Coronavirus Impact: Shipping Index Hits All-Time Low & UPS Agrees to Make Flights to China Voluntary

by | Feb 6, 2020

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Bellwether for Shipping Reaches All-Time Low 

The spread of the coronavirus is showing no signs of slowing down, and the impacts of the disease are being felt in the shipping industry. Fear of the implications that the virus could have is impacting the markets and the Baltic Dry Index, which reflects the health of global shipping.

While the entire index is suffering, the Baltic Capesize part of the index is particularly suffering. The capesize index tracks ships that are too large to fit through the Panama or Suez canals, so they must instead go through the Cape of Good Hope or Cape Horn, according to Axios.

Just five months ago, the index sat at 5,073 points. On Jan. 31, the index fell below zero for the first time ever, and now it has fallen even deeper and is sitting at minus 102 points.

“The coronavirus has complicated matters, reduced workforces at ports, and extended the New Year holiday in some major steel-producing areas, said Derek Langston, head of research at shipbroker SSY to The Wall Street Journal. “Although ports are functioning, inland transportation is restricted and operations are proceeding more slowly.”

The coronavirus may be the biggest driver of the fall for the index, but it is not the only thing affecting the shipping industry. The first quarter of the shipping industry is usually quiet for freight activity, and that along with bad weather and high fuel prices have impacted the index greatly.

UPS Union Reaches Agreement to Make Flights to China Voluntary 

The union that represents UPS pilots reached an agreement on Feb. 5 with the shipping company to make all flights to mainland China voluntary. This move comes amid growing concern about the spreading coronavirus which has killed hundreds and spread to dozens of countries.

“Following days of discussions, UPS agreed and signed a Coronavirus Letter of Agreement with the IPA that gives our pilots the right to take a personal leave of absence for trips containing a flight segment into, or out of, mainland China,” Robert Travis, president of the Independent Pilots Association, said in an email published by CBS News.

According to the company, pilots who feel uncomfortable traveling to mainland China because of the virus will be temporarily replaced. Those pilots will take an unpaid leave of absence, or they can use sick days if they are not put onto another flying route.

Many airlines have suspended services to mainland China and Hong Kong, citing a sharp decline in passengers who want to travel to these areas. Fewer passengers would normally mean more space for cargo, but due to fears of the virus, that is not currently the case.

FedEx is not taking the same precautions that UPS is taking. While Fed Ex is saying that some shipments may be delayed due to travel restrictions, the company is currently operating at regular capacity and carrying out all of its scheduled flights to and from China.

Topics: COVID-19, Shipping Trends, UPS