With the start of 2020, the focus of the container shipping industry was the implementation of IMO 2020 and low-sulfur fuel. Before we could begin reviewing what impact this was having to the shipping industry with the increase of charges and regulations taking effect, a new virus emerged out of China and became the focus of trade.
The coronavirus’ (COVID-19) full impact to the shipping industry is still unclear. The failing to re-open many locations after the annual Lunar New Year in China caused a major shortfall to container exports as the demand dropped significantly. As of February 23rd, the number of blank sailings (vessel sailings cancelled or omitted by the carrier) the carriers announced equated to an estimated total demand shortfall of 1.7 million TEUs (twenty-foot equivalent units). These cancelled sailings for export cargo back to Asia could last for 3 to possibly 10 weeks into the future. With the number of empty containers rising in North America and Europe, the carriers will be pushed to return some of the empty container equipment back to Asia.
We are starting to receive notifications that some regions have been cleared to return back to work which means the Chinese factories will begin working overtime to try and offset the time lost during the mandatory shut down. What should we expect? For at least the next few months, China will be experiencing a container shortage until more empties are brought back to the various ports or the carriers will be forced to purchase new container equipment to bring into rotation for shippers to begin loading their freight for immediate export. There will still be backlog issues at the ports especially for reefer equipment as the ports are at full capacity for plug ins for the reefer units. Until the importers in China retrieve their reefer containers, unload and return back to the terminals, this will cause a temporary global shortage for many food exporters across the globe. As we continue to hope for the best case scenario that the coronavirus is contained quickly to stop the disease from spreading further and harming more people, we also hope it will be confined swiftly to lessen the affects it will have on overall global trade.