Courtesy of Adam Sharpe @Lloyd’s List Maritime Intelligence
Carriers faced with the likelihood of a steep decline in earnings are taking steps to mitigate losses, while China reacts to the backlog of containers building up at major ports.
Spot rates in container shipping markets have weakened substantially despite an increase in blank sailings by carriers, while the volume of idle capacity in the world boxship fleet continues to grow.
SPOT rates in container shipping markets have weakened substantially despite an increase in blank sailings by carriers, while the volume of idle capacity in the world boxship fleet continues to grow.
Carriers, faced with the possibility of shrinking revenue and increased losses, have opted to cut their rates with the Shanghai Containerised Freight Index on the Shanghai Shipping Exchange showing significant declines.
The SCFI index, which resumed operation on Friday, February 14, showed Asia-Europe rates fell more than 12% from the pre-holiday level on January 23, and transpacific rates slid 6-8%.
Several Chinese cities are still not allowing office and factories to reopen following the end of the extended Chinese New Year holiday due to restrictions put in place to contain the spread of coronavirus, meaning production and sales have suffered.
Carriers have tried to cope with the virus-led fall in cargo demand by withdrawing sailings. The Sea-Intelligence consultancy recorded 25 extra void sailings on the transpacific trade last week, up from 21 a week ago. This is in addition to the 61 cancellations resulting from the original New Year holiday.
On Asia-Europe trade, the tallies are 22 versus 10 over the same period, plus 44 blanked sailings driven by the Chinese holiday.
The blanked sailings, as well as delays to scrubber retrofits, have had the knock-on effect of increasing the number of idle vessels in the world containership fleet.
New figures from Lloyd’s List Intelligence show that from the end of January, the total amount of idle capacity stood at 326 vessels, comprising 757,478 teu, representing 3.4% of the global fleet.
This was already up from 3.2% at the start of the month, as the normal seasonal reduction in demand began to see idle numbers rise. But in the past two weeks that number has increased again, with 834,198 teu, or 3.7% of fleet capacity, now unemployed.
Alphaliner noted this week that a number of carriers have already announced further blank sailings in the coming weeks and forecast that this could push the inactive fleet capacity to more than 1.6m teu, with all ship sizes above 1,000 teu negatively impacted.
The extent to which coronavirus has already been factored in to the earnings potential of major carriers is likely to revealed in the coming days as container lines Maersk and Hapag-Lloyd release their outlooks for the year ahead.
