Supply issues loom amid coronavirus pandemic
The container shipping market is largely braced for a tough quarter, with the global slowdown resulting from the coronavirus outbreak creating a range of logistical issues. Over the course of the first quarter, the market saw ports shut down, with shelter-in-place regulations coming into force and a dip in import demand, which left carriers trying to manage the fall in rates with a raft of void sailings.
With footfall in shopping districts tumbling around the world, particularly in the outbreak hotspots of North America and Europe, there has been much lower customer demand, leaving some cargo owners cancelling contracts up to a few years out. But market sources say that, even if there is a sudden loosening of the restrictions, the logistical constraints in the market are due to continue for some time to come.
The Platts Container Rate 13 — North Asia to West Coast North America — has dropped $75 from January 3 to $1,525/FEU as of March 31, although the fairly limited loss was evidence of the carrier action in blanking several sailings to maintain capacity rates along this route. Platts Container Rate 1 — North Asia to North Continent — fell significantly, however, dropping from $1,850/FEU to $1,275/ FEU over the same period.
Port delays
March saw a shutdown, albeit temporarily, at the port of Houston, with safety protocols also coming into force at many other ports across the world, including the port of Barcelona.
“There are still logistical delays at Spanish and Italian ports and we may see that increase to some other countries like Greece and North African nations which are already showing some jittery effects,” said one Mediterranean carrier source.
With issues surrounding port slowdowns across the world, despite port employees being classified as key workers in many nations, there are expected to be more logistical problems going forward.
“The issue isn’t really whether the ports are operational at the moment, it’s the number of truckers, the warehouse staff at the companies buying goods — these are the people that we should be worried about as they are not classified as key workers. If you can’t move goods from the port, it’s not much good if the ports are fully operational or not,” said a freight forwarder source.
Source: S&P Global Platts
Weaker bunker prices
On the back of tumbling oil markets, bunker fuel charges contracted significantly over the course of the first quarter.
However, the picture going forward may not be as supportive as this would initially suggest, with falling oil prices amplifying signs that a recession may be on the horizon, meaning lower consumer demand and lower volumes being shipped as a consequence.
On top of this, should oil prices rebound, there could be some considerable issues for shippers, freight forwarders and carriers that have bunker adjustment mechanisms in place.
The downward spiral in the wider oil complex has written off any net rises that the International Maritime Organization’s 2020 sulfur regulations could have added to the cost of container freight at the start of the year. Savvy market players, however, are keenly reviewing their bunker recovery mechanisms in preparation for the inevitable rise in oil prices, which has the potential to cause as much disruption to the container bunker fuel charges as the falling price.
— George Griffiths, Global Editor, Containers