Hard times on Q2

Now as novel coronavirus (COVID-19) has arrived to every corner of Europe and USA and is dealing hard blows to economies and manufacturing, shipping and ports are feeling the effect of quarantine measures. Manufacturing slows down and consumption slows. Central Banks rush to calm down the situation.

CEO of Copenhagen based SeaIntelligence, Lars Jensen shared his views in an interesting short article published on his LinkedIn page. In this article Jensen talks about the hard time Q2 will bring to container carriers. Jensen starts by pointing out there is no accurate information on current bookings on ships as carriers do not share this data. However even with data available some estimates can be made.

When COVID-19 hit China, China responded by immediately closing factories and limiting mobility of people. Heavy measures taken seemingly worked and China has reported decline on new cases. Meanwhile these measures reduced factory output in China to near zero. This in turn immediately resulted in a dramatic decline in containers moving through chinese ports. Jensen estimates a shortfall of 1.7 million TEU. This will eventually be seen in Q2 results once those are published. Especially those carriers who are relying on chinese cargo will be hit hard on Q2 revenues.

If Coronavirus epidemic in Europe and USA can be suppressed as quickly as in Asia, we could potentially see a ‘V’ shaped recovery. This could still save the Q2 results for container carriers. However if the fight against the virus drags longer and markets will see a ‘L’ shape instead of a ‘V’ shape carriers really need to get creative figuring how to utilize enormous overcapacity.

Big and well funded carriers will survive this crisis but a long fight against coronavirus and lack of cargoes to carry for an extended period of time might well be the final blow driving some smaller carriers out of business.

About Author

Tuomo Keltto

Tuomo Keltto is a logistics engineer who continued his studies in Seoul, South Korea. He studied at the Korean Government scholarship for a Master's degree in international trade and logistics. Now he is back in Finland and he works at Neste in Porvoo. - He has previously been in Steveco Hietanen for three summers as a temporary stevedore and as a foreman for one summer.