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Reliability to suffer as void sailings multiply

Container line service cuts and rising congestion will make it hard for shippers to plan ahead.

The global economic lockdowns that have spurred yet more mass voiding of sailings by container lines look set to blight the supply chain planning efforts of shippers for weeks to come.

As reported in Lloyd’s Loading List, Drewry expects additional blank sailings and service suspensions to be announced as carriers attempt to manage the downturn in box volumes resulting from economic shut downs as governments attempt to limit Covid-19 deaths.

For those shippers not affected by declining demand and still buying space on container ships, further disruption should be expected, according to Lars Jensen, CEO of Sea-Intelligence Maritime Consulting.

He predicts more short-notice service cancellations from carriers in the second quarter and advises that shippers formulate “extremely flexible” logistics plans including being ready to use alternative carriers.

He told Lloyd’s Loading List cargo owners should also be prepared for transit times becoming much longer at short notice, direct connections suddenly becoming transhipment connections and “congestion issues in ports and terminals and a potential shortage of trucking capacity”.

Blanked sailings surge

The number of Q2 sailings blanked by carriers continues to grow as the Covid-19 pandemic prompts additional ad hoc capacity cuts. Both the 2M and THE Alliance have announced major capacity cuts on the Asia-Europe trades with almost immediate effect, with the former suspending the Far East - North Europe ‘AE-2/Swan’ service and of the Asia-Med ‘AE-20/Dragon’ service which was due to start loading in China on 8 April.

“Compared to earlier this year, when the COVID-19 outbreak only affected manufacturing in China and thus exports from Asia, the disease has since spread to Europe and to other parts of the world, where nation-wide lockdown orders and production line closures are now putting a lid on demand,” said Alphaliner.

The analyst said carriers were also blanking additional sailings on the Transpacific, but to a lesser extent than on the Asia-Europe lane.

“Even further cuts might be on the table for this trade in the not-too distant future,” added Alphaliner, which also noted that India had recently entered a three-week lockdown period which has prompted several shipping lines to announce voyage cancellations.

On the trans-Atlantic trade, THE Alliance has also blanked the 22 April westbound sailing of the North Europe-USEC ‘AL4’ service from London-Gateway citing a lack of cargo, while COSCO Shipping Lines, OOCL, Yang Ming and Ocean Network Express have decided to postpone the launch of their new East Med-US East Coast ‘EMA’ service by three weeks, reports Alphaliner.

Service reliability plunge

Late notice changes to schedules are already impacting carrier service reliability. According to Sea-Intelligence, global schedule reliability dropped by a further 3.4 percentage points month-on-month in February 2020 to 65.1%, the lowest recorded global score since the analyst introduced its coverage of reliability in 2011.

Alan Murphy, CEO, Sea-Intelligence, told Lloyd’s Loading List that not only do blanked sailings directly impact shippers with space booked on a specific service, they also affect the schedule reliability of services still in operation, as inducement calls and other tactical measures become harder to implement within existing schedules.

“On top of this, everyone is focusing on retaining cash flow, including the carriers, and even though bunker 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 as boxes are piling up inland.”

Carriers to rip up schedules?

Asked if schedule reliability might deteriorate further from February’s level, Murphy replied,

“I cannot say for certain that it will get worse, as we've already hit a 9-year low and it is quite possible that the carriers may completely reschedule their networks,” he said. “If they in their new schedules include sufficient buffers to handle the coronavirus challenges, schedule reliability could technically improve.”

He also said it was worth factoring in the possibility that lower demand could in turn lead to higher schedule reliability, a trend apparent on the Africa trades in recent times where lower demand has led to fewer boxes, fewer vessels and less congestion.

Congestion a key factor

However, he said shippers hoping that falling demand would result in improved reliability would likely be disappointed.

“I think that hoping for such a silver lining is a little too optimistic, as 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,” he said

“Carriers may have to tranship in unfamiliar ports and terminals, and the massive amount of blank sailings will lead to inland supply chain disruptions, which will lead to pile-ups and challenges in container repatriation, and thus to equipment shortages.

“Even if we should find ourselves in a swift recovery, we will probably see continued equipment shortages.

“I would expect schedule reliability to be very poor in the months ahead, and probably drop further.”

Source: Lloyds Loading List

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