Carriers’ balancing act continues into 3rd quarter

Data from April gave the container shipping industry its first glimpse of the impact of the Covid-19 pandemic, with April 2020 global volumes plummeting 16.9%, compared to April 2019.

And while the financial implications of such a drop are serious for the lines, their effective volume reductions, are supporting revenues and may even lead to profitability for some by the end of 2020.

In days gone by, a big hit on volume like this would have had a huge financial impact on the carriers, however, in 2020, the shipping lines have been remarkably effective at managing their collective capacity on the key global trade lanes.

As we move into Q3, which is the traditional peak volume period for global trade and the carriers, we consider what has changed since Q2 and what the impact of this will be on the market in terms of pricing and service.

Carriers had been expecting a decline in volume for the first quarter of up to 25% and while they expect container shipping demand would remain “very fluid, they are anticipating some sort of recovery in the third quarter, with further improvements running into the end of the year.

While carriers have restored volume on some Middle East and Indian trade lanes, they have blanked 94 scheduled sailings on Asia–Europe routes from April through August, with more likely, which suggests they are uncertain how strong the peak will be.

Metro negotiate rate, space and service agreements across all key carriers and alliances to give our customers the agility, flexibility and dependability they need during these challenging times

The three main alliances are remaining very agile in how they are managing their projected capacity.

2M has removed 22% of its capacity, however, they are operating a ‘sweeper’ service to lessen the impact of any rolling’s and to maintain its volume commitments.

The Oceans alliance have brought back the previously intermittent LL3 service in Q3, but has yet to announce its Q3 blank sailings program.

The Alliance is expected to reduce in capacity by 28% within their service offering, as the FE4 service remains rationalised.

The extensive blank sailings have caused capacity out of China to tighten, an issue that will likely become more acute in the second half as demand returns and blank sailings remain at a high level through August.

Capacity out of Asia is becoming tight, but our commercial team go through accurate allocation planning with every carrier on a daily and weekly basis to secure capacity and ensure that our customers can ship everything on time, even with much of the container fleet lying idle.

Prudent shippers are building additional lead time into their supply chain planning, to avoid cargo rolling, missed sailings, or terminal delays because of manpower issues.

On the Asia to USWC trade, the previously announced 133 blank sailings for 2020 has now been lowered to 120. It remains to be seen if this was on the basis of an expected increase in volume.

The capacity for Q3 compared to Q2 looks to be improved, but the impact of the peak is still uncertain, which means that that the carriers will continue to closely manage capacity to suit demand.

If demand surges, the carriers can consider re-introducing idle ships, but the strength of the economy and demand will determine what comes next in terms of capacity on these key trades.

Metro provide a diverse offering of competitive sea freight, sea/air, air freight and rail options on all global trades