Coronavirus Hits Shipping as China Port Traffic Slides
Date: Thursday, February 6, 2020
Source: The Wall Street Journal
Maritime data provider Alphaliner projects falling trade could cut 6 million containers from shipping business this year
Ship calls at or through major Chinese ports have fallen 20% since Jan. 20, maritime data provider Alphaliner said, as measures to control the coronavirus outbreak cut into international supply chains.
The research firm said in a report that it projects the impact of factory shutdowns and other restrictions hitting China’s economic output will reduce global ocean container volumes, a major piece of global trade, by about 0.7% over the full year, or about 6 million containers.
China, acting to halt the spread of the disease, has extended until Feb. 9 the Lunar New Year holiday that traditionally curtails factory production. Travel restrictions remain in place, however, which may leave many factories short of workers to resume production if they try to reopen next week.
“The full impact of the Chinese coronavirus outbreak on container volumes will not be fully measurable until ports announce their throughput numbers for the first quarter, but data collected on weekly container vessel calls at key Chinese ports already shows a reduction of over 20% since 20 January,” Paris-based Alphaliner said in the report, released late Tuesday.
Brokers in China said bookings for container ships, tankers and dry bulk vessels are falling rapidly and that the slowdown could extend until March.
The reduction in shipping volumes is expected to ripple across supply chains in the U.S. and Europe, with rail and truck volumes likely sliding in the coming weeks on the reduced flow of international goods.
“As far as box volumes in China, we see a fall of around 23% over the past three weeks as the country is gradually shutting down,” said Wang Lei, a broker in Shanghai, the main gateway for Chinese exports and the world’s busiest seaport with some 42 million containers a year.
“Workers from crane operators to customs officials and truck drivers are staying home,” Mr. Lei said. “It’s always slower during the Lunar New Year holidays, but this is something else. People are afraid to interact and it’s killing business.”
China is the world’s biggest exporter, and container ships move everything from clothes and furniture to electronics, cars and industrial equipment from seven sprawling ports on its Pacific coast to the U.S., Europe and the rest of Asia.
Big container lines continue to operate at China’s main coastal seaports, but the world’s top 10 operators have canceled at least two dozen sailings to China in recent weeks, many more than they typically drop during the traditionally slow first quarter.
Danish maritime giant A.P. Moller-Maersk A/S said it will cut two sailings in the key Asia-Europe trade loop over the next two weeks. A number of other carriers have canceled sailings, too, including France’s CMA CGM SA and Taiwan’s Evergreen Marine Corp.
Other global carriers are set to announce more voided sailings in coming days that could extend to mid-March, shipping executives said.
Supply chains have begun feeling the heat. Hyundai Motor Co. said Tuesday it will begin suspending production at all seven of its plants in South Korea because of a lack of parts made by suppliers in China. Tesla Inc. warned of delivery delays in China with its factory in Shanghai closed due to the outbreak, while Kia Motors Corp. cut car production in three South Korean plants due to parts shortages from Chinese suppliers.
“Ironically, the only port which is busy is Wuhan because it has become the city’s lifeline,” said a Singapore broker. “Everything from food and medicine to petrol and other supplies comes through there.” The Yangtze River port at Wuhan, the main city in China’s Hubei province at the center of the outbreak, has remained open even as travel in the region has been locked down.
The virus is also stopping work at China’s shipyards, where dozens of ocean-going vessels are undergoing repairs or are scheduled to be retrofitted with sulfur-trapping exhausts in line with a mandatory global maritime directive to drastically cut ship sulfur emissions.
“We are trapped on board waiting for some service work to be done,” said Nikos Papatheodorou, the chief mechanic of a Greek-operated dry bulk vessel at China’s private Changhong shipyard. “There are about two dozen ships berthed at the yard and we were told that we could be facing delays of up to three weeks.”
The Baltic Capesize Index, which measures the cost of moving commodities on the world’s largest bulk ships, has been in negative territory since last Friday. Demand for raw materials in China “has fallen off a cliff,” said the Singapore broker.
The tanker market is also reeling as the Organization of the Petroleum Exporting Countries and its allies look for an agreement to slash daily production because of deeply reduced demand from China.
“All crude sectors are already recalibrating sharply lower and there are some very dark clouds on the horizon for the tanker market,” said London-based ship brokerage E.A. Gibson Shipbrokers Ltd. in a report on Monday, adding that daily freight rates for large crude carriers fell around 40% last week.