[080420.EN.SEA] Container Shipping Hit On All Fronts By Virus Pandemic; Signs Of Worse To Come

THE crisis embracing the global container shipping industry looks set to worsen, and some experts do not foresee any improvement until next year. At the moment, the number of void sailings have surged from 45 to 120 in just three days while schedule reliability has plummeted.

The sector is grappling with demand from cargo buyers in the US and Europe collapsing at an alarming pace. Hopes for a second-half V-shaped rebound are dwindling. Containers already delivered to import terminals are piling up, prompting Mediterranean Shipping Company (MSC) to introduce a stopgap storage plan, New York's FreightWaves reported.

According to the latest global schedule reliability statistics compiled by Copenhagen-based Sea-Intelligence, reliability in February dropped to 65.1 per cent, "the lowest recorded global score since Sea-Intelligence introduced the score in 2011," says CEO Alan Murphy.

Furthermore, the average delay for late vessel arrivals rose to five days in February, the highest number seen "outside of the US west coast labour dispute in early 2015".

Asked by FreightWaves whether reliability would worsen, Mr Murphy replied: "Yes, I would expect schedule reliability to be very poor in the months ahead and probably drop further."

"On top of this, everyone is focusing on retaining cash flow, including carriers, and even though bunker [marine fuel] prices are incredibly low, and thus schedule recovery - speeding up - is now much cheaper, I strongly doubt there is any willingness to blow cash on marginally improving schedule reliability when it is already extremely poor and boxes are piling up inland."

SeaIntelligence Consulting CEO Lars Jensen also believes reliability is likely to deteriorate.

"I cannot say for certain that it [reliability] will get worse," Mr Murphy conceded, noting that "it is quite possible that the carriers may completely reschedule their networks, and if their new schedules include sufficient buffers to handle the coronavirus challenges, schedule reliability could technically improve - although the 'new' product being sold, now with considerable buffer, would be inferior to what would have been promised without such buffers.

"It could also be argued that lower demand could in turn lead to higher schedule reliability, a pattern we have seen in recent years in the Africa trades, as lower demand leads to fewer boxes which leads to fewer vessels, which can mean less congestion where congestion is a main cause of poor schedule reliability."

"That said," Mr Murphy continued, "I think that hoping for such a silver lining is a little too optimistic. I think congestion will increase in the coming months as importers will be struggling to pick up their containers, even if there will be less of them, and carriers may have to transship in unfamiliar ports and terminals.

"The massive amount of blank sailings will lead to inland supply-chain disruptions, which will lead to pileups and challenges in container repatriation, and thus to equipment shortages," Mr Murphy added.

Mr Jensen said in an online post: "The speed of the [demand] drop is bound to create significant problems because you already have a large amount of cargo on the ships. When it arrives at the destination, it arrives into a reality where it is not needed or wanted by anyone."

The container pileup concern is becoming so acute that MSC has just created the Suspension of Transit (SOT) programme. To better accommodate containers shipped from Asia that are delayed on the import side, it has set up special yard storage at six transshipment hubs: Bremerhaven, Germany; Busan, South Korea; King Abdulla port, Saudi Arabia; Lome, Togo; PSA International Panama, and Tekirdag Asyaport in Turkey.

The latest step-down comes on top of a pronounced US import decline in the first quarter. According to SONAR data on the seven-day moving average of the number of customs filings, US filings for imports from China to all US ports are down 42 per cent year to date and filings for imports (regardless of origin) to the port of Los Angeles are down 18 per cent.

Freightos chief marketing officer Eytan Buchman pointed to a "scramble" by shippers to cancel orders.

He highlighted the fallout from Amazon's mid-March decision to stop accepting nonessential goods to its warehouses from third-party "Fulfiled by Amazon" (FBA) sellers.

"Shipments booked by FBA sellers using the Freightos.com marketplace?reached a peak three weeks ago only to sink by nearly 50 per cent last week after the change in Amazon's policy," Mr Buchman said.

Mr Jensen offered a pessimistic view on the timing of a rebound of containerised import demand. "My view right now is that the rebound will not happen until 2021," he warned.

"Even if we are wildly optimistic and assume all lockdowns are removed in two to three months, that does not mean consumer confidence returns that fast. And more importantly, importers will be wary about ramping up imports quickly after summer because of the lingering worry about the second wave [of infections] late in 2020. If the second wave goes OK, then we will see a very sharp rebound in 2021."

Source : HKSG.