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Global Supply Chain News: Just How Bad will It get for Ocean Container Carriers?

  Maersk Says Q2 Container Volumes will Fall 20-25%


May 20, 2020
SCDigest Editorial Staff

As SCDigest has reported, these are tough times for ocean container carriers, with rapidly falling volumes at first due to supply issues early in the year from the coronavirus crisis in China that shuttered factories, and then from a huge drop in demand as the virus broke out in the US and Europe. (See Ocean Cargo Carriers Hunkering Down to Survive in Face Collapsing Demand.)

Supply Chain Digest Says...

One industry CEO recently said that if volumes recover in Q3, the top 10 container carriers will likely all still be standing at the end of the year.

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The Maritime analysts at Alphaliner predict that global container shipping volumes will fall 7.3% in 2020 versus last year, a sizable drop for sure but perhaps much less than the fall that will be seen in certain lanes, notably Asia to US and Euro ports.

The latest Global Report from the National Retail Federation and Hackett Associates forecasts that US container imports will decrease 20.4% in May, followed by declines of 18.6% in June, 19.3% in July and 12% in August.

The drop will then at least fall into the single digits, at 9.3%, in September.

Maersk Lines, the sector's largest container carrier with a 17% market share, is projecting even lower volumes in Q2 than the Port Tracker report predicts its container traffic will decrease expects container traffic to decrease 20-25% in the quarter.

”Without a doubt it's going to be the steepest ever drop in demand within a quarter,” said Maersk CEO Soren Skou.

To compensate, Skou said Maersk is blanking a growing number of previously scheduled sailings, as many as 140 in Q2 after voiding 90 sailings in Q1.

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The strategy worked in Q1, with Maersk saying it actually saw rates rise 5.7%. Whether that will repeat itself in Q2 with even greater volume declides remains to be seen, but Skou told analysts "The aim is to provide capacity in line with demand. We save costs with the fewer sailings and capacity utilization on the ships that still sail is high."

What happens beyond Q2 is anyone's guess. One industry CEO recently said that if volumes recover in Q3, the top 10 container carriers will likely all still be standing at the end of the year.

If not, expect bankruptcies, mergers and acquisitions.

How long before container volumes recover? Will many carriers fail? Let us know your thoughts at the Feedback section below.


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