially as charterers of tonnage. “The survey shows the state of the first months; it is a snapshot,” said Hartmann: “Given the predicted dramatic decline in world trade, a further tightening of the market situation for merchant shipping is to be expected.” “Significant parts of the German merchant fleet are thus foreseeable endangered in their existence,” warned the VDR president, recalling the consequences of the financial crisis of 2008/2009 for domestic shipping: “Since then, we have lost 1,500 merchant ships to foreign countries, which was a third of the German fleet. If production and consumption do not recover quickly worldwide, the consequences of the pandemic could be much harsher than the financial crisis. If we were to lose another third of the fleet from Germany, tens of thousands of jobs at the location would be endangered. In addition, the supply of the export champion Germany would increasingly depend on state-influenced shipping companies outside of Germany. After all, Corona teaches us not to increase dependencies any further.” For the time being, no layoffs / Training positions remain constant Encouragingly, although short-time work has been ordered in shipping companies and savings programs have been announced, layoffs are currently not planned by more than 90 percent of the shipping companies surveyed. Training has also not been reduced so far; two-thirds of respondents want to hire as many apprentices as last year. Hartmann: “The shipping companies are continuing to engage in training despite the crisis. Everyone is trying to retain their employees and thus the maritime know-how. Whether we can continue to do this depends on the extent to which there is concrete support in this severe crisis.” In the short term, shipping companies based in Germany, like other service industries, need unhindered access to KfW aid measures. So far, the support measures have not reached the industry to the required extent. Access to liquidity is crucial. “German shipping companies, as mostly medium-sized businesses, face extinction without effective support from the KfW programs,” said President Hartmann and criticized: “Banks refuse to forward funding applications to the KfW, even though they would only have a small residual risk to bear and have themselves been supported with a lot of taxpayer money – an untenable situation.” To overcome the crisis in the medium term, additional tax burdens on German shipping companies compared to foreign competitors within the EU must urgently be avoided – for example, the 19 percent insurance tax on ship insurances. “In this case, our location is no longer competitive,” explains Hartmann: “We also need clarity on whether the proven instruments of shipping promotion for training, qualification, and employment of seafarers at the German location will remain in place.” Advancing CO2-neutral shipping However, the VDR president also emphasized that it remains necessary in the long term, despite the foreseeable burdens resulting from the crisis, to continue advancing research and development work for green, as CO2-neutral shipping as possible. The industry is already engaging in this today, for example, through a proposal in the International Maritime Organization (IMO) to establish a global research and development fund, which is to be financed internally by the industry. Hartmann: “We hope that the states support this path to secure a sustainable future for shipping. Because one thing is also a major concern for us in these times: we want to continue to contribute to climate protection as shipping.” German shipping does not want to relent in its efforts to find joint and global solutions for the rapid reduction of greenhouse gas emissions from ships in the IMO – even in times of recession: “We should not pit one against the other now,” said Hartmann. Photo: Frauke Feind/Pixabay https://www.reederverband.de