 Pandemic shows carriers¡¯ ¡®warp speed¡¯ response to capaci |
Source |
American Shipper |
Post Date |
11/10/2020 |
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If you are involved in high-frequency speculation on the stock market, speed is a competitive parameter. A decade ago, a fiber-optic cable was built between New York and Chicago to facilitate faster trading ¡ª but signals traveling at light speed to a satellite and back were simply not fast enough.
Container shipping ts to work at a somewhat more sedate pace. Not only are transportation times on the deep-sea trades measured in weeks, but the booking uptake process prior to vessel departure also plays out over a few weeks. As such, there is ample time to plan ahead and adjust the plans based on changes.
However, it is also clear that developments in 2020 are shifting at a pace faster than the industry can physically cope with.
Chinese New Year was on Jan. 25, and two days later, the Chinese government announced the lunar holiday had been exted until Feb. 2, and for some provinces until Feb. 9 amid the COVID-19 outbreak. On Jan. 28, we saw 2M announce the first additional blank sailings on top of the already pre-planned seasonal blankings.
By Feb. 9, all the carriers had announced an additional 24 blank sailings across the trans-Pacific and Asia-Europe trades; a week later, this had escalated to 47 blank sailings. Two weeks later, it was at 64 blank sailings. Eventually, approximately 1 million TEU of capacity had been removed due to the virus outbreak in China.
When China began to re, the amount of blank sailings ped to almost zero by the of March. However, when the pandemic then spread rapidly in the rest of the world, the carriers announced the withdrawal of an additional 1 million TEU of capacity inside of just a single week, and within three weeks, the additional withdrawal stood at 2 million TEU.
The rapid reduction of capacity in the spring appears to be clearly driven by information from the shippers¡¯ supply chains wherein purchase orders to factories were being canceled. The carriers response time was much faster than ¡°just¡± waiting until you actually saw a downturn in bookings.
¡®Warp speed¡¯ reaction from carriers
In a trade where the combination of transit times and the uptake time of bookings is normally measured in weeks and months, the reaction time from the carriers is nothing short of warp speed. This is driven by the warp-speed changes in consumer behavior due to the sudden lockdown measures.
However, while it is indeed possible for the carriers to react at such warp speed when it comes to the cancellation of sailings, there are other physical elements of shipping for which warp speed reactions are not possible.
The sudden changes in both demand and supply d severe disturbances in the equipment location across the world. And when ¡ª unexpectedly ¡ª demand skyrocketed, vessels and sailings were reinstated, but equipment could not be moved to the right locations at the same warp speed. Consequently, we are now in the midst of an equipment challenge in many locations across the world which cannot be fixed quickly. It takes time to move containers across the world ¡ª and in order to speed up that time, some carriers are ning to say ¡°no¡± to export shippers on traditional backhauls, in turn creating additional supply chain problems.
Looking at the physical time frames involved in repositioning, combined with the large orders placed in Chinese container factories, the equipment problem could become resolved within a few months ¡ª but this assumes there are no other surprises leading to new warp speed decisions from the carriers.
We are right now seeing a rapidly escalating second wave of the pandemic in Europe, leading to a new round of restrictions, including Germany and France announcing strong new lockdowns. The pandemic is also on the rise in the US. It is impossible to predict the outcome of this for the coming month, but if this new pandemic wave again results in a pullback from consumers, carriers are likely to react at warp sp
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