- By Sagar Shere April 09, 2020
The outbreak of COVID-19 pandemic has impacted global shipping trade, over the past week the global container shipping lines have canceled more than 160 sailings as they try to maintain freight rates in the face of billions of dollars in potential losses driven by falling trade demand.
The combined losses are from $800 million to $23 billion this year is been estimated by the Sea-intelligence, depending on how they manage the economic impact from widespread coronavirus-driven lockdowns. The financial fallout for the shipping lines appears to be relatively mild so far compared with that of airlines and other transportation operators that depend on passengers.
But shipping lines are hunkering down with major national economies wavering while their businesses halt operations, factories idle assembly lines and job losses mount. Carriers including Denmark’s Maersk Line, Switzerland-based Mediterranean Shipping Co. and Japan’s Ocean Network Express Pte. Ltd. are trying to guard against crashing freight rates on major trade lanes as capacity increasingly outweighs demand.
“It’s a developing storm, and The challenge will be to carefully manage capacity going forward so to prevent a freight rate collapse,” said Sea-Intelligence Chief Executive Lars Jensen.
Jensen said industrywide losses could reach $23 billion if liners embark in an all-out price war similar to that after the 2008 financial crisis when freight prices fell to levels that barely covered fuel costs.
“The rate collapsed during the financial crisis was partly caused by an inability to reduce capacity in a timely fashion. The potential loss is of such a staggering magnitude that carriers are highly likely to blank far more sailings in case we begin to see rates slide too far,” Sea-Intelligence Chief Executive Lars Jensen added.