RG Business

Volatile period for shipping reflects Bermuda’s economic challenges

Pinterest LinkedIn Tumblr

Shipping is pivotal to Bermuda’s survival. As a geographically remote island with few natural resources, ships are our lifeline, bringing food, materials and other goods that enable our community to function. In normal times, they also bring most of our visitors.

But the times since March 2020 have been anything but normal, thanks to the effects of the Covid-19 pandemic, bringing a dearth of cruise ship visits and a spike in cargo rates that have caused pain across the Bermuda economy.

Cheryl Hayward-Chew, as chief executive officer of the Meyer Group of Companies, is hoping that 2023 will herald a return to something closer to the norm. “Just like the recession in 2010, Covid exposed any weaknesses in our economy,” she said. “It’s had a huge impact on the community and many are still recovering — it’s almost like a post-traumatic stress event.”

Ms Hayward-Chew’s work and experience gives her a broad perspective of all things maritime. Meyer Group is a port agent, managing the needs of all types of vessels entering Bermuda, from cargo to cruise to yachts.

Meyer Freight represents two regular cargo carriers to the island, the Bermuda Islander and its weekly service from Salem, New Jersey, and the Somers Isles service from Fernandina Beach, Florida. And Meyer Tours is an agency working with local tour operators to organise excursions for cruise ship visitors.

In addition, Ms Hayward-Chew is the chairwoman of Polaris Holding Company Ltd, parent company of Stevedoring Services, operator of Hamilton docks.

Increasing shipping costs have been one of the drivers of Bermuda’s rising cost of living. Globally, cargo rates have soared over the past two years.

“In 2020, people weren’t travelling or going anywhere, but they did start buying more goods, especially from Asia,” Ms Hayward-Chew said. “Normally, there is trade both ways, but at that time, many containers were going back empty to Asia.

“Importers can bring in containers from Asia, via a transshipment, which means it is shipped from Asia to a US East Coast port and then to the island on one of the local cargo lines. Before the pandemic the cost to ship a container from Asia was $5,000 to $6,000 – it rose to $24,000 to $25,000.”

Some importers who had traditionally sourced goods from Asia because they were cheaper, responded to the spike in shipping costs by switching to US suppliers, Ms Hayward-Chew said. But this year, the dynamics driving shipping costs are very different.

Western consumer demand has cooled with the easing of Covid restrictions, resulting in more spending on travel and services and less on goods.  As a result, Ms Hayward-Chew noted that shipping a container from Asia to Bermuda in mid-November cost between $4,000 and $5,000 — lower than pre-pandemic prices.

Other factors have added to goods transportation costs in 2022.  “The Ukraine-Russia war has resulted in skyrocketing fuel costs,” Ms Hayward-Chew said. “The cost of trucking in the US and Canada has also rocketed, because of both fuel costs and a shortage of truckers. Older truckers are retiring and younger ones are being snatched up by Amazon.”

At the end of 2021, the market price for a barrel of US crude was $75. By June this year it had soared 60 per cent to $120. By mid-November it had fallen back to just over $80, bringing a fall in emergency fuel surcharges and low transportation rates. A busy Christmas season for online shopping could drive trucking costs higher again, however.

Ms Hayward-Chew said the three local cargo lines — Bermuda International Shipping, Bermuda Container Line and Somers Isle Shipping — had tried to cushion the island from the effects of rising costs. “They had no increase in 2021 and an increase of between 3 and 4 per cent in 2022,” she said.

“Even though their operational costs have gone up by as much as 30 per cent, they’re very aware of the impact that increases have on Bermuda, consumers and importers. When they’re considering their increase for 2023, I’m sure they will be as conservative as possible.”

A broad-based slump in consumer demand is reflected in Bermuda’s import volumes. Polaris reported that in the six-month period ended September 30 this year, container cargo volumes were 11.7 per cent lower than pre-pandemic levels. Break bulk cargo, which includes heavy equipment, construction material and loose cargo, fell by nearly 20 per cent.

Another side of Meyer’s business — as port agent for cruise ship and as an agency for tourist excursions — saw an even more dramatic impact from the pandemic. After only four cruise ship visits in 2020, there were a mere 36 in 2021, compared to 184 in 2019.

“Our tour agency is there to serve cruise ship passengers, so having no cruise ships was decimating,” Ms Hayward-Chew said. “This year started slowly and quickly ramped up. We had a number of cancellations because of Covid policies, but in the end, we’ve had a good year.”

While the cruisers are coming back in 2022, excursion and experience businesses that had been downsized or shuttered over much of the previous two years, have in some cases been reluctant to risk a rapid return to full capacity. Meyer has also seen tour-boat operators struggling to find staff.

This comes as cruisers are returning to the oceans with enthusiasm. For example, Norwegian Cruise Line, a regular visitor to Bermuda, stated in an earnings report in November that it expected a record 2023, with full ships despite higher pricing. Such pent-up demand is reflected in Bermuda’s cruise ship schedule.

“Next year, we have 223 scheduled cruise ship visits — many more than 2019,” Ms Hayward-Chew said. “Even the first quarter, we have an unusually high 23 visits. But how will we service these vessels in January and February, when most of the industry will either be taking a breather or doing the maintenance work that may have been postponed over the past two years?

“We have had conversations with the Bermuda Tourism Authority about this and made clear that Bermuda needs to be open for business. Cruise ship passengers are the foundation of Bermuda’s tour and experience products. Knowing that thousands of people will be coming in is what enables many of them to exist.”

Write A Comment