The volume of container shipping will drop sharply around May, and a price war between container shipping companies is about to start.
On the 25th local time, the Director General of the World Trade Organization Azevedo said in a video speech that the new coronary pneumonia is a crisis that threatens the health of the people, but it inevitably also has a huge impact on the economy, trade and employment. The latest forecast shows that the economic impact and unemployment caused by the epidemic will be more serious than the financial crisis more than a decade ago, and WTO experts also predict that global trade will fall sharply.
Sindh Marine noted that the shipping consultancy MSI warned in its monthly outlook released on Thursday: "With the spread of the new crown covid19 epidemic worldwide and subsequent measures taken by countries to prevent and control the epidemic, container shipping is leading The outlook of the liner industry in the near future is rapidly deteriorating."
MSI said in the report: "There is no doubt that the container shipping volume will inevitably shrink in 2020, and the recent decline may be close to or even exceed (2008) the level of the financial crisis."
Feng Boming, Chairman of the Board of Directors of Zhongyuan Shipping Port, also said in an interview with Lloyd's Daily that the shipping industry has underestimated the threat of coronavirus to the industry, and the shipping industry will soon feel a greater impact.
"Shipping companies have been prepared for the consequences of China's epidemic, but they did not foresee that the epidemic will eventually become a pandemic, which may make the current period of recovery in container traffic quite short.
According to MSI, on the east-west main routes (trans-Pacific route, Asia-Europe route), “in view of the impending collapse of consumer spending in Europe and North America, the volume is facing huge downward pressure.” The report also said that European imports are facing "Almost unprecedented headwinds", the trans-Pacific route will also face the same impact as the Asia-Europe route, but will lag behind.
"While the data for March should be maintained at a reasonably optimistic level, after that, the question will become'How bad will the situation actually become?'"
Feng Boming also introduced that the goods currently being shipped were ordered before the global outbreak, and these goods may be shipped before May. "Subsequently, exports to Europe and America will decline, and ports and shipping companies will be affected."
MSI believes that the recession throughout 2020 will not be as severe as in 2009, but the second quarter of 2020 may reach the lowest level during the financial crisis.
Specifically, the consulting company expects that the total traffic volume of Asia-Europe routes in March-May will decrease by 17.8% compared with the same period of the previous year, the trans-Pacific route (West Coast of the United States) will decrease by 15%, and the trans-Pacific route (East Coast of the United States) Will drop by 13%.
In addition, MSI also emphasized: "No route can escape the impact of the global economic downturn." MSI pointed out that due to capital flight in emerging markets, soaring dollar value and falling commodity prices, non-main routes are also exposed to great risks. "
"Due to economic contraction, interruption of supply chain and reduction of transshipment cargo, interregional routes will also face severe pressure," the report added.
MSI expects the total container shipping volume on Asia-Middle East-India routes to decline by 12% year-on-year in March-May, and the Asia-Latin America and transatlantic westbound routes will decline by 10% year-on-year. Down 8% and 5%.
MSI said that the continued cancellation of orders by American sellers will force shipping companies to suspend more voyages. In April, there will be a large number of blank flights during the outbreak of China’s epidemic in February this year. In April, the spot freight rate may not be maintained by April.
But the difference is, "This time the impact on demand will come from importers, not exporters, which will change the shipping company’s incentive strategy during price negotiations." Because, when (China) does not produce goods at all, it reduces freight Taking market share is not so meaningful. But in the coming months, the situation may be different, that is, a new price war is more likely. "
But MSI expects the price war between shipping companies will not be as large as in 2016. Because the business alliance between major shipping companies has been strengthened in the past four years, the EU antitrust exemption has also been extended.
However, the decline in freight rates will inevitably fall. The company estimates that spot freight rates on Asia-Europe routes in May will drop by 36% from February, and freight rates on trans-Pacific routes will drop by 17%.
For shippers, low freight rates are of course beneficial to profitability, but low freight rates will also create additional problems. That is to say, in extreme cases, when shipping companies cannot obtain sufficient freight to repay debts, and no government can provide assistance, such as the global supply chain chaos caused by the bankruptcy of Hanjin in 2016 will also bring serious problems to shippers. Blow.
Although MSI’s new report does not mention the risks of shipping companies’ bankruptcy, Alix Partners and Stifel shipping analyst Ben Nolan, including MOODY'S, have repeatedly warned A moment of Hanjin may come.
Nolan warned in a report on Monday, "If Coronavirus eventually causes the global economy to fall into a severe recession or Great Depression, then including the world's second largest container shipping company, Mediterranean Shipping MSC, which has a market share of up to 16%. May all be at risk.
Nolan also introduced that, in addition, CMA CGM, the world's fourth largest container shipping company, was previously downgraded to Caa1 by Moody's (the CMA CGM was downgraded and the risk of default increased). Another name on the list of risks is Yangming Shipping, which ranks eighth. The company's market value has shrunk to only $375 million.
But Nolan also said that the crisis may end without serious consequences.
Related Industry Knowledge
- Differences between DDP, DDU and DAP trade terms in container import and export shipping
- Types and characteristics of container shipping containers
- Common logistics and transportation terms for bulk cargo
- Chinese and English shipping name table
- Understand shipping LCL in one article! How do foreign trade companies operate?
- Dalian Container Terminal has the ability to electronically release all domestic and foreign cargo logistics
- International express delivery from price competition to informatization competition
- Notice on the current better service of foreign trade logistics
- Sinotrans opens up a new channel for international logistics between China and Europe