Container Lines Cut Sailings On Coronavirus Impact

Container ship lines and freight forwarders will keep minimal business operations through at least the first week of February as China's major coastal provinces extend holidays due to the coronavirus outbreak. But the slowdown in freight activity is prompt

Benzinga · 02/03/2020 16:40

Container ship lines and freight forwarders will keep minimal business operations through at least the first week of February as China's major coastal provinces extend holidays due to the coronavirus outbreak. But the slowdown in freight activity is prompting major ocean carriers to cancel sailings during the period, and beyond.

The World Health Organization (WHO) said the confirmed death toll in China rose by 45 to 304 overnight as of Sunday. Total new cases confirmed in the country rose 21% to 14,411. Outside of China, 23 countries have reported 146 cases of coronavirus, with only one confirmed death.

Those living and working in the world's export factory face a "very high" risk of contracting the disease, WHO said.

Part of China's approach to limiting further cases is extending the Lunar New Year shutdown through Feb. 9 in at least 14 cities and provinces. Seven of those are along China's coast. They include Guangdong, Fujian, Zhejiang, Shanghai, Jiangsu, Shandong and Hebei.

Despite the extended holiday, container line Hapag-Lloyd said marine terminal operations in China are continuing as normal. The inland Hubei province, in which the city of Wuhan is the epicenter of the outbreak, is the exception, with barging operations to the coast shut down.

Global transportation and logistics companies with local offices are responding by extending office closures, as well as shuttering some operations. Hapag-Lloyd said offices in the affected coastal provinces will remain closed in line with the official holiday extension. Further, employees are being urged to use video and telephone conferences to limit exposure to the illness. 

Maersk said most of its operations remain normal, with the exception of complete closures in Wuhan. Its coastal offices will remain closed in line with the Lunar New Year extension.

But the world's biggest shipping line said as a result of the reduction in demand, it will cancel two Asia-Europe sailings. They are scheduled to sail over the next two weeks, amounting to 26,000 twenty-foot equivalent units (TEUs) in capacity.

Ocean Alliance is set to cancel three Asia-Europe sailings over the next three weeks due to the coronavirus, according to U.K.-based container research firm PR News Service. Those include the 13,380-TEU CMA CGM Laperouse, originally scheduled to depart Feb. 2; the 20,160-TEU Ever Globe scheduled to depart Feb. 9; and the 14,074-TEU CSCL Saturn, scheduled for Feb. 19 departure.

Freight forwarders are taking similar precautions. DHL Global Logistics has suspended all operations in the Wuhan epicenter. The world's largest ocean forwarder, Kuehne + Nagel, said its local offices will open in line with the extended Lunar New Year schedule.  

Employees of the Ningbo Shipping Exchange, a provider of container rate indices in Zhejiang province, are working from home.

Container lines had already cancelled a number of Asia-Europe sailings in response to the expected slowdown, helping keep container freight rates firm. The Drewry World Container Index for Shanghai-Rotterdam (SONAR: WCI.SHARTM) is down about 10% at the end of January from its early 2020 peak while the Shanghai-Genoa rate (SONAR: WCI.SHAGOA) remains largely flat.

Asia-Europe ocean freight rates were strong heading into 2020. (SONAR: WCI.SHARTM, SHAGOA)

The coronavirus outbreak means an even "more sluggish recovery" in container freight pricing, on top of the usual Lunar New Year slowdown, according to Platts Global Container Weekly Commentary. But the extension of the Lunar New Year holiday means Chinese manufacturers will restart operations later than previously expected. This suggests even more cancellations may be in the offing.

"Typically, demand does not return for ex-Asia front hauls until the start of March, but the latest developments point to an even longer recovery time," Platts said. While the cancelled sailings are one step to dealing with the lower demand, "should there be further delays in the recovery of Chinese manufacturing, these measures may not prove enough."

Image Sourced from Pixabay