ANALYSTS from UK-based shipping consultancy Drewry have warned that the devastating disruption to trade and the subsequent shock to global economies in 2020's first half will have a lasting impact on how ocean carriers ride out the bad weather created by the global pandemic.
The company's research managers Philip Damas and Simon Heaney mapped out forecasts as best they and their company could for the container shipping sector in what are uncharted waters. The weather report was not good.
Drewry's senior manager of container research Mr Heaney said second-quarter 2020 container port throughput is projected to drop an estimated 16 per cent compared with the same time last year, and the company's revised baseline overall outlook for 2020 has global container cargo handling down 8 per cent. 'And that would be the worst performance since the financial collapse of 2009.'
It might also be an optimistic view, reports weekly business news journal, Business In Vancouver, BIV.
Mr Heaney noted that a scenario in which the pandemic lingers deep into 2020 and is followed by another outbreak in 2021 would result in a 12 per cent drop in container traffic this year followed by another 6 per cent decline in 2021.
'Such an outcome,' he said, 'could have very grave implications for the container industry and would certainly require more radical surgery beyond the industrial scale of blank [cancelled] sailings we are currently witnessing.'
That radical surgery from a prolonged downturn, he added, 'would undoubtedly raise the risk of a major carrier bankruptcy, and in this nightmare scenario we would expect to see mass idling of ships and staff reductions.'
That could have serious consequences for Vancouver-based Seaspan Corp, which is the world's largest lessor of container ships. Its customers include major container carriers such as Cosco ; Yang Ming Marine, which reported a US$27 million loss in 2020's first quarter; and the Ocean Network Express (ONE) shipping alliance.
Drewry's Z score financial metrics, which are used to assess how close a container carrier company is to slipping into bankruptcy, noted that eight of the 11 global container carriers assessed were in the Z score's financial distress zone.
Only three were relatively secure, according to Drewry's managing director in charge of logistics practice Mr Damas. He noted that Drewry's Z scores were based on financial data from the end of 2019.
'So as we move into the current market downturn, these Z scores will deteriorate. Therefore we should not [discount] the possibility that one of the weaker carriers could reach Hanjin-type levels and disappear.'
Mr Damas added that the 8 per cent projected drop in global container volume represents a revenue reduction of approximately US$18 billion for the container carrier sector.
Mr Damas also noted that several other issues are threatening to seriously disrupt container shipping. They include the challenge of repatriating seafarers whose employment contracts with ships have expired but cannot return to their home bases because of international travel restrictions.
If those crew members or their unions do not agree to contract extensions, ships will be under-manned and considered unseaworthy. That will force more cancelled sailings and further disrupt global trade and supply chains.
SeaNews Turkey
The company's research managers Philip Damas and Simon Heaney mapped out forecasts as best they and their company could for the container shipping sector in what are uncharted waters. The weather report was not good.
Drewry's senior manager of container research Mr Heaney said second-quarter 2020 container port throughput is projected to drop an estimated 16 per cent compared with the same time last year, and the company's revised baseline overall outlook for 2020 has global container cargo handling down 8 per cent. 'And that would be the worst performance since the financial collapse of 2009.'
It might also be an optimistic view, reports weekly business news journal, Business In Vancouver, BIV.
Mr Heaney noted that a scenario in which the pandemic lingers deep into 2020 and is followed by another outbreak in 2021 would result in a 12 per cent drop in container traffic this year followed by another 6 per cent decline in 2021.
'Such an outcome,' he said, 'could have very grave implications for the container industry and would certainly require more radical surgery beyond the industrial scale of blank [cancelled] sailings we are currently witnessing.'
That radical surgery from a prolonged downturn, he added, 'would undoubtedly raise the risk of a major carrier bankruptcy, and in this nightmare scenario we would expect to see mass idling of ships and staff reductions.'
That could have serious consequences for Vancouver-based Seaspan Corp, which is the world's largest lessor of container ships. Its customers include major container carriers such as Cosco ; Yang Ming Marine, which reported a US$27 million loss in 2020's first quarter; and the Ocean Network Express (ONE) shipping alliance.
Drewry's Z score financial metrics, which are used to assess how close a container carrier company is to slipping into bankruptcy, noted that eight of the 11 global container carriers assessed were in the Z score's financial distress zone.
Only three were relatively secure, according to Drewry's managing director in charge of logistics practice Mr Damas. He noted that Drewry's Z scores were based on financial data from the end of 2019.
'So as we move into the current market downturn, these Z scores will deteriorate. Therefore we should not [discount] the possibility that one of the weaker carriers could reach Hanjin-type levels and disappear.'
Mr Damas added that the 8 per cent projected drop in global container volume represents a revenue reduction of approximately US$18 billion for the container carrier sector.
Mr Damas also noted that several other issues are threatening to seriously disrupt container shipping. They include the challenge of repatriating seafarers whose employment contracts with ships have expired but cannot return to their home bases because of international travel restrictions.
If those crew members or their unions do not agree to contract extensions, ships will be under-manned and considered unseaworthy. That will force more cancelled sailings and further disrupt global trade and supply chains.
SeaNews Turkey