Liner operators could face collective losses of $23bn this year, says container analyst Sea-Intelligence.

The figure is an estimate of potential losses for carriers that have been forced to cancel services and blank sailings as the coronavirus outbreak continues to result in a drop in container volumes.

The Danish analyst said the staggeringly high figure was likely to be reached if liner operators were unable to prevent freight rates from declining by as much as they did during the financial crisis in 2009.

To avoid that worst-case scenario, capacity withdrawals need to be focused on supporting freight rates, Sea-Intelligence said.

It suggested a more benign scenario would see collective profits fall by $6bn this year compared with 2019.

That would be the effect of a 10% decline of volumes and carriers managing to prevent any material decline in freight rates.

Blanked sailings

Liner operators have had to cancel hundreds of sailings on major east-west trades after the Covid-19 pandemic caused shipments from China to their major markets to dry up.

The service cancellations have been especially heavy on the Asia-Europe trade, where up to one-third of capacity — between 29% and 34% — has been removed over the past four weeks, according to Sea-Intelligence.

It estimated that the number of blank sailings had increased four-fold — from 45 to 212 — in the past month.

Most of the blank sailings are clustered in the coming five to six weeks, although there are multiple service cancellations scheduled until the end of June.

“The primary purpose of the capacity reductions should be seen as an effort to prevent a catastrophic drop in rate levels,” Sea-Intelligence said.

“The development of freight rates will be important in the coming weeks, as that will determine the degree to which we will see even more aggressive capacity reductions.”

Shift to transpacific

Most drops in capacity so far have focused on the Asia-Europe trade, but service cancellations and blanked sailings are increasingly spreading to the other trades.

On the transpacific trade, carriers have been cutting capacity at short notice as trade volumes drop, according to Alphaliner.

The 2M partners of Maersk and Mediterranean Shipping Co (MSC), as well as THE Alliance members of Hapag-Lloyd, Ocean Network Express (ONE), Yang Ming Marine Transport Corp and HMM, have announced the suspension of one service between Asia and the US West Coast (USWC) and another between Asia and the US East Coast (USEC).

The Ocean Alliance — made up of CMA CGM, Cosco Shipping, Evergreen and OOCL — has not yet announced drastic capacity cuts but will blank 15 sailings in April and May, Alphaliner said.

Rates steady

To date, the capacity cuts have had a limited impact on freight rates in the transpacific.

Rates between China and the USWC were broadly stable at $1,531 per 40-foot container (feu) on 6 April, or around 3% lower than last year’s prices for this week, according to Freightos.

But rates are expected to drop as consumer demand plummets.

“Ocean rates have stayed level,” Freightos said.

“But the rash of cancelled ships during the Chinese shutdown that prevented a collapse of ocean rates may not prevent a sharp price drop this time, as the underlying demand for freight dissipates.

“The anticipated early peak season in ocean freight is now reversing course as carriers rapidly blank sailings and shippers scramble to cancel orders, even leaving shipments at ports across the globe or diverting to longer sailings to delay accepting goods.”