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Box carriers take major hit from coronavirus, sparking survival fears

24/03/2020

ON intra-Asia container shipping routes there have been 544 service suspensions of seven to 30 days by internationally trading box ships since January 25, leading to US$220,000 losses per ship on average from charter and bunker costs, according to SITC estimates.

Carriers have seen their liftings and incomes quashed by the coronavirus that sparked the prolonged closure of factories in China, which are now seeing a resumption in activity, as the outbreak is gradually brought under control.

The blanked sailing have had ripple effects, including equipment shortages for exports between the US and Europe. Concerns are also mounting regarding consumers' future appetite for imports amid soaring infections in some regions around the world, such as the US.

Liner shipping is already a highly leveraged business. Now the cash-strapped ocean liners will be struggling. Without government help, they will be forced to sell ships, subsidiaries or even their entire business, reported London's Lloyd's List.

Some smaller carriers on intra-Asia trade will face "financial survival within the next couple of months," consultancy Sea-Intelligence warns.

"With the surge of outbreak risks in South Korea and Japan, the extended supply chain [disruption] may affect the Chinese market, which has already been impacted by the delay in work resumption," the researcher said. "It is possible that cargo volume in March will remain low."

If it materialises, then the major carriers will suffer, too. Some have piled up huge debts in recent years via newbuilding investments or mergers and acquisitions, despite a thin margin from operations. The epidemic-led cash haemorrhage can ramp up the default risks.

Loan extensions and asset disposals will be inevitable. Yet, that may create opportunities for cash-abundant buyers to drive the container shipping' consolidation to the next level.

Source : shippingazette.com