Storage centers are overwhelmed with products such as refrigerators and washing machines, as retail has asked shipping companies to delay deliveries, which can drag container shipping up to 30% in the coming months, said Esben Poulsson, President of the International Maritime Chamber (ICS). This slowdown has dropped shipping activity probably around 15% so far this year amid the coronavirus pandemic, added Poulsson, who projected that the second-quarter decline, compared to last year, will depend on the extent to which governments reopen economies.

“Stocks of goods like clothing, textiles, household appliances, are full,” Poulsson said by phone last week. “We have heard consignees of these goods asking shipping lines if they can store these goods for a period of time or slow down their vessels or basically delay delivery,” the ICS representative added. In fact, shipping companies such as CMA CGM and MSC have raised offers that will allow them to delay the delivery of containers at destination ports, temporarily ceding storage spaces in different locations in their storage centers in different parts of the globe until when necessary. .

The drop is a setback for global shipping lines such as Cosco Shipping and ONE, which started the year strong when healthy trade volumes allowed the shipping industry to increase rates. That optimism has now evaporated, as the virus outbreak has forced consumers to stay home, holding back retail sales in the biggest consumer markets.

Advance bookings for transportation from Asia to North America and Europe have slowed in April and May, according to ONE CEO Jeremy Nixon. And the situation is not less, the low demand for capacity has led the inactive fleet of container ships to a strong increase, reaching 2,20 Mteu - corresponding to 385 units - as of March 13. This number is expected to increase in the coming weeks and also to increase the number of canceled itineraries. Similarly, it is believed that the upcoming Labor Day holiday in May could trigger a new round of capacity cuts.

In the United States, containers entering through the Port of Los Angeles plummeted 26% in March from the previous year, while performance in container mobilization in Singapore fell to its worst reading since August, while productivity Hong Kong fell below average after a short breather in February.

“Some container ships have been running at only 20% capacity and numerous sailings have been cancelled,” Tim Huxley, president of Mandarin Shipping Ltd., said in an interview. “Our five containerships have been carrying less and we have also had to put up with some waiting time between each job.”

The financial pain from the shutdowns of major economies is spreading throughout the supply chain, said Lee Klaskow, a senior logistics analyst at Bloomberg Intelligence. “The bulk, Ro-Ro and container shipping industries will bear the brunt when service industries grind to a halt and manufacturing capacity sits idle,” he added.

Where is it going?

To react to declining exports from Asia, ONE has reduced the region's regular itineraries to northern Europe, the Mediterranean and North America, Jeremy Nixon said. A major question for the industry now is when demand might pick up and whether global trade will be permanently disrupted by the pandemic. "In the long term, we continue to see strong trade requirements for global trade and container shipping," Nixon said. “But the challenge will be to see what the growth is after the coronavirus.”

However, there are dark clouds that could indicate the opposite. One of them is the analysis carried out by Alphaliner on the Altman Z-Scores of the world's top shipping companies at the end of 2019, which showed that seven of the eleven shipping companies have Z-Scores lower than 1,3, which indicates a probability “very high” of a possible insolvency. The other four (Hapag-Lloyd, Maersk, OOIL and Wan Hai) had healthier Z-Scores of 1,72 to 1,92, but could also come under pressure if the demand crunch continues for an extended period.