THE crisis embracing the global
container shipping industry looks set to worsen, and some experts do not
foresee any improvement until next year. At the moment, the number of
void sailings have surged from 45 to 120 in just three days while
schedule reliability has plummeted.
The sector is grappling with demand from
cargo buyers in the US and Europe collapsing at an alarming pace. Hopes
for a second-half V-shaped rebound are dwindling. Containers already
delivered to import terminals are piling up, prompting Mediterranean Shipping Company (MSC) to introduce a stopgap storage plan, New York's FreightWaves reported.
According to the latest global schedule reliability statistics compiled by Copenhagen-based Sea-Intelligence,
reliability in February dropped to 65.1 per cent, "the lowest recorded
global score since Sea-Intelligence introduced the score in 2011," says
CEO Alan Murphy.
Furthermore, the average delay for late vessel arrivals rose to five
days in February, the highest number seen "outside of the US west coast
labour dispute in early 2015".
Asked by FreightWaves whether reliability would worsen, Mr Murphy
replied: "Yes, I would expect schedule reliability to be very poor in
the months ahead and probably drop further."
"On top of this, everyone is focusing on retaining cash flow, including
carriers, and even though bunker [marine fuel] prices are incredibly
low, and thus schedule recovery - speeding up - is now much cheaper, I
strongly doubt there is any willingness to blow cash on marginally
improving schedule reliability when it is already extremely poor and
boxes are piling up inland."
SeaIntelligence Consulting CEO Lars Jensen also believes reliability is likely to deteriorate.
"I cannot say for certain that it [reliability] will get worse," Mr
Murphy conceded, noting that "it is quite possible that the carriers may
completely reschedule their networks, and if their new schedules
include sufficient buffers to handle the coronavirus challenges,
schedule reliability could technically improve - although the 'new'
product being sold, now with considerable buffer, would be inferior to
what would have been promised without such buffers.
"It could also be argued that lower demand could in turn lead to higher
schedule reliability, a pattern we have seen in recent years in the
Africa trades, as lower demand leads to fewer boxes which leads to fewer
vessels, which can mean less congestion where congestion is a main
cause of poor schedule reliability."
"That said," Mr Murphy continued, "I think that hoping for such a silver
lining is a little too optimistic. I think congestion will increase in
the coming months as importers will be struggling to pick up their
containers, even if there will be less of them, and carriers may have to
transship in unfamiliar ports and terminals.
"The massive amount of blank sailings will lead to inland supply-chain
disruptions, which will lead to pileups and challenges in container
repatriation, and thus to equipment shortages," Mr Murphy added.
Mr Jensen said in an online post: "The speed of the [demand] drop is
bound to create significant problems because you already have a large
amount of cargo on the ships. When it arrives at the destination, it
arrives into a reality where it is not needed or wanted by anyone."
The container pileup concern is becoming so acute that MSC has just
created the Suspension of Transit (SOT) programme. To better accommodate
containers shipped from Asia that are delayed on the import side, it
has set up special yard storage at six transshipment hubs: Bremerhaven,
Germany; Busan, South Korea; King Abdulla port, Saudi Arabia; Lome,
Togo; PSA International Panama, and Tekirdag Asyaport in Turkey.
The latest step-down comes on top of a pronounced US import decline in
the first quarter. According to SONAR data on the seven-day moving
average of the number of customs filings, US filings for imports from
China to all US ports are down 42 per cent year to date and filings for
imports (regardless of origin) to the port of Los Angeles are down 18
Freightos chief marketing officer Eytan Buchman pointed to a "scramble" by shippers to cancel orders.
He highlighted the fallout from Amazon's mid-March decision to stop
accepting nonessential goods to its warehouses from third-party
"Fulfiled by Amazon" (FBA) sellers.
"Shipments booked by FBA sellers using the Freightos.com
marketplace?reached a peak three weeks ago only to sink by nearly 50 per
cent last week after the change in Amazon's policy," Mr Buchman said.
Mr Jensen offered a pessimistic view on the timing of a rebound of
containerised import demand. "My view right now is that the rebound will
not happen until 2021," he warned.
"Even if we are wildly optimistic and assume all lockdowns are removed
in two to three months, that does not mean consumer confidence returns
that fast. And more importantly, importers will be wary about ramping up
imports quickly after summer because of the lingering worry about the
second wave [of infections] late in 2020. If the second wave goes OK,
then we will see a very sharp rebound in 2021."