Pavel Lisitsin Explains One of the Main Questions is If the Industry Recovery is Possible

November 09 15:36 2021

Pavel Lisitsin highlights the key indicators of when “the light will appear at the end of the tunnel.” It is likely that the media covering the aftermath of the COVID-19 pandemic will also play a key role in demonstrating the progress. Another important indicator will be the volume of imports transported by the sea.

Pavel Lisitsin notes that the volume of sea imports will indicate the recovery of the global economy as a whole, especially in manufacturing and exports. The fact that many of these goods will be transported across the sea will be an indicator that the sector has recovered and is now an active part of international trade.

“During the recovery, there may be trends showing that some of the original centers of sea trade, such as the United States, Europe and Southeast Asia, are regaining this status,” says Pavel Lisitsin (rus. “Павел Лисицин”).

The old game of using cheap raw materials from developing countries to create expensive finished products in developed countries is likely to come into play again during the recovery of shipping.

“China has long occupied an economic niche as an agent capable of producing finished goods from raw materials that it imported from the poorest parts of Africa,” says Pavel Lisitsin.

At the same time, finished products go to Europe and North America. Along the way, shipping will facilitate the trade.

Pavel Lisitsin: key indicators of shipping recovery

During the crisis, the shipping industry experienced a shortage of space, although demand continued to grow.

“Now the demand has exceeded all expectations,” notes Pavel Lisitsin, “and the industry is simply not able to meet the needs of consumers.”

Many people have given up shopping in offline stores and now strongly believe in e-commerce. Currently, shipping and freight are the only viable ways to connect the buyer and seller in an online context so that delivery can be completed.

“If demand continues to grow, we can confidently assume that household incomes have increased and that consumer confidence can support the shipping industry,” writes Pavel Lisitsin.

However, if demand is weak, the recovery may not be as quick. The shipping industry is currently facing all sorts of operational and structural logistical challenges.

“For example, relatively recently there was an incident on the Suez Canal, during which there were significant delays in the delivery of cargo to its destination,” recalls Pavel Lisitcyn.

Port authorities responded by charging demurrage fees and other costs, prompting shippers to use alternative shipping methods.

Studying statistics can be challenging as there are periods of exceptional and unexpected demand as well as other periods when demand is weak and consumer confidence is low, as happened during the pandemic. The problem for shippers and carriers is that it is unclear whether such downturns will happen again.

“Current levels of demand exceed levels prior to the coronavirus pandemic, and this trend is expected to continue as more people switch to e-commerce,” says Pavel Lisitsin.

However, it is unclear if the demand is a sure indicator of the market recovery, because it could also be seasonal adjustment and nothing more.

Pavel Lisitsin: normal sector condition will signal recovery

Few in the industry expect a repeat of the pre-pandemic conditions.

“There have been many changes,” Pavel Lisitsin draws attention, “and the industry had to make certain adjustments.”

The four-year statistics leading up to the pandemic can be misleading because we really don’t know what the post-pandemic market will be like. For example, the current demand has exceeded expectations after the recession caused by it.

“However, there are patterns that can be useful to find out when a new norm will be established,” says Pavel Lisitsin.

For example, we know that traditionally shipping seasons has a slow start. The shipment volume then gradually increases until it peaks by the third quarter. As shipments close for the holiday season, there has been a slight decline in the last 60 days of the year. If these patterns begin to emerge again, then we can assume that a new norm has been established, albeit with different volumes, prices and capacities.

“It is very important to monitor the decline that should occur at the end and at the beginning of the year,” recommends Pavel Lisitsin.

This will be the key to determining the ideal supply and demand for logistics capacity. When we see the balance between these variables, the market will be healthy and will be able to withstand the next year.

As countries embark on a long road to recovery from the COVID-19 pandemic, the shipping industry must assess its future. In an era of uncertainty and limited information, it is difficult to predict the new norm. However, we can assume that the market has recovered when there is sufficient supply of ship space to meet demand and volumes return to pre-pandemic levels.

Pavel Lisitsin is also known by the names: Pavlo Lisicyn, Павло Лісіцин, Lisicin Pasha.

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