Port Wings, 13 May 2020:
Just as the number of blank sailings out of China by container carriers started to subside, the industry is bracing for another surge of void sailings on the Asia-Europe trade in the next three weeks with carriers withdrawing close to 40 per cent of capacity in an attempt to match their available space with evaporating demand.
Cancelled sailings linked to COVID-19 until week 28 beginning July 6 currently stand at 55 on Asia-North Europe and 38 on Asia-Mediterranean, according to Sea-Intelligence Maritime Consulting, which said the next three weeks would see 35 per cent of Asia-Europe capacity pulled from the trade.
A blank sailing (a void sailing) is a sailing that has been cancelled by the carrier. A blank sailing could mean a vessel is skipping one port, or that the entire journey is cancelled. When carriers see such a sharp drop in booking activity, they have no choice but to cancel sailings. The strategy put in place by the carriers to address the huge volume drop across major container trades globally, since the outbreak of Covid-19.
Ports felt the impact of blank sailings in February, which saw the highest sailing cancellation rate since the COVID-19 outbreak, with a spike of 105 cancellations across Transpacific and Asia-North Europe & Mediterranean trades. The lowest was in March, with only 33 cancellations, representing a drop of 69% from the previous month.
2M alliance between the two container shipping majors Maersk and MSC was especially active as the two carriers temporarily withdrew the AE2/Swan and AE20/Dragon services on the Asia-Europe trade for the entire second quarter of 2020.
However, if demand picks up earlier than expected they might also resume service earlier. The capacity withdrawal equals a 21% capacity reduction in the trade.
Furthermore, quite a few of the blank sailings from all the alliances are made with a notice time much shorter than usual. This shows that the drop-off in booking levels is happening very quickly.
With container exports from China reduced drastically, Shipping lines were losing millions of dollars sailing as per committed schedule but with ships partially filled. The only way to sail with good volume so that the journey is profitable for the shipping line is to reduce the total sailings between a pair of ports.
This will mean that containers pile up at the port for every missed sailing and thus when the ship does sail, it sees a good volume.
There is a severe shortage of equipment (actual physical empty containers) because there is a pile-up of filled containers at the ports (due to blank sailings).
Also, a lot of vessels with containers stranded in and around south and east of China, as containers are not allowed to be discharged, is adding to reduced capacity/containers shortage.
Empty containers are in short supply and thus the cost for containers is rising. Long term rate contracts are being voided citing Force Majeure and Carriers have also begun imposing an “equipment imbalance surcharge”.
Despite crude having crashed, the benefits have been wiped off, and as an example, spot rates from JNPT and Mundra to the US East Coast (New York) have increased by around 20%. Prices to other ports have also increased between 15% and 100%
Visibility is of prime importance in these times of uncertainty. Empty container triangulation can help. In a nutshell, an empty container with an importer can be used by an exporter nearby without having to be transferred back to the yard.
Container ship operators such as Maersk Line, CMA-CGM S A and Mediterranean Shipping Co S A (MSC) are looking at ways to cut costs as volumes plunge in what is Asia’s third biggest economy.
Container volumes at JNPT, India’s top container port, fell 37 per cent in April compared to the same month last year. Pan India, container volumes have declined by more than 12 per cent since April year on year, when the new financial year began.
Since March 25, forty-six sailings of scheduled services had to be blanked / cancelled and some of the services had to be rationalised, resulting in huge costs to the lines for the idling of vessels.
Taking that into account, even if they have to forego one sailing, that is much more favourable for an owner/operator. Most of the existing weekly services are calling at Indian ports once in two weeks or even longer. Weekly sailings have gone now basically because there is no cargo, both ways. This is not a problem specific to India, it’s all over the globe.
The unprecedented number of cancelled sailings will extend until July, a clear indication of low demand expectations by carriers and a lack of forward bookings. That means Europe’s hub ports will take a hit at least through the second quarter.
Despite the huge number of blanked sailings, the decline in the number of deep-sea container vessel calls was being counterbalanced by carriers increasing the frequency of regional feeder services.
The canceled sailings will require a reshuffle of the supply chains, and the new arrangements are expected to be ad-hoc as market uncertainty lingers on.