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Global Supply Chain News: Dramatic Changes in Global Shipping as a Result of Collapse of Demand Due to Coronavirus

 

 

Many Product Categories See Sharp Drop, but On-Line Sales Holding Up, Shipping CEO Says


April 1, 2020
SCDigest Editorial Staff

In January, container shipping lines cut back on sailings out of China, as the coronavirus there caused factories to close and many ports to shut down for periods of time. Cargo containers piled up at terminals and on vessels for weeks as operations in China ground to a near halt.

Now, as the virus hammers the West, carriers are moving even faster to cancel sailing, but now due to falling demand in many sectors, which is resulting in huge overcapacity.

Supply Chain Digest Says...

While demand plummets for items from apparel to auto parts, demand for imported food and other consumer staples is surging.


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Last week, the carriers had cancelled two sailings due to the pandemic spread. However, as of Sunday, that number had increased to 45 blank sailings, according to data carried in the latest report from Copenhagen-based Sea-Intelligence Consulting.

According to the Splash24x7 web site, it is not just the scale of the voided sailings, but the speed with which they are being announced that is expected to create supply chain challenges for many shippers.

"Typically, shipper supply chains are fairly resilient if a 3-4 week notice is given… That carriers now cancel multiple service with very short notice should therefore be seen as a clear indication of just how quickly demand is dropping, due to the pandemic shutdown of major parts of the global economy," Sea-Intelligence said in its report.

As a result, inbound shipments into the US are falling rapidly.

Container volumes from China into California's three largest ports - Los Angeles, Long Beach and Oakland - were down 35.2% in February from a year ago, according to trade data research company Panjiva.

But that was mostly the result of supply issues China. Now, "we are looking at a demand side shock which is impacting North America and Europe by the sudden lockdowns of cities," Jeremy Nixon, CEO of Japanese container carrier Ocean Network Express, told the Wall Street Journal this week.

Panjiva's analysis found overall US seaborne imports fell 15% in the first two weeks of March, including a 44.9% decline in imports from China and a 6.5% slide in goods from Europe - and that as the virus was just catching hold in the US. The numbers for the second half of March are sure weaker still.

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The ports of Los Angeles and Long Beach said last week that they would cut the operating hours at their gates by an hour each day to thoroughly clean terminals and equipment there – though how you clean a massive port complex is not exactly clear.

While demand plummets for items from apparel to auto parts, demand for imported food and other consumer staples is surging, as it is for some other items from on-line merchants.

The Wall Street Journal reported that shipping executives say some big retailers selling those kinds of products are negotiating up to 30% more space on ships over the next three months - space that looks likely to be readily available.

Nixon said his shipper customers that sell on-line "see strong demand, and those who don't will see a fall."

All in all, it looks like another year of deep red ink for ocean container carriers.

 

How much do you think US imports will fall? Let us know your thoughts at the Feedback section below.

 

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