While financial experts wonder if we’re going to witness another ‘Hanjin’, the world’s 4th largest container line, CMA CGM is following MSC in offering a ‘Suspension in Transit’ service, The Alliance cut services from Asia and 2M reduce transatlantic sailings.
The deteriorating global economic outlook, as countries follow China’s struggle to contain the spread of COVID-19 has forced carriers to make extensive capacity cuts in a bid to match rapidly declining demand, diminishing cashflows and weakening already fragile balance sheet.
Economists are predicting the US will not emerge from negative GDP growth until at least the fourth quarter, and that in Europe, a severe recession is now unavoidable.
Carriers have reacted to these gloomy forecasts by announcing plans to increase capacity withdrawals over the next few weeks, that will result in 25-30% of Asia/Europe capacity being taken out of service.
Financial analysts looking at the likelihood of insolvency within the next two years believe that carriers with elevated leverage ratios were especially vulnerable, identifying six with negative working capital including CMA CGM, Hapag-Lloyd, HMM, PIL, Yang Ming, and Zim.
Carriers with poor track records of negative earnings were also at risk, with three carriers highlighted, HMM, Yang Ming, and Zim. Despite the high debt levels and the potential for insolvencies in container shipping, experts believe that another Hanjin would not be allowed to happen.
MERGERS ARE THE NEW BLANKED
The members of THE Alliance have decided to temporarily merge their Far East – North Europe services ‘FE2’ and ‘FE4’ into a single loop (‘FE2’) for the months of May and June, effectively halving the megamax service.
Hapag-Lloyd, HMM, ONE and Yang Ming will combine the ’FE2’ and ’FE4’ loops from week 19 in early May to week 26 in late June.
The combined ‘FE2/FE4’ loop will call at Busan, Shanghai, Ningbo, Yantian and Singapore. North Europe calls are yet to be confirmed subject to berth window availability. An eastbound call at Singapore is scheduled on the way back to Busan.
Maersk and MSC are to suspend their joint North Europe – US East Coast ‘TA4/NEUATL4’ service for a period of five weeks starting in week 18, when the sailing of the 5,095 teu ORCA I from Antwerp on 27 April is withdrawn.
STORAGE IN TRANSIT
CMA CGM will offer the option of delaying the delivery of containers to the port of destination, by storing them temporarily in dedicated hubs, until the recipient is ready to accept them.
The move is aimed as easing destination port problems, primarily terminal and storage yard congestion, caused by fallout from the COVID-19 pandemic.
With this ‘delay in transit’ offer, CMA CGM is the second carrier to offer such a possibility after MSC, which launched its ‘suspension of transit’ (SOT) program in early April.
CMA CGM offers the possibility for North European importers to have their containers stored temporarily in Algeciras and Piraeus.
Algeciras and Marsaxlokk act as a buffer port for cargo to the West Med and Adriatic.
Tripoli (Lebanon) and Marsaxlokk have been se-lected as potential waiting hubs for cargo to the East Med and the Black Sea.
The other hubs include Tanger Med (for West Africa), Kingston (for the Americas), as well as Singapore and Busan.