Hong Kong’s flight ban exacerbates global shortage of sailors

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Greetings from Singapore, where your Trade Secrets contributor will be fully vaccinated on May 19 — just seven days before a long-delayed travel bubble with Hong Kong is finally due to begin operating. If all goes well, next month could be the beginning of a return to relative normality in terms of travel between Asia’s two leading financial centres, 17 months after the Covid-19 pandemic erupted out of central China.

Alas, we have been here before, only to be disappointed at the final hurdle. The Singapore-Hong Kong travel bubble was originally due to begin in December, but was postponed after there was a surge in cases in the Chinese special administrative region. A similar surge in either place over the next few weeks could delay the scheme again.

Hong Kong in particular has been susceptible to sudden Covid-19 clusters. Singapore has also recently had cases in which fully vaccinated individuals contracted the virus, although it is not clear if they also transmitted it to others. Along with the tragic resurgence of the pandemic in India, it is all a reminder that we are probably many months if not years away from a return to the ease of international travel so many of us took for granted for so long.

In this Asia briefing, Trade Secrets examines another good-news, bad-news aspect of the pandemic. While international shipping rates are soaring, it is extremely hard to secure the manpower needed to crew the world’s merchant marine fleet — in large part because of the Covid-19 surges in India, the Philippines and other main sources of sailors for the global shipping industry.

Policy Watch, meanwhile, looks at the US’s decision to send abroad 60m shots of the Oxford/AstraZeneca vaccine.

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The sailors swept up in the flight suspension

On April 20 Hong Kong issued a two-week suspension of flights from three “extremely high-risk” countries — India, Pakistan and the Philippines.

The horrors of India’s recent Covid-19 surge, from about 10,000 new cases per day in February to more than 300,000 per day over the past week, has dominated global news headlines.

In the Philippines, meanwhile, the number of new cases has surged to a seven-day average of more than 10,000 per day over the past two months, compared with 2,000 or fewer in January and February. Pakistan’s seven-day average also increased from about 2,000 to 5,000 over the same period, with more than 10,000 new cases recorded on April 25.

All three countries are important suppliers of the estimated 1.5m crew and officers required by global shipping companies. According to the International Chamber of Shipping, the Philippines is a top-five supplier of both crew and officers, while India is a top-five supplier of officers.

More than a year into the pandemic, it was already extremely difficult to fly sailors around the region to relieve existing crews. Hong Kong’s ban on flights from three important labour markets has compounded the complexity for shipowners. “This is a real and ongoing problem,” said Tim Huxley, director at Mandarin Shipping in Hong Kong. “India, Pakistan and the Philippines were major sources of crew.”

Crew contracts could require sailors to remain on board a ship for anywhere between four and 10 months, he added, and Hong Kong has traditionally been a key hub for rotating crews. When that is not possible, crew contracts have to be extended — usually with generous compensation for sailors who cannot be rotated off their ships and flown home.

“This has been happening regularly,” Huxley said. “If you get to the end of a contract and just cannot get somebody off the ship, you have to try to extend them. For the period they’re going over contract you pay them extra — maybe 20 per cent extra — increase their internet allowance so they can communicate more with their families and otherwise do as much as you can for crew welfare.”

One solution is China which, like the Philippines, is also a top-five supplier of both crew and officers. With Covid-19 under control there for more than a year now, it has become increasingly attractive to use Chinese crews and rotate them in Chinese ports. As a result, the cost of Chinese crews is increasing.

Shipowners, however, can increasingly afford the higher crew costs. A year ago Mandarin Shipping was leasing its intraregional “feeder ships”, which have a carrying capacity of about 1,800 containers, at just $8,250 per day — below break-even. Now, said Huxley, they were commanding a “very profitable” $24,000 per day.

According to the Xeneta Shipping Index, the world’s largest container ships are also benefiting from the ability of China’s factories to meet strong demand for consumer durables around the world. Container rates from east Asia to northern Europe more than tripled late last year, while transpacific rates more than doubled in the second half of 2020.

Huxley said last year’s survival strategy was “tighten your belts, be honest and upfront with your bankers, hope you have patient shareholders and keep everything short so you’re not taking long-term commitments at bad rates”.

“You really just had to slug it out until it began to turn and it really did begin to turn strongly around September last year,” he added. “It’s been in lift-off mode ever since.”

Policy watch

The US is set to send up to 60m doses of the Oxford/AstraZeneca Covid-19 vaccine overseas, according to reports on Monday. About 10m doses will be ready to ship within weeks, according to the White House. While the administration did not say where the vaccines will be heading, India is a likely candidate.

While these doses have been made in America, they cannot be used there as the AstraZeneca shot is yet to receive approval from the US Food and Drug Administration. The news comes at a time when the US, which has inoculated more than half its population and is now offering a first shot to all adults, is coming under pressure to provide more vaccines for the rest of the world.

It is also sending medical supplies and vaccine materials to India, after receiving a request from India’s government. As more countries, such as the UK and Israel, reach a point where they have a surplus of shots, we would hope these efforts are replicated elsewhere. Claire Jones

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