- 30 sailings remain canceled, with 23 across the Pacific and the rest to Europe.
- The cancelations have resulted in a delay or reduction in shipments to the U.S.
- More than 350,000 containers have been removed from global trade since the virus outbreak.
- There is a shortage of power plugs for refrigerated containers due to a shortage of staff at Chinese ports.
- Daily freight rates have fallen to between $10,000 and $40,000, from up to $80,000.
According to an article published in The Wall Street Journal and authored by Costas Paris, shipping trade volumes are on a downhill due to coronavirus outbreak. Large container ships are leaving Chinese ports as little as 10% full, and sailings are being canceled as carriers brace for a financial retreat
What happened?
This has caused a ripple effect and its presence is being felt in industrial production. The shipping sector is embracing a blow due to reduced output.
“Substantially less cargo is being moved between China and the rest of the world,” said Lars Jensen, head of Denmark-based maritime research group Sea-Intelligence. “Last week we had an additional 30 sailings canceled, with 23 across the Pacific and the rest to Europe.”
Delay in shipments
The canceled trips amounting to 50 have resulted in a delay or reduction in shipments to the U.S., where retailers may see a slowdown in their traditional restocking of inventories for the spring.
Senior executives at five European and Asian container ship operators told the Journal that their companies are preparing profit warnings for the first half or the full year. Ocean cargo carriers had been hoping for a rebound in business with the easing of the trade showdown between the U.S. and China.
Bad news for shipping
“If this continues you will see a sea of red this year. It’s really bad,” said the chief financial officer of a large Asian box-ship company, asking not to be named.
A Shanghai broker said at least one container ship that can move more than 20,000 containers left Shanghai for Northern Europe with only 2,000 full containers.
“It will pick up more at ports on its way, but loading data show it will reach Europe around 35% full,” this broker said. “That’s unprecedented, and a lot of money is being lost because it doesn’t even cover the fuel cost.”
350,000 containers off-market due to virus outbreak
Sea-Intelligence said in a report this week that more than 350,000 containers have been removed from global trade since the outbreak of the virus led China to impose large travel restrictions at the end of the country’s Lunar New Year holiday break.
Companies exporting goods into China are also facing problems because only a fraction of workers is back at work to handle goods arriving at ports. That has backed up cargo at terminals and warehouses at big gateways including Shanghai, Tianjin and Ningbo.
“It [congestion] is due to inbound shipments that have either not been cleared by customs brokers or for which delivery and pick-up services could not be arranged,” said Resilience360, which monitors risks across supply chains and is owned by Deutsche Post DHL.
Shortage of power plugs
A broker in Singapore said there is an “acute shortage” of power plugs for refrigerated containers that move fresh produce in Ningbo because there are no workers at terminals. He said some cargo has been diverted from several mainland ports to Hong Kong, which some carriers and shippers are now using as an alternative entry point for goods that are then trucked into China.
A group representing U.S. agriculture exporters warned its members this week to ensure that ocean carriers can store their goods on arrival in China, particularly items like meat, vegetables, and fruit that require refrigeration. American exporters are seeing cargo backed up even at U.S. hubs because of the congestion in China’s distribution networks.
Shipments down by half
Brokers said crude and natural gas shipments are down by nearly half across China’s main ports. Daily freight rates for big crude tankers have fallen to between $10,000 and $40,000, from up to $80,000 at the start of the year.
Norway-based BW Energy, which operates the world’s biggest fleet of gas carriers that move products like propane, this week cut its projected valuation for an initial public offering at the Oslo Exchange from $$700 million to $500 million.
“The offering period has coincided with significant volatility in the global financial markets due to the outbreak of the coronavirus in China, which has also triggered a material downward movement in the oil price,” the company said.
Retrofitting to take a backseat
The China Association of the National Shipbuilding Industry said more than 200 deliveries of ships under repairs or retrofitting could be pushed back. China is the world’s biggest shipbuilder, with more than 960 vessels set to be delivered this year, according to data provider VesselsValue.
“The Chinese players are facing significant challenges in fulfilling their contracts because they are not able to operate at full capacity after the Lunar New Year holiday,” the shipbuilding group said.
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Source: TheWallStreetJournal
