The Wall Street Journal has reported that shipping lines have canceled more than 160 itineraries in the past week, trying to sustain freight rates against potential losses of billions of dollars caused by falling commercial demand due to the COVID-19 pandemic.
Service cancellations have increased from 45 last week to 212, according to Sea-Intelligence ApS, a trend indicating that the northern hemisphere's summer peak season could be largely muted and that the shipping companies that carry most of the global goods expect the economic repercussions of the coronavirus pandemic will extend into the peak shipping season.
Sea-Intelligence estimates that the world's largest container shippers will suffer combined losses that range between $ 800 million and 23 billion dollars this year, depending on how they manage the economic impact of widespread closures caused by the coronavirus.
Shipping companies, including Maersk, MSC and ONE, are trying to avoid falling freight rates on major trade routes, as capacity increasingly outpaces demand. "It's a developing storm," said Sea-Intelligence CEO Lars Jensen. "The challenge will be to carefully manage capacity in the future to avoid the collapse of freight rates."
Cancellations focused on Asia-Europe and services on the Trans-Pacific route began to increase in January and February when the coronavirus began to spread in China, forcing Beijing to almost completely paralyze the economic activity.
China is now pushing cargo again, but demand has plummeted as the major US and European cities are increasingly blocked. Some US ports have decreased operation hours at cargo terminals because of the decrease in demand.
Freight rates are currently nearly 20% below equilibrium levels. However, they have remained relatively stable since the beginning of the year, as the closings restricted capacity and price-focused competition.
Jensen anticipates that the pandemic will reduce demand for container shipping this year by 10%, roughly the same decline as in 2009, when the financial crisis unfolded, disrupting world trade.