Container shipping sector stung by coronavirus, but recovery is likely

The accelerating spread of the coronavirus has smacked the container shipping sector with reduced global container volumes and carrier earnings, but the medium-term impact will probably be manageable—provided the virus spread is contained—according to a report from U.K.-based shipping consultancy Drewry Shipping Consultants Ltd.

Container shipping lines have grown resilient to disruption in recent years, since they have often been forced to adapt to unexpected forces such as trade wars, port lock downs, and new viruses, the firm said. And overall, container shipping is not as exposed to coronavirus problems as the airline or tourism industries. But in the near term, maritime trade will still suffer from a slump in revenues, as quarantines and travel restrictions prevent employees from working at ports, leading to a dip in port volumes, shortages of empty containers, and cancelled ocean sailings.

That finding is in line with a report from another trade industry analyst group, Xeneta, which concluded that long-term ocean freight rates are currently standing firm in the midst of growing global coronavirus concern, despite widespread ramifications for the container ship segment as a whole.

Oslo, Norway-based Xeneta made that finding based on its latest XSI Public Indices report, which provides market intelligence based on real-time, crowd-sourced data from shippers. “The shipping industry, like much of the rest of society, has been rocked by coronavirus. It is operating as a major disruptive force, derailing supply chains and impacting on both exports and imports across the board,” Xeneta CEO Patrik Berglund said in a release. https://www.xeneta.com/xsi-public-indices

Xeneta reports that vessels leaving China have been sailing with utilization rates of less than 20%, despite the fact that a huge amount of tonnage has been removed from the market. Maersk alone has dropped more than 50 sailings from Chinese ports since late January, according to Xeneta.

“A huge amount of business has been lost,” Berglund said. “A complex range of factors – including quarantine times, a lack of workers at key ports and throughout supply chains, and travel restrictions – are working as one to disrupt the status quo, causing severe issues for those reliant on the supply of goods from China. Uncertainty reigns supreme.”

Long term recovery likely as experts study the virus

Shipping lines have become skilled in recent years at negotiating unpredictable challenges, but the coronavirus is a higher hurdle than most because so little is known about it. In the long term, the outbreak may cause even more damage if it becomes widespread, because countries face a “knowledge deficit” that is blocking their ability to plan responses, Drewry said.

“While it is preferable to avoid tabloid-esque doomsday predictions, so little is known about Covid-19 at this juncture—other than it is highly contagious, appears to have a much higher fatality rate than seasonal flu, and currently has no vaccine—nobody can confidently predict the outcome. Authorities have the daunting challenge of protecting public safety without overly harming the economy, that if it turns sour could lead to its own health risks, all the while trying to avoid panic,” Drewry said.

Still, if this contagion follows historical patterns, the sector should be able to rebound, the report found. “In our view, there is enough historical evidence from recent outbreaks such as SARS, MERS and Ebola to suggest that Covid-19 can be contained fairly quickly, or at least become much better understood, and that on the balance of probability, the outcome will not be devastating,” Drewry said.