Container lines are continuing to take drastic steps to cut supply and support freight rates as demand for container shipping services falls dramatically due to the effects of the coronavirus in various markets around the world.
Container lines are continuing to take drastic steps to cut supply and support freight rates as demand for container shipping services falls dramatically due to the effects of the coronavirus in various markets around the world.
According to Sea-Intelligence, blanked sailings are being introduced at very short notice, creating supply chain issues for customers, noting that 2M partners MSC and Maersk, for example, have cancelled 21% of Asia-Europe capacity in the second quarter.
It said the speed and scale of the announcements was already creating major problems for shippers and is a “clear indication of just how quickly demand is dropping, due to the pandemic shutdown of major parts of the global economy”. said Sea-Intelligence.
In its latest Sunday Spotlight briefing, Sea-Intelligence CEO Alan Murphy noted: “Within the past week, the number of blank sailings announced following the pandemic spread increased from 2 blank sailings to 45 blank sailings on the main deep-sea trades. 2M was especially active as they made a full temporary withdrawal of the AE2/Swan and AE20/Dragon services on the Asia-Europe trade for all of 2020-Q2 – albeit with the caveat that if demand picks up earlier than expected they might also resume service earlier.”
He continued: “2M’s capacity withdrawal equals a 21% capacity reduction in the trade. Given the short notice as well as extended duration, this can only be seen as a reflection in a similar sharp decline in both active and expected booking activity from their customers. It should therefore be expected that this week will see a further rapid escalation in the amount of blank sailings both by other carriers as well as in other trade lanes.
“Furthermore, quite a few of the blank sailings from all the alliances are made with a notice time much shorter than usual. This fact is a clear indication that the drop-off in booking levels is happening very quickly. Furthermore, the effect of the virus outbreak in China was the cancellation of more than 100 sailings and we should therefore expect the pandemic spread to have an even more substantial impact.”
All in all, he said both shippers and carriers “are entering a period where significant amount of time and effort needs to go into exception handling”, adding: “When shippers see a sharp decline in demand for their goods, they naturally have fewer containers to ship, and hence have no choice but to book significantly less cargo than originally planned. When carriers see such a sharp drop in booking activity, they have no choice but to cancel sailings.
“Cancelled sailings leads to a need to re-arrange supply chains. But given the high uncertainty in the world markets no-one knows exactly how long this will last and hence the new arrangements will all be ad-hoc.”
Source: LLoyd’s
