Effects of COVID-19 pandemic on Montenegrin maritime sector: seafarers stuck at sea as industry sinks

By Siniša Luković

Global maritime industry will decline by 4.1% in 2020 due to the disruption caused by the COVID-19 pandemic, as estimated by the United Nations Conference on Trade and Development (UNCTAD) in late November. From Montenegro’s standpoint, the predictions made by experts affiliated with this permanent UN body based in Geneva are more than optimistic, as the coronavirus and measures taken by the Montenegrin authorities since mid-March until today to curb the epidemic have had far, far worse effects.

The fact that literally not a single cruise ship bringing in tourists has docked in any of our ports since mid-March, that the Montenegrin marinas were at best half full this summer even at the height of the nautical season, and that the state caused numerous problems to our seafarers when returning from ships with its often illogical quarantine measures, all add to the gloomy picture of the effects that the pandemic has had on this branch of the economy.

From the point of view of approximately 7,000 active seafarers from Montenegro, who are almost exclusively employed by foreign shipping companies, the pandemic-characterized 2020 was and still is extremely tough and challenging. In the spring, while the world was just getting acquainted with the novel virus and its effects, many countries imposed virtually complete border closures to foreign nationals and severe restrictions on air traffic, making the problem of regular crew changes and repatriation of seafarers one of the burning issues for the entire maritime industry.

It is estimated that there are about 2 million active seafarers globally. The lockdown and difficulties with crew changes left as many as about 200,000 of them trapped on ships around the world even after the end of their employment contracts. Due to problems with travel and air transport, crews remained stuck at sea for months. In those early stages of the pandemic, some seafarers remained on board continuously for six or eight months, with some breaking the “magical limit” of 12 months of uninterrupted navigation. Being stranded on a piece of floating steel for months with more or less the same twenty people, separated from family and friends, takes its toll on seafarers even in normal conditions. How this will reflect on their physical and mental state in the extraordinary circumstances of the COVID-19 pandemic remains to be seen in the coming period. An additional problem is that even during short times when ships are docked in ports, seafarers now generally cannot get off the vessel to visit a town and escape from the gruelling everyday life at least for a moment.

The gravity of the situation is also illustrated by the fact that the International Maritime Organization (IMO) has made special protocols with measures and procedures for crew members to prevent the spread of COVID-19 infection. It has also has set up a Seafarer Crisis Action Team to assist seafarers with repatriation, boarding or crisis situations. In early December, the 75^th UN General Assembly adopted a Resolution on international cooperation to address challenges faced by seafarers as a result of the COVID-19 pandemic to support global supply chains, calling on UN member states to designate seafarers as key workers and implement relevant measures to enable seafarers to disembark and embark, as well as to provide them with unrestricted access to medical care.

Earnings remain unchanged, but Europe is not in focus

Many seafarers from Montenegro have also been among those who have suffered the consequences of the pandemic, especially those who sailed as white-collar staff on cruise ships. During the spring and the first months of the summer, our media were full of dramatic testimonies of some of our citizens who, as crew members of cruise ships which were laid up in various ports around the world, found themselves literally in a kind of a months-long imprisonment because they could not be repatriated. They were waiting for months to return to the country, with their employers devising various methods to bring them back home in coordination with Montenegrin diplomats. However, even when they finally reached the borders of their country, these seafarers and their colleagues who were returning home from merchant ships, where the sanitary risk is many times lower than on cruise ships, were, often unreasonably, kept in quarantine in Montenegro for another fifteen days. The public still remembers the protests – nearly rebellions – which occasionally broke out among repatriated seafarers due to poor conditions in quarantine hotels, especially in the one in Vučje resort and partly the one in Igalo. All that, however, was being gradually overcome and worked out, to the extent that departures and returns from ships are a bit less problematic today.

“Embarkation and disembarkation are still difficult compared to pre-Covid circumstances. In comparison with the first months of the pandemic, the situation is now somewhat easier because there are more PCR testing labs, many countries have introduced a simplified border crossing procedure, recognizing the importance of seafarers as a labour force of special importance to the global economy. Yet, various restrictions imposed by airlines, insurance requirements and the like still remain. The average cost of embarking or disembarking an individual seafarer is now 100% higher than in pre-Covid times, so shipowners often decide to change large numbers of crew members at the same time, as they reduce costs by sending more people off or on board at the same time. That’s why seafarers are sometimes left waiting for disembarkation for several months after the end of their contracts,” sea captain Janko Milutin of the Shipmasters Association of Montenegro and the Kotor-based “Seamonte” ship manning agency told Vijesti.

