By : Bambang Sabekti (professional in maritime Industry) and Asmari Herry (Container Shipping Observer)

It seems that Indonesian economy will improve soon after the Covid-19 has been under control, although we still have to be vigilant new variant of Omicron which now spread over several countries including some Asean’s countries. Because of lowering case of Covid 19, imports for pharmaceutical and “medicine” products decreased by 35.44% compared to the previous month.

Indonesia has experienced a peak of positive cases in June-July 2021 but in September and beyond showed a downward trend in cases and hopefully it will continue to be stable within very small if it cannot be eliminated at all.

The economy is relatively within the expectation on the track of positive which is seen from the stable rupiah exchange rate, inflation, and exports that continue to rise. Referring to Central Bureau of Statistics (BPS) report, Indonesia's trade balance again recorded a surplus in October 2021 of US $ 5.73 billion. The surplus was supported by a non-oil and gas balance surplus that reached US $ 6.61 billion.

Accumulatively, the trade balance surplus in the period January-October 2021 reached US $ 30.81 billion. This is much greater than the same period the previous year and the largest since 2012 or over the last 10 years.

Some of Indonesia's trading partner countries that contributed to the largest trade surplus include China, the United States (US), India and the Philippines, with a total of US $ 3.67 billion.

The growth of non-oil and gas exports in October 2021 was due to an increase in exports from all sectors, especially mining which rose 20.11% compared to the previous month (MoM), followed by oil and gas (9.91%), agriculture (2.70%), and processing industry/ manufacture goods (3.61%).

Furthermore, other export products that also grew significantly compared to previous month were dregs, food, tin and iron/steel product.

The improvement in export performance of these products was driven by supercycle commodities that made the price of Indonesia's main export commodities reach high levels. While in Tanjung Priok Port, which is the largest port in Indonesia, there are interesting numbers, because the import is greater in quantity, in twenty equivalent units (TEU) compared to exports, both in 2020 and in 2021. But this year there was an increase in the volume of both exports and imports by 10% and 13% respectively compared to last year for the same period.

Indonesia's exports of manufactured products showed expansionary growth in October in line with the easing of Restrictions on Community Activities (PPKM) in almost all the of regions. Purchasing Manager's Index (PMI) Indonesia occupies the highest position with a value of 57.2 points compared to other ASEAN countries, unfortunately in November PMI again corrected at 53.9.

The export performance of the processing industry / manufacture during January - October 2021 reached US $ 143.76 billion, or reached an increase of 35.53% year on year (YOY). This value contributed the largest to 77.16% of total national exports during the 10 months.

Our important business partner, China, also posted a record monthly trade surplus in October as exports surged despite global supply-chain disruptions. Their exports value (in the dollar) rose 27.1% last month. That was the 13th straight month of double-digit growth, and exceeded economists’ expectations of a 22.8% gain. China’s imports, meanwhile, increased 20.6%, leaving a trade surplus of $84.54 billion.

China’s trade growth has remained well above pre-pandemic levels all year. Its exports through October have already surpassed all of 2020. China’s exports to the European Union and the U.S. have grown fastest among its major trading partners this year, customs data showed. The nation’s trade surplus with the U.S., a source of trade tensions between the world’s two largest economies, rose to 2.08 trillion yuan ($325 billion) in the 10 months through October from 1.75 trillion yuan a year earlier, partly because Chinese imports of U.S. soybeans slowed due to weather-related issues in recent months. Machines and electrical products accounted for almost 60% of Chinese exports by value this year, as reported by China’s customs administration .

Global supply chain disruption

In the initial covid-19 months, from about March 2020, major shipping lines anticipated surplus capacity following a sudden fall in demand due to lockdowns. They adjusted their operations accordingly, and re-routed vessels or parked them some places and cancel the sailing (blank sailing) for certain vessel .

By August 2020, freight rates started taking off. In addition, there’s is a global imbalance in trade. This means that containers are filled up at Asia including Indonesia ports and shipped to big consumption centres like Europe and the US and they are unloaded there and then shipped back empty to Asia Ports, to be refilled again.

At all steps, bottlenecks have arisen. Ports at the heart of the global trading system, such as Los Angeles and some China’s ports, have moved in and out of lockdown over the past year. This has affected the speed with which containers were loaded or unloaded from container ships. In February 2021, that number had soared to 40 and in mid-October 2021, that had crossed 70 cargo ship. But good to know consumer consumption is very strong in US.

Supply chain is global. So a backlog of ships off the coast of California means fewer empty containers heading back to Asia, which means fewer ships and containers available for exports, raising the cost to ship a container from Asia to Europe and US by 400%-500%, it make international shipping line in very excellent result in bottom line ( P&L). As reported by Alphaliner, average operating margins of top ten carriers recorded an impressive 56% in 3Q2021. The ten carriers have already generated nearly USD 80 billion in EBIT in the first nine months of the year and could be on track to log EBIT of USD 115-120 billion in 2021. Based on 3Q2021 operating margins, the Taiwanese lines retained their grip at the top of the rankings with Evergreen at nearly 70%. Maersk recorded the lowest figure at 46.1%. Carriers have opted to use the extraordinary amount of cash generated to invest heavily in the air, road and land assets, port terminals, build up their fleets or cut debt.

In major consumption centres like the US and Europe, the crisis has been compounded by a shortage of trucks and labour at crucial points in the supply chain. The global shortage in containers and ships has had serious effects on countries and ports that are not at the centre of the global supply chain, which includes Indonesia. Given the serious crunch in container capacity, global shipping companies have shifted focus to easing shortages along major routes. Much of the capacity which formerly served developing markets has been allocated to the major trade lanes i.e. the Trans-Pacific trades and the Asia to Europe market which make much better yield compared with other trade lanes such as Intra - Asia and Australia Trades.

Many shipping lines have started to miss outcalls to smaller ports in developing markets, preferring to consolidate their services around ‘mega ports’ for reasons of customer demand and speed as reported by Sea-Intelligence. The disruption to shipping schedules has reduced many smaller countries’ export capacity, resulting in containers being left in port. While freight increase is a global phenomenon, shipper may be suffering more as they have very little negotiating power.

Covid-19 had a negative effect on container shipping demand when production areas in Asia or consumption areas such as the U.S. and Europe were locked down. Beyond that, the Covid-19 effect on container shipping rates has been highly positive, due to the shift in consumption from services to goods, compounded by port congestion.

The global supply chain crisis is not yet over, the Omicron variant could deal another blow to supply chains. A lot of unknowns, but Omicron is certainly setting up to be yet another test of resilience for global supply chains that were already under stress and in the midst of a lengthy healing process.

According to Vespucci Maritime CEO Lars Jensen, there’re two elements in play related to the possible Omicron effects, ie: one is the risk of more shutdowns of port and infrastructure facilities and the second aspect is on-demand, especially in the U.S. where the pandemic has pushed a shift from service spending to spending on goods. This is a key reason for the demand boom in container volumes to the U.S. If the omicron [variant] extends the pandemic period, this will keep the boom running.