CORONAVIRUS: container line shipping heavily hit
Ships that do sail between Asia and Europe are less loaded
The coronavirus has caused approximately 105 canceled sailings from Asia to Europe and North America. Such a decline in capacity leads to a loss of around $ 1 billion for the entire container liner sector.
In the period from 20 January to 10 February 2020, the capacity in container liner shipping with China dropped by 20 to 40 percent compared to the same period last year, according to an analysis by leading international shipping consultant Drewry. The fear is that the losses will increase even further.
Drewry has developed various scenarios for the development of the virus and its effect on container liner shipping.
- Scenario A (most positive) assumes a rapid containment of the virus in China with the Chinese economy regaining full function within two months. The expectation is that rates for sea freight will rise and that extra or larger ships will try to make up arrears.
- Scenario B is based on the further spread of the virus outside of China, consequently reducing consumer confidence. Far-reaching quarantine measures could cause serious disruption of transport and distribution. Such a scenario would reduce the constant growth in container volume. In this context, shipping companies would withdraw capacity from the market, have fewer sailings and scrap ships faster. Shipping companies’ rates and profit margins will be put under significant pressure.
- The most negative scenario C assumes a pandemic and a revival of the coronavirus in China. As a result, trade would come to a standstill, putting production and consumption under pressure. Such a scenario would lead to a global recession with a strong decrease in container volume. To prevent bankruptcies, shipping companies will proceed with large capacity reductions and frequent ship dismantling.
Scenario C is the most unlikely, according to Drewry. We are currently in scenario B. If the virus can be contained in the coming weeks and the economy and logistics in China recover quickly, scenario A is still possible.
The association for trade and logistics evofenedex is not only concerned about the large number of canceled sailings, but also about reports that ships that sailed to Europe, in recent days, have a low load factor. Containers have remained on terminals due to poor handling or have not been delivered on time. These ships are expected in European ports from mid-March to mid-April. Only then, a reliable estimate can be made of the damage to entrepreneurs who are mainly dependent on goods from China. evofenedex calls on shipping companies to clearly communicate with their customers which containers have not been taken but have been booked, upon departure from Asia, to prevent unpleasant surprises for entrepreneurs.
For more information about the Drewry scenarios, please see here.