BIMCO warns of disruptions if coronavirus is not brought under control

Shipowner association BIMCO is warning that the fallout from the coronavirus outbreak in China could intensify, if stringent public health measures are sustained for an extended period.

 

Alphaliner estimates that already 1.7 million TEU of export capacity out of China has been cancelled since late January, and anecdotal reports suggest that many of the remaining departures are sailing with less than a full load.

 

Ship agencies and carriers have reported that trucking shortages are a serious factor, and BIMCO indicates that in some provinces, up to two-thirds of the driver workforce has not turned up for work.

 

BIMCO chief analyst Peter Sand presented three likely scenarios concerning the impact of the virus' outbreak on shipping. In the first instance, China's control measures succeed, and work begins to return to normal in Chinese factories by March. In the second scenario, normalisation does not occur until April; and in the third and worst-case scenario, the virus continues to spread in ways that are not possible to predict or analyse.

 

Scenario one entails a relatively minor disruption to global supply chains and a manageable impact on carriers. Scenario two would be more serious since an enforced factory shutdown in China extending into April, "will extend disruptions to manufacturing, hinterland transportation and port operations.

 

"Given the lower container volumes, caused by a halt to regional manufacturing, the disruption could extend into a global supply shortage of retail and manufactured goods," Mr Sand wrote in a BIMCO bulletin.

 

For tankers, the damage has substantially been done, Mr Sand said. Between the lifting of US sanctions on the Cosco Dalian and the impact of the coronavirus, tanker rates dived from US$100,000 per day in December to just $18,000 per day in January. Mr Sand forecasts that "earnings will be at the disease's mercy during February through March and will not necessarily exhibit a sharp rebound afterwards."

 

He wrote: "The outbreak of the coronavirus has illustrated just how dependent shipping has become on the Chinese economy. If large parts of Chinese labour force are quarantined, the commercial shipping segments will be stuck in gloomy territory."

 

For shipping interests, the impact on Chinese shipbuilders may prove to be one of the few positives: the delivery of new tonnage has been temporarily restricted by quarantine measures, which will help to bolster rates.

 

Source:BIMCO

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