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Drewry sees Covid-19 downturn stretching to five years

According to a report in the Hong Kong Shipping Gazette newsletter, container shipping lines face the prospect of cutting capacity by scrapping ships if the downturn caused by the Covid-19 crisis persists, says London consultancy Drewry.

"The band-aid of blank sailings won't cut it," Drewry research manager Simon Heaney told a recent webinar.

Healey saw a downturn stretching to five years that would see a "withdrawal of capacity on a more permanent basis, demolition ramp-up, and an end to newbuilds."

The capacity cuts, which saw about 10 per cent of the container ship fleet idled in May and June, according to Drewry, have helped support freight rates.

As a result, Drewry's head of research, Martin Dixon, told the webinar that carriers are on course to make operation profits of USD9 billion this year, "which is a complete reversal of the USD4 billion deficit" forecast in March.

Dixon said 2021 would be another strong year, with carriers forecast to generate operating profits of USD7 billion against the USD3 billion forecast in March, although that is "predicated on carriers holding on to the gains" seen this year.

Dixon thought freight rates could soften in the second half of this year, with an overall three per cent gain in rates, as carriers found it more challenging to match capacity to recovering demand.

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