He points out that, fortunately, the corona crisis has not significantly affected the incomes of seafarers so far, which have remained more or less unchanged. However, as the global trade is currently more oriented to the Pacific region than to routes towards Europe, shipowners are looking for crew members from that region more often because it is easier and cheaper for them to rotate crews on ships operating in that part of the world, rather than sending seafarers from Europe there.

“Conversely, shipowners whose ships operate in this part of the world prefer to have crews from Europe, so we also get inquiries to send complete crews from Montenegro. This, however, is not so easy for us, because we practically don’t have, for example, helmsmen, oilers and other similar lower ranks,” Milutin explains. On the other hand, in the beginning it was even more difficult for our seafarers who were caught by the pandemic at home, because they were left without the possibility to board a ship and earn their livelihoods for an indefinite period of time.

A study by the American Cornell University has shown that during the first months of the pandemic between March and June, when the tightest restrictions and prevention measures were in force, an unprecedented global decline in volume of maritime traffic was recorded in virtually all segments of the world maritime industry. The decline ranged from 5.62% to 13.77% for container ships, to 3.32% for bulk carriers, 9.27% ​​for tankers, and from 19.57% to as much as 42.77% for passenger ships. A survey of representatives of 200 of the world’s leading shipping companies, conducted in mid-October by the international law firm DWF, has shown that as many as 63% of respondents have suffered negative economic consequences due to the pandemic and various lockdown measures around the world, while as many as 60.5% of respondents have said that they had to cut their workforce because of that.

The European Maritime Safety Agency (EMSA) announced that in the first ten months of 2020, the number of ships entering EU ports had decreased by 14% compared to last year as a result of the COVID-19 pandemic, with Spain, Slovenia, Croatia and Iceland being the hardest hit, while the industry sector that saw the largest decline was passenger ships – cruise ships, ferries and ro-ro ships on regular lines.

Montenegrin seafarers, like their colleagues around the world, have faced additional financial challenges as more foreign companies that hire them were forced to take a number of austerity measures and cut operating costs due to the economic effects of the coronavirus crisis and the reduced volume of traffic in global trade, 80% of which takes place by sea. Therefore, many companies put some of their ships out of service, and some of them simply started laying off workers because they were literally fighting for their very survival, as is, for example, the case with Bourbon Offshore, which employs a considerable number of our seafarers on their tugs, suppliers and similar oil industry support vessels.

Cruise industry

The world’s cruise industry is certainly the hardest hit by Covid, with over 90% of its capacities literally being suspended for months, as there are practically no cruises anywhere in the world at the moment due to the pandemic. In recent months, these companies have sent a number of their slightly older cruise ships to breaking yards in order to reduce costs. As a result, at least in the foreseeable future, a large number of jobs for seafarers and white-collar staff of various profiles who sailed on those ships have been cut. When it comes to the Montenegrin maritime economy, the pandemic has had the most devastating impact on cruising as one of its fastest growing segments. The fact that until March 16, when the ban on cruise ships was introduced in Montenegro, the busiest Montenegrin cruise port of Kotor recorded the arrival of only 9 smaller ships in the first quarter, out of as many as 560 planned arrivals of cruise ships this year, best illustrates the scale of the disaster which has affected not only the Port of Kotor company, but also all other links in the chain of cruise service providers.

Instead of the projected total revenue of €4.6 million in 2020, the Port of Kotor suffered a loss of €1.4 million at the end of the third quarter, with the deficit being expected to grow further by the end of the year. Kotor’s losses in cruising could not be offset by the results achieved in yachting, as by early September only about 120 yachts had sailed into the port under the walls of the Old Town, out of the total expected 1,600 yacht arrivals in 2020. The money that the Port of Kotor lost due to the absence of cruise ships, is added to the huge sums that were lost by everyone else involved in the cruise industry chain in Montenegro – starting with the state that collects so-called light dues (charges levied on ships for the use of sea routes) and other taxes, through maritime agents, pilotage and towing service providers, suppliers, excursion organizers, bus companies that take cruise ship passengers sightseeing, travel agencies… The extent of work involved is best illustrated when figures are compared with 2019, when 490 cruise ships came to Montenegro, bringing along almost 650,000 passengers.

