Lars Jensen
BY STAS MARGARONIS
Lars Jensen, CEO of Copenhagen-based SeaIntelligence provided the following ocean shipping reports via LinkedIn:
- Far Eastern exports declined 1.4 Million TEU in Jan/Feb. New data from Container Trade Statistics show that the combined container volume exports from the Far East in the two first months of the year declined from 14.2 Million TEU in 2019 to 12.8 Million TEU in 2020( April 6th):”This is a first strong data point in assessing the demand impact from the virus, and it should be kept in mind that this solely includes the effect of the virus outbreak in China up to the end of February.”
- The CEO of Danish clothes and fashion company Bestseller interview with Danish newspaper Berlingske and provides good insights on his outlook which is highly relevant to the shipping industry (April 5th):
- In terms of size they have 2.300 stores in the west and also sell to 15.000 retailers. They have 7.000 stores in China. Revenue has declined 80% in the west. However given the way the supply chain works they still have 6 million articles of clothing arriving each week. They have rented all available warehousing capacity in southern Denmark and additionally have 1000 containers stored in front of the warehouses.
- Despite China gradually opening sales are at 65% of last year’s level, hence even when the virus outbreak is contained financial recovery takes a long time. In terms of expectations in fall 2020 they have only reconfirmed 70% of the original orders. He expects the company is 20% smaller next year.
- This is the perspective of single, though large, importer. But it clearly shows the challenges shipping must face in the coming weeks. It casts serious doubts as to any strong recovery in 2020. It illustrates how we will see significant warehousing and storage problems as well as how a sizeable part of the container fleet becomes inaccessible as it is being used for storage purposes.
- Blank Sailings & Risk of Freight Rate Collapse On Ocean Carriers April 6th. He notes “212 services cancelled – worst case loss 23 Bn USD. The overview in this week’s Sea-Intelligence Sunday Spotlight shows that carriers have now cancelled 212 services globally due to the pandemic:
1) Especially the next few weeks will see large capacity reductions, with Asia-Europe being most impacted thus far with some 30% capacity reduction over a 3-4 week period.
2) Whilst it is clear that blank sailings save costs, the more important element is to prevent a collapse in freight rates.
3) Modelling in the Sunday Spotlight shows that if carriers maintain rate levels and “only” experience the anticipated 10% demand decline this will cost them 6 Billion USD in 2020 and lead the industry to a combined loss of 0.8 Billion USD. Failure to stem rate declines will rapidly make it much worse.
4) If rate levels develop as we saw under the financial crisis the industry’s combined loss will balloon to 23bn USD in 2020.
5) The rate collapse during the financial crisis was partly caused by an inability to reduce capacity in a timely fashion.
6) The potential loss is of such a staggering magnitude that it is clear that carriers are highly likely to blank far more sailings in case we begin to see rates slide too far.
- Abandoned Container Warning (April 3): Abandoned containers likely to increase sharply – and forwarders might be liable. In any normal year hundreds of thousands of containers filled with cargo are abandoned. There are many reasons for this ranging from perfectly legitimate causes such as consignees going bankrupt to unscrupulous people using it as a means to get rid of garbage or illegitimate cargo.
1) The global economic shock is bound to increase this problem sharply in the coming weeks and months as many consignees become unwilling or unable to take delivery of the cargo
2) The carriers are (hopefully) well aware of the implications and legal repercussions in dealing with this, but perhaps it is prudent to raise a warning flag to the freight forwarders.
3) One year ago – in what now appears to be with extreme foresight – the British International Freight Association published a warning for freight and logistics companies as they might well be liable towards the carriers in cases where the cargo is abandoned.
4)The full overview from BIFA can be seen here: BIFA issues warning about the perils of containers abandoned overseas