Container shipping industry idling services in the face of coronavirus’ impact on supply chains
Many industries are hurting at the moment, more from the steps taken to counter the spread of the COVID-19 virus than from infection hitting crews or ports.
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With China slowly emerging from lockdown and both Europe and North America in the grips of extended lockdowns, container traffic has collapsed.
World Cargo News reports container traffic through the Port of Los Angeles during March was down significantly in the wake of the pandemic. Los Angeles moved 449,568 TEU in March 2020, a 30.9% decrease compared to last year.
“For the first quarter of 2020, volumes have decreased by 18.5% compared to 2019,” the port is quoted by the report as saying. “It was the lowest amount of monthly cargo moving through the Port since February 2009.”
“We’ve had two serious shocks to our supply chain system. First the trade war between the U.S. and China and now the Covid-19 pandemic,” said Gene Seroka, executive director of the Port of Los Angeles. “With U.S. retailers and cargo owners scaling back orders, volumes are soft even though factories in China are beginning to produce more. Amidst this public health crisis, there will be uncertain months ahead in the global supply chain.”
The trend continued in March, with imports down 25.9% to 220,255 TEU compared to the previous year, while exports decreased by 23.8% to 121,146 TEU. The biggest drop was in empty container movements, which declined 44.5% to 108,168 TEU in total.
Container lines are canceling sailings at a rapid rate with inactive capacity hitting 2.46 million TEU last month.
More than 250 planned sailings could be canceled in the second quarter alone, Shipping Watch reported last month. The article adds up to 30% of total capacity is being removed from some of the most badly affected routes.
Several routes have been fully canceled for the second quarter, as ship owners are directing their vessels in for early maintenance or, where possible, early installation of scrubbers that had been scheduled for the next two years.
Shipowners are now taking the opportunity to get them fitted early, but this presupposes the equipment is available and yards have the space to carry out the work. The scrubber installation schedules were already packed for months ahead, so with yards trying to operate safe working practices, capacity is likewise reduced. Shipping Watch reports a million TEU of shipping capacity is currently in yards having this work done.
China’s import and export figures are still down despite easing of restrictions across the country and the authorities’ talk of a 100% return to work.
World Cargo News suggests 70% is closer to reality. The South China Daily Post reported China’s exports fell in March by 6.6% in U.S. dollar terms compared to the same period a year earlier (following a 17.2% contraction in January and February combined).
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Some shipping lines were already in a difficult position, heavily laden with debt and facing a slowdown in trade due to the U.S.-China trade war. The greater impact of the virus’ damage to global supply chains could see bankruptcy in the months ahead and a smaller container shipping industry emerges from what is left.
That would not be good news for consumers, as less capacity and less competition mean rates would rise.
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