“A rough estimate is that due to the absence of about 500 this year’s cruise ships, at least €25 million in direct revenues has been lost and at least as much in the revenues that would have been generated by a chain of other providers and caterers serving those ships and their passengers. The importance of the cruising industry for our economy is also indirectly shown by literally hundreds of calls that we get every day from caterers, traders, carriers and travel agents, who all want an answer to a single question – when will cruise ships start coming again? Personally, I think that it could still happen in the next few months”, Mihailo Vukić, the owner and director of the Bar-based Allegra Montenegro maritime agency, told Vijesti.

Losses in our ports in this year’s cruising are measured in tens of millions of euros, so it is not surprising that all those involved in this business are trying to bring and station cruise ships in one of our ports in the period when they are in lay-up. Depending on whether a ship is in the so-called warm or cold lay-up status, (lay-up for a shorter or extended period of time) i.e. depending on the number of crew members retained on board, operating costs for the owner of only one large cruise ship range between 1 and 3 million dollars per month. The biggest expenses in such cases are wages for crew members, but the rest of allocations that end up in the pockets of port operators, the economy and, indirectly, in the budgets of the countries where the ship is located, are not negligible either. Currently, about 95% of the world’s cruise fleet is in lay-up. European ports host over a hundred ships, with more than half of them staying in various ports in the Mediterranean. Montenegro also tried to get its fair share of the cake, so the first cruise ship to undergo a three-month lay-up in Montenegro – Norwegian Spirit of Norwegian Cruise Line – arrived in the Port of Bar in late November. However, achieving something greater in this regard was prevented by a barrier perhaps stronger than Covid – the traditional rigidity and inflexibility of the Montenegrin state administration and incompatibility of the relevant legislation.

Yachting fared the best

Another segment of the Montenegrin maritime economy that was virtually battered by the pandemic this year are tourist and excursion boats, several dozen of which take tourists on short tours along the Montenegrin coast during the summer. This year, most of those vessels did not go out to sea at all, and their owners were left with empty pockets because hardly any tourists visited Montenegro last summer. The only exception was the excursion boat Katica from Tivat, which made only twenty trips around Boka with groups of foreign tourists, primarily from Ukraine. In doing so, due to measures limit the spread of coronavirus, this boat with a capacity of 370 passengers accommodated significantly fewer people – up to a maximum of 90, which was ultimately reflected in reduced revenues for the owner.

Despite a dramatic decrease in traffic compared to last year, the impression is that the yachting industry suffered proportionately the smallest losses as a result of coronavirus.

“We had fewer yachts this year compared to last year, but the situation in that segment of our services was not as bad as we had expected it to be. Still, the results we achieved in yachting this year were above our expectations because more of those boats came than we had hoped for,” Vukić points out.

In the spring months during the complete lockdown, the leading Montenegrin marinas such as Porto Montenegro, Porto Novi and the Bar marina implemented a series of innovative and proactive measures and programmes to train their staff and design protocols for the arrival and servicing of yachts at the time of the increased health and sanitary risk. Although this year’s results of our nautical tourism cannot come close to last year’s, when there were 4,775 yacht arrivals with 28,562 passengers, the situation in our marinas this summer at the height of the nautical season was still a little less depressing than in the Port of Kotor, where there were no cruise ships in sight. For instance, out of a total of 85 births in the Luštica Bay marina, 70% of them were occupied in August, whereas berth occupancy in August in the largest marina in Montenegro – Tivat’s Porto Montenegro, with a capacity of 450 yachts, was 72%. However, these data should also be taken with caution, because long-term moorings are counted as occupied, regardless of whether there is a moored yacht at a given moment or not. There is, however, a fundamental difference, because when a boat is actually in the marina, the accompanying economic effects of its stay consequently grow through the costs it generates there through supply, payment of various services and consumption by its crew. Yet, all of this is missing when a yacht is not moored at the leased berth, which is formally counted as “occupied” by the marina management.

“Our annual birth occupancy in 2020 is 70%, which is an even better result than the one from last year, when we had 68%. Such score was achieved due to the extension of contracts for a majority of ships moored in Porto Montenegro as their home port, which also led to an increase in the average docking time of yachts in our marina from 51 to 105 days”, Danilo Kalezić, Porto Montenegro’s senior PR and marketing manager, told “Vijesti”. He points out that large boats came more often to that marina this year, so the average length of yachts that sailed into Porto Montenegro this year was 22 metres, up from last year’s 21 metres.