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Coronavirus set to ‘hammer’ container shipping demand

Bimco rules out a short-term recovery and predicts rates are more likely to fall than rise.

Container shipping demand will not enjoy a late summer – or even autumn – revival, according to Bimco. Indeed, rates are more likely fall rather than rise in the coming months.

“The coronavirus pandemic looks set to continue to hammer container shipping demand,” said Peter Sand, Chief Shipping Analyst.

“While the lower demand that came when China shut down much of its manufacturing in February has passed, it was been replaced by a demand shock, as almost every other country entered their own forms of lockdown.

He said the recession and drop in consumer spending the pandemic had provoked would continue to hit the container shipping industry hard “with no sudden bounce back in demand expected”.

He added: “Even under the WTO’s (World Trade Organization) optimistic scenario, container shipping demand will fall by 10% in 2020.

“Bimco expects that, much like on the Far East to Europe route, spot rates and contract rates will fall in the coming months, with average earnings for the year at loss-making levels.”

In his latest analysis, Sand notes that the idle container ship fleet reached a new record this month, at 2.65m TEU, as lines took action to shore up spot rates.

With demand still severely affected, he predicts the idle fleet will remain at around 10% for the rest of the year.

“The large idle fleet has, so far, been enough to support freight rates, temporarily hiding the losses for carriers,” he said. “While savings are made by not sailing – with voyage costs and some operating costs avoided – the empty ships are still generating a loss on a daily basis, with some of the operating costs still present and financing costs unchanged, while not providing any income.”

Sand believes carriers are having particular difficulties finding ways of deploying all the ultra-large container ships delivered in recent years.

“Their size means many of them can only be deployed on the Far East to Europe route, and with demand here falling, the ships will have nowhere to go,” he said.

“The jump in idle fleet also shows that cascading to other routes in present market conditions is not an option, as demand has evaporated across the board. In the charter market, the biggest losers in the short term are those who charter their ships on short-term contracts.”

Source: Lloyds Loading List



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