US$23 billion loss risked 'if box carriers lose rate control'
IN planning their container shipment bookings for the third quarter, shippers and forwarders can expect a new wave of blanking announcements over the next two-to-three weeks
16 June 2020 - 23:54
The second quarter of the year was characterised by a wave of cancelled sailings. So far, there have been relatively few announced for the third quarter, according to eeSea data.
During July, there are some 235 headhaul sailings scheduled for the Asia-North Europe and transpacific trades, with just five blanked so far. In comparison, May saw 245 sailings and 51 cancellations, and June saw 223 sailings and 28 blanks, reports London's Loadstar.
However, SeaIntelligence Consulting founder Lars Jensen told a recent TOC Events webinar that shippers could expect more blankings for July unveiled soon.
'July is now just five weeks out and that's typically when the first bookings for those sailings would be made, so I would expect carriers to announce blank sailings in the next two or three weeks - not necessarily for all of the third quarter, but certainly July.'
Last week saw some sailings on the transpacific trade 'unblanked', but Mr Jensen cautioned: 'We are beginning to see unblanking, but I do not believe this is sign that demand is returning. What this is a sign of is that the enormous amount of capacity withdrawals was slightly overdone.
'It is not a sign of strong demand, but rather shows that the carriers would rather blank too much than too little.'
He explained that blank sailings had proved to be carriers' only way of maintaining revenue and that, should the industry suffer a freight rate drop in line with the demand decline, the financial disaster would be magnified.
'Carriers cannot do anything about demand, but they have learned that they can affect rates. So the strategy is clear - remove as much capacity as it takes to prevent rates from sliding.
'How much will carriers lose? We think full-year demand will decline by about 10 per cent. If carriers lose this volume but manage to maintain freight rates, the overall loss to the shipping industry will be about $800 million.
'If they lose the volume and the rate levels, the overall industry loss could amount to $23 billion, and the sole difference between the two scenarios is how carriers pull capacity,' he said.
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