Tuesday, August 9Inside Business Africa

Container vessels may lose $23 billion to coronavirus

Container carriers are on the verge of losing about $23 billion owing to the sharp drop in demand due to coronavirus pandemic.

Shipping consultancy, Sea-Intelligence in its latest report predicts that in the worst-case scenario, about $23 billion would be lost to the virus.

According to the report, the largest capacity withdrawal is seen in the Asia-Europe trade, which is entering a four -week period with 29-34 per cent of the capacity having been removed from the market.

As Sea Intelligence explains, the aim is to prevent a catastrophic drop in freight rate levels, while trying to cut costs at the same time.

CEO of Sea-Intelligence, Alan Murphy said: “In the most benign scenario, the carriers experience a 10 per cent volume decline in 2020 due to the pandemic but manage to prevent any material decline in freight rates. In this case, their profits will decline by $6 Billion compared to 2019 and cause all main carriers combined to lose $0.8 billion in 2020,” 

“The economic impact of the push to adapt to the demand drop is yet to be seen as things develop.

“Hence the development in freight rates will be important in the coming weeks, as that will determine the degree to which we will see even more aggressive capacity reductions,” Murphy added.

Meanwhile, it revealed that the global schedule reliability of liner shipping companies dropped to the lowest recorded level since Sea-Intelligence introduced the score in 2011.

For example, in February 2020 the schedule reliability was down by a further 3.4-percentage points month on month hitting 65.1 per cent.

The reliability of container shipping has been considerably impacted by the lockdown measures related to the coronavirus pandemic as well as other restrictive actions causing delays in cargo operations.

Furthermore, ad hoc decisions on blanking of sailings by major shipping alliances amid sharp demand downturn are making it even harder to maintain sailing schedules.

Schedule reliability in February 2020 was lower by 8.5 percentage points compared to the 73.6 per cent recorded last year, Sea-Intelligence said.

“In terms of the average delays for late vessel arrivals, 2020 so far has seen the highest delays outside of the US West Coast labour dispute in early 2015,” Murphy said.

Based on the consultancy’s data, Hamburg Süd was the most reliable top 15 carriers in February 2020 with schedule reliability of 74.7 per cent, followed by Maersk Line with 73.0 per cent, and Wan Hai with 72.2 per cent. The nine carriers recorded February 2020 schedule reliability of 60 per cent-70 per cent.

There were only three carriers that had February 2020 schedule reliability of less than 60 per cent, PIL with 59.2 per cent, OOCL with 58.9 per cent, and Yang Ming with the lowest February 2020 schedule reliability of 56.8 per cent.

Source: Guardian

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