Tough going for carriers forced to keep trying to match supply with falling demand
Date: Thursday, April 30, 2020
Source: The Loadstar
Indications are that ocean carrier financials for the first quarter will be satisfactory, due to prudent capacity management around the extended Chinese New Year shutdowns.
However, all bets are off as to how successful carriers will be navigating the current and following quarters.
Strong operational results published by OOCL this week, followed by similarly robust numbers from its parent, Cosco Shipping, should be a precursor for a reasonably good first-quarter performance from the liner industry.
Sea-Intelligence Consulting chief executive Lars Jensen noted a common trend among the data of rate increases.
“Despite the negative volume impact from the virus outbreak in China and the early effects of the pandemic at the end of March, carriers have managed to maintain a strong grip on freight rates through their swift action in cutting capacity.”
And he is sticking with his firm’s prediction of a 17m teu decline in volumes this year, and pointed out that Cosco’s volume loss in the first quarter, largely unaffected by the pandemic, was 6.3% down on the same period of the previous year.
Carriers are doing what they can to adjust capacity to meet the much reduced demand across their tradelanes by withdrawing substantial amounts of tonnage and suspending or merging loops, while still providing a scaled down network coverage to cover commitments.
Speaking via a Blue Communications webinar panel session yesterday, entitled Covid-19 meets IMO 2020, Jan Christensen, senior director purchasing and supply at Hapag-Lloyd, said the disruption from the Covid-19 crisis was “different”.
“What is unique about this crisis is that it is not just a local or regional market being affected. We see our volumes, especially in the car industry, textile, furniture industries all suffering.”
He said, like any other container carrier’s, Hapag-Lloyd’s response was to “reduce costs and lower capacity” as well as to “closely watch our liquidity”.
And in an S&P Global Platts special report on the implications for shipping of the pandemic, global containers editor George Griffiths said: “The container shipping market is largely braced for a tough quarter.
“With footfall in shopping districts tumbling around the world, particularly in the outbreak hotspots of North America and Europe, there has been much lower demand, leaving some cargo owners cancelling contracts up to a few years out.”
Indeed, carrier sources The Loadstar has spoken to recently now privately admit they have given up hope of a sharp v-shaped bounce-back and instead are focusing on a longer, u-shaped recovery for some time during the second half of the year.