SHIPPING lines are gearing up to take more ships out of service in Asia, a move sparked by the coronavirus outbreak in China hitting production.
The action is also expected to drive up container spot rates dramatically, and that they will remain high until the pent-up demand from frustrated orders is satisfied.
Prior to the factory shutdown over the Chinese Lunar New Year holiday, the Shanghai Containerised Freight Index (SCFI) registered a spot rate of US$969 per TEU from Asia to North Europe and $1,179 per TEU for Mediterranean ports, reported UK's The Loadstar.
On the Asia to US trade lanes the SCFI readings were $1,545 per FEU for the US west coast and $2,951 for east coast ports.
Workers will start returning from their extended CNY break on February 10, but reports suggest that the closures could last until the spread of the outbreak is halted.
So far, carriers have given a "business as usual" message to customers, with Japan's ONE, for example, saying that, other than in Hubei province, "vessels are still maintaining their normal port calls and operations".
Another negative factor preventing the major ports from running during the crisis, is the lack of staff, including the absence of truck drivers and warehouse staff.
After sweeping up the rolled cargo left on the quay before CNY, demand from China could fall dramatically, and thus carriers will struggle to justify dispatching ships to Europe only half-full, unless they can extract a substantial premium from desperate shippers.
"The virus outbreak brings considerable uncertainty to trade out of Asia in the short-term for all parties," Flexport's head of ocean Martin Holst-Mikkelsen told The Loadstar. "Carriers are announcing additional blank sailings in anticipation of further slowing demand," he said.