Main container shipping lines may lose about US $ 23 billion in 2020 if the situation is worst

The impact of the new Corona virus (COVID-19) could cost major shipping lines up to $ 23 billion in 2020 under the "worst" scenario, according to Sea-Intelligence analyst. Alan Murphy, CEO of Sea-Intelligence, said carriers could see rates drop to levels similar to those they experienced during the 2009 financial crisis.

Sea-Intelligence has observed that in the past week (week 14), the number of canceled long-distance trains has increased from 45 to 212. The majority of canceled sailings are concentrated within five to six next week, while more services are canceled until the end of June.

The biggest reduction is seen on the Asia-Europe transport, where the market is now entering a four-week period with 29-34% of its capacity being withdrawn from the market.

This week (week 15), the rate of Asia-Europe transport capacity cuts are expected to be 18%, with a forecast to continue to increase capacity cuts at 29% for week 16; 34% for weeks 17 and 18; 30% for week 19; 22% for week 20; 15% for week 21; before falling below 10% for weeks through week 25 (mid-June).

“The financial impact on carriers may be enormous, although the impact depends on the pricing of the upcoming carrier,” Murphy said. The worst case scenario is the total loss of major carriers of US $ 23 billion in 2020. On the other hand, the best scenario will see carriers lose 10% of their output this year, but must try prevent any rate drop. "In this case, their profits would drop by US $ 6 billion compared to 2019 and lead to major carriers with a total loss of US $ 0.8 billion by 2020," according to Murphy.

“So it is clear that the main purpose of the capacity reduction is seen as an attempt to prevent a catastrophic drop in price. Cost savings are also important, as they are also measured in billions of dollars, but far less than the rate impact rates that will take place, ”he added.

Murphy said the rate development will be important in the coming weeks as that will determine the level of capacity reduction.

Phaata (Source Seatrade Maritime News)

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