Limited space on container ships remains big challenge during the second quarter of 2020
Shipping lines have announced a historical record of ‘blank sailings’, as more than 250 scheduled sailings are withdrawn by container lines during Q2 due to the Covid-19 crisis.
All trade lanes worldwide are therefore impacted, not only the East-West routes.
For example ‘The Alliance’, consisting of carriers Hapag-Lloyd, Hyundai, ONE and Yang Ming, announced last week that they have revised the sailing schedules for May and June, “in response to lower market demand due to the spread of the virus”.
Shipping line MSC announced already earlier the temporary suspension of two important services between Asia and the US, as well as two loops during the second quarter on the services between Asia and Europe.
The Asia-Europe trades have seen the greatest level of capacity reduction, according to a report by Sea-Intelligence.
The consulting firm indicates that “the financial impact on the carriers could also be profound”, but will depend on the rate levels in the next weeks as “it is clear that the primary purpose of the capacity reductions should be seen as an effort to prevent a catastrophic drop in rate levels”. Cost savings are important, but the freight rates will determine the overall financial outcome. Sea-Intelligence did estimate the cost for the shipping lines in a worst-case scenario at 23 billion USD, in their least catastrophic scenario, the shipping lines’ profits would fall by 6 billion USD compared to last year.
By deciding to lay up ships, container lines can save on operating costs such as fuel, but still a lot of other costs (salaries of crew, insurance fees, …) have to be paid.
The idle containership capacity is reaching a record high of 3 million TEU, according to market analyst Alphaliner. The inactive fleet of container vessels is the result of mainly two reasons: vessels that had to go to yards for scrubber retrofitting (see the new IMO2020 regulations) as well as the capacity reduction by shipping lines due to the strong decline in demand for container shipments.
Therefore we would like to advise you to provide us as soon as possible with your forecast for the next weeks.
For more detailed information, please contact our team.