- The present scenario gives the ship owners only a little flexibility to shift vessels around in response to changing markets.
- This crisis will impact world economic flows and it is necessary to revamp the supply-chain models.
- The megaships that were once profitable have now become a financial albatross during the Coronavirus pandemic.
- The ultra-large ships that have come to dominate container fleets in recent years sails half empty due to poor demand from western countries.
A recently published article in Wall Street Journal breaks the news about the drowning mega carriers in the shipping industry due to collapsing demand. Megaships have become a financial albatross for ocean carriers during the corona virus pandemic.
Little flexibility to shift vessels
Shipping-industry experts say the economic disruption from the pandemic restrictions has laid bare a key weakness in the vessels that can carry some 20,000 boxes each and are as long as the Empire State Building is tall.
The ships provide big operating-cost savings on major trade lanes in periods of high demand, but critics say they also box in ship owners, giving them little flexibility to shift vessels around in response to changing markets.
Line operators canceled nearly 380 sailings
Liner operators have so far canceled more than 380 sailings since February across the world’s busiest trade routes due to the coronavirus shutdowns, and shipping analysts expect more cancellations as rising unemployment and weakening manufacturing and retail markets severely curtail demand.
“This crisis will impact world economic flows and necessitate that we all rethink our supply-chain models,” said Rodolphe Saadé, chief executive of France’s CMA CGM SA whose company ordered nine 23,000-container ships in 2017. “Supply chains will need to adapt to sharp fluctuations between supply and demand.”
Ocean carriers will have a hard time shifting their broader fleet strategy, however. Shipping lines have many megaships costing upward of $140 million apiece on order—CMA CGM is due to start receiving the first of its next generation of bigger ships this year—and London-based Braemar ACM Shipbroking expects overall container capacity to increase 3.7% this year.
“If you had a blank sheet of paper and planned from scratch, you probably wouldn’t order these ships,” said Lars Jensen, chief executive of Copenhagen-based SeaIntelligence Consulting, “But the big liners have invested way too much to sideline them and with the scrapped sailings, cargo owners will have to adjust to slower and less efficient service.”
Shipping lines have postponed deliveries in the past but canceling orders would be an expensive proposition, and, in any case, many ships are already under construction and headed into service.
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Source: Wall Street Journal
