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Coronavirus sparks force majeure conjecture

Shipowners are having to reacquaint themselves with the disruptive intricacies of force majeures on their daily operations in the wake of the coronavirus.

The decision by Beijing to extend the holiday period, local ports getting clogged up and a host of strict quarantine measures put in place by China’s trading partners is putting pressure across the maritime supply chain.

UK insurer Standard Club has warned shipowners in a notice that some of its members are now faced with delivery delays for scrubber installations at Chinese repair yards due to the impact of the novel coronavirus outbreak.

According to the club, it has received some queries from the members concerned to check whether such a situation would fall within force majeure.

“The race to get scrubbers retrofitted on ships ahead of the second part of IMO2020 regulations (ban on the carriage of non-compliant fuels which comes into effect on 1 March 2020) may result in a significant extension of the budgeted downtime for many vessels,” Standard Club said in a notice.

The China Council for the Promotion of International Trade is offering force majeure certificates to businesses in China affected by the outbreak of the novel coronavirus, with many shipyards applying for this.

“It is unlikely that the new coronavirus has rendered any port unsafe as the risk of infection would appear to be manageable. Owners may face difficulties refusing to call at Chinese ports on the basis of unsafety. That said, the situation is moving quickly and this issue will need to be considered carefully, especially with respect to Wuhan and other nearby ports on the Yangtze River,” law firm Clyde & Co said in a release discussing force majeure.

Bloomberg reported that China’s big state-owned liquefied natural gas (LNG) importers including CNOOC, Sinopec and PetroChina are considering force majeure declarations on contracted cargo deliveries on a weakened demand outlook. Asian spot LNG prices have dived to a record low this week.

Many countries are increasing their precautionary measures for ships calling from China.

Singapore, South Korea, Australia and Indonesia have all enhanced screening measures for ships which recently left China and Indonesia is also planning to suspend food beverage imports from China. The Philippines has prohibited crews onboard ships coming from China from disembarking.

The effects of the virus are beginning to be felt in global supply chains outside of China with South Korea’s number one car manufacturer, Hyundai Motor, revealing that it has halted operations at one of its assembly lines in Ulsan because of a lack of parts due to the coronavirus outbreak in China. The auto maker is also reviewing a wider suspension of production.

Jason Jiang

Jason is one of the most prolific writers on the diverse China shipping & logistics industry and his access to the major maritime players with business in China has proved an invaluable source of exclusives. Having been working at Asia Shipping Media since inception, Jason is the chief correspondent of Splash and associate editor of Maritime CEO magazine. Previously he had written for a host of titles including Supply Chain Asia, Cargo Facts and Air Cargo Week.
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