Coronavirus Toll on Shipping Reaches $350 Million a Week

Coronavirus Toll on Shipping Reaches $350 Million a Week
Costas Paris Feb. 10, 2020

Falling volumes and canceled sailings hit container shipping, bulk operators face falling industrial demand

Diminished trade as a result of the coronavirus outbreak is costing container shipping lines $350 million a week in lost volumes, a new report says, as declining activity in China begins to take a deeper toll on maritime operations from shipyards to carriers of bulk commodities.

More than 350,000 boxes have been removed from global trade networks since the disease broke out last month, Denmark-based maritime data provider Sea-Intelligence said Monday.

China’s industrial sector is slowly resuming production with the end of Beijing’s formal extension of the Lunar New Year holiday on Monday, but many factories remain closed and others were operating at only a fraction of their capacity as a swath of the country remained locked down under travel restrictions meant to hold back the spread of the virus.

Port officials and tug operators at the ports of Shanghai and Hong Kong, two of the world’s busiest container shipping gateways, said only about half of dock workers returned to work on Monday.

“Truck drivers spent the night in their vehicles waiting to unload cargo to ships that didn’t show up,” said Li Chen, a tug captain for Shanghai Salvage Co., a state-run maritime services operator. “There are delays in processing cargo with customs still on skeleton staff. The usual rush after New Year isn’t here. A lot of people fear for their jobs with business falling so much.”

At least 21 sailings between China and the Americas have been canceled so far, according to Sea-Intelligence, along with 10 cancellations in the Asia-Europe trade loop.

The cancellations amount to 198,500 containers in the trans-Pacific market, while cancellations between Europe and Asia amount to about 151,500 boxes.

U.S. retailers depend on those imports to replenish inventories heading into the spring, but the nation’s largest retail group is predicting sharply diminished shipping volumes over the next few months.

The monthly Global Port Tracker report issued Monday by the National Retail Federation and Hackett Associates projects inbound container volumes at U.S. seaports in February will be down 12.9% from a year earlier and off 9.5% in March from a year earlier.

The report also lowered its forecast for container imports into the U.S. by 370,000 containers over February and March from estimates made before the coronavirus outbreak.

“U.S. retailers were already beginning to shift some sourcing to other countries because of the trade war, but if shutdowns continue, we could see an impact on supply chains,” said Jonathan Gold, the NRF’s vice president for supply chain and customs policy.

IHS Markit, a transportation data provider, said in a new report that it expects dry-bulk shipping will be the hardest hit of the shipping sectors because of weak demand from China’s factories for raw commodities such as iron ore and coal.

“The first quarter will likely see a significant drop although a question remains on the extent of demand recovery once the dust settles and in the second half of 2020,” said Rahul Kapoor, a vice president at IHS Markit.

Jie Ming, a crane manager at the Xixia industrial area at the Port of Nanjing, the biggest port on China’s Yangtze River, said inbound iron ore shipments were significantly lower over the past three weeks.

“I’ve never seen it so slow as this,” he said.

Work at China’s shipyards is being delayed on new vessels and for ships that are being fitted with exhaust systems known as scrubbers to meet regulatory requirements for reduced sulfur emissions.

“We got two ships in Southern China that need to be retrofitted,” said a Scandinavia-based tanker owner who asked not to be identified. “They were supposed to be back in the water over the next couple of weeks, but we were told the yard has issued force majeure certificates for eight vessels they are working on, saying the virus will push back deliveries by a minimum three weeks.”

Under the legal protections of force majeure, companies can seek to avoid penalties that may come from not fulfilling contracts.

Ship broker Clarksons PLC said deliveries of new tankers, bulk ships and container ships would also likely be delayed over the coming months because of the slowdown from the coronavirus.

Chinese shipyards have 960 vessels in their order books worth a combined $27 billion, according to VesselsValue Ltd., a London-based maritime service.

“We are working at around a quarter of our capacity,” said an executive at China State Shipbuilding Corp., which employs more than 300,0000 workers at various facilities. “The supply chain for some yards has been seriously impacted. Spares aren’t being delivered and engineers are still at home.”

“Chinese New Year pushes back work scheduled by up to four weeks. Coronavirus is adding another three weeks of delays,” he said.