It would not be an understatement to say that the international shipping industry is the lifeblood of the global economy. With more than 80% of the volume of international trade transported by sea, the shipping industry serves as an immensely important facilitator of trade and global commerce.
The Coronavirus outbreak brought severe disruption to the shipping and logistics sector in 2020; this has persisted in the years that followed, with shipping bottlenecks plaguing ports in 2021 and well into 2022. Given the uncertainty in the industry, it has never been important for the shipping industry to avoid wasting money – which means making use of effective competitive currency exchange services that fulfil their business requirements.
All of the voyages that are made within the shipping industry take place within the context of the wider international supply chain. Given the globalised nature of the industry, it’s essential that shippers hedge themselves against unfavourable movements in the currency markets, given the sheer extent of the foreign exchange risk that they face every day.
What contribution does the shipping industry make?
The shipping industry makes a remarkable contribution to the UK economy. According to a new report from the Centre for Economics and Business Research published in 2019, the UK shipping industry generated £19bn in turnover, an increase of 41% from 2010, and £6.1 billion in GVA. IT also directly supports 181,000 jobs.
Shipping is the largest part of the wider British Maritime sector, which facilitates 95% of all UK trade.
How international payments and exchange rates affect the shipping and logistics industries
The global nature of the shipping industry makes it particularly vulnerable to fluctuations in foreign exchange rates. A series of international payments need to be made by shipping companies for each voyage that their ships make, and this necessarily involves the use of a variety of currencies. These payments include purchases of bunker fuel, maintenance works, orders of new pieces of equipment, port dues and payment of crew members, many of whom may request payment in their home currencies. Ocean freight rates are usually priced in dollars, which further exposes shippers to fluctuations in currency exchange rates. Finally, banks often charge substantial fees on their international payments and foreign exchange services.
All of these expenses must be settled at different points during each voyage, leaving maritime professionals particularly exposed to foreign exchange rate fluctuations. With all of these concerns in mind, Moneycorp is delighted to offer flexible, cost-effective currency exchange solutions and low-cost international payments that can save shipping industry professionals time and money on their foreign exchange payments.
How has Brexit had an impact on the shipping sector?
Following the UK’s vote to leave the European Union in June 2016, the pound sterling fell to its lowest level against the dollar in 31 years. This was a positive result for British shipowners who were able to make handsome returns upon repatriating revenues that they’d received in dollars into sterling.
The picture, however, is a decidedly mixed one: in February 2022, the shipping industry in the UK suffered from a doubling in delays at UK ports as a result of customs rules on goods entering Britain from the EU that have been introduced post-Brexit.
Find out more about the impact of Brexit on a range of industry sectors today.
How we can help your business save money
We can help you navigate your way through the foreign exchange market and save money on payment routes. We do this by leveraging our local clearing capabilities to help solve the complexities of settling to local port authorities worldwide.
Your business multi currency account provides you the flexibility to pay crew members around the world on an ad-hoc or recurring basis, manage additional costs due to the pandemic and minimise cash on board vessels through account and card services to operators and the crew.
Our team of experienced account managers look after thousands of businesses, a large proportion of which work within the shipping industry, enabling us to propose tailored solutions to help protect their finances. With global payment solutions for international businesses, as well as strategies for currency risk management, we work to provide effective FX solutions for the shipping industry.
The impact of Covid-19 on shipping
The spread of the Coronavirus had a major impact on the shipping industry, with Chinese shipping being the first to be adversely affected by the outbreak. It did not take long, however, for the global maritime industry to feel the impact of the pandemic. The disruption caused by Covid-19 is the primary driver of the global shortage of shipping containers, which resulted in a significant increase in container freight rates from Asia: the cost of a 40ft unit reached $10,000 for the first time in January 2021. Importers around the world had no choice but to accept skyrocketing freight costs.
It is clear now, however, that the shipping industry has recovered from the worst effects of the coronavirus outbreak. The pandemic has given the industry the opportunity to assess how it can become more resilient and adaptable in the face of future pandemics. Securing the best possible rates on international payments is one way in which shipping industry professionals can accomplish this and protect their bottom line.