Actual measurements of the demand impact on container trade still do not exist. All the data sources which measure this are time-lagged and hence the only entities knowing the actual data are the carriers. They will, of course, be well aware when looking at their own booking data, but they are not sharing such data.
However, their actions in terms of blank sailings allow for an estimate of the impact. This is elaborated upon in the Sea-Intelligence Sunday Spotlight this week. Essentially the Corona-related blank sailings are an indication of the shortfall in demand. The blank sailings can be compared to the usual blank sailings from Chinese New Year. We can measure the usual volume shortfall from Chinese New Year. These three components can be combined, and that leads to the estimate that the Coronavirus is resulting in a volume shortfall of 1.7 Million TEU.
The loss in volume leads to not only a loss in revenue but a negative impact on the carriers’ cashflow. If we for simplicity assume an average payment time of 2 months, this means an adverse cash flow impact for the carriers in Q2 2020.
If we do get a V-shaped recovery this would coincide with a likely boom in volumes in Q2 as manufacturing plays “catch-up” and hence the carriers should be able to manage this cashflow impact nicely.
However, if the virus spreads and we see a further negative impact on volumes this could lead to a problem for carriers in a financially weak position – especially for those whose volumes are highly depending on Chinese cargo.
Please note, that over the past week, my updates have begun to focus on the impact of the pandemic – the 1.7Million TEU impact was related to the impact in China before it became clear that the virus causes a pandemic in the rest of the world. With the drastic shut-down in the past few days this is now also changed toa worst case where it might be as much as 17 million TEU – the same 10% impact as we saw during the financial crisis.
Lars Jensen is a leading expert in the container shipping industry. He is the CEO of SeaIntelligence Consulting, that provides specialized consultancy services for all stakeholders in the container shipping industry, with expertise in strategy, process management, market intelligence, digitization and training.