Coronavirus impact on container shipping grows albeit at slower pace

Whilst the outbreak of the coronavirus (COVID-19) continues to have an impact on container shipping, the fallout is slowing down, according to analyst Sea-Intelligence.

Sea-Intelligence data has suggested that a stabilisation is seen in terms of blank sailings since Chinese New Year in January, around the same time that COVID-19 cases started to increase at a faster pace.In the weeks of 5-15 of 2020 starting 27 January, blank sailings on the transpacific increased to 111, of which 48 have been blanked due to COVID-19 and the remainder due to the normal seasonality of Chinese New Year. On Asia-Europe, blank sailings increased to 75, of which 29 are due to COVID-19. As at 1 March 2020, volume loss due to blank sailings was at 1.9m teu. At a rough average freight rate of $1,000 per teu, this equates to revenue loss of $1.9bn for the carriers.

“Even though the carriers have announced seven more blank sailings over the past week, which corresponds to an additional 7% removal of capacity, the pace of new blank sailings has clearly declined, suggesting a belief from the carriers that volumes will slowly be brought back to normal levels,” said Alan Murphy, ceo of Sea-Intelligence.

“This, however, does not mean the ripple effects are over – far from it. We have already outlined in the past weeks how this will impact the round-trip dynamics and create shortages of both vessel capacity and equipment availability,” Murphy warned.

He observed that carriers are already pushing rate increases on account of this, and for some backhaul shippers the coming weeks might be a matter of whether they can get their cargo moved at all, almost irrespective of the price they are willing to pay.

Murphy added that carriers have managed to maintain freight rates thus far through proactive capacity management, staving off a “feared financial-crisis-like rate implosion.”


China's factories at risk of double whammy as coronavirus hits South Korea, Japan

BEIJING (Reuters) - The spread of the coronavirus in South Korea and Japan could mean a second wave of disruption at Chinese factories after the disease triggered a record contraction in activity last month.

Cases of the flu-like epidemic have jumped in South Korea and Japan, prompting some manufacturers there to partially suspend operations and risking a reduction in the supply of spare parts to factories in China as they restart work.

China, the epicenter of the outbreak, has seen a sharp drop in new infection cases, and authorities have eased some travel restrictions and enabled some businesses to reopen.

But imports from South Korea and Japan play a key role in China’s manufacturing economy, particularly the production and assembly of electronics goods.

“The lack of a few components can halt the entire production process, so if Japanese and Korean firms can’t supply goods, then they’ll increase headaches for assemblers like Foxconn,” said Dan Wang, a technology analyst at Gavekal Dragonomics, a research firm.

Apple iPhone maker Foxconn said in late February it was restarting production of its main plants in China and warned its revenue would be hit this year due to the epidemic.

Foxconn did not immediately respond to a Reuters’ request for comment.

The coronavirus has killed over 3,000 people worldwide and infected more than 80,000, most of them in China. But South Korea is the second biggest hotspot with over 4,300 confirmed cases. Japan trails with nearly 1,000 cases, stemming mostly from infections onboard a cruise ship quarantined near Tokyo.

The epidemic triggered the sharpest contraction in activity on record at China’s factories last month, a private survey showed on Monday, after authorities imposed tough travel curbs and public health measures to contain the outbreak.

If the virus worsens in South Korea and Japan, analysts said China’s factories could take another hit even as they stutter back to work.

China takes in a quarter of South Korea’s total shipments abroad, importing $64 billion of semiconductors last year as well as billions of dollars in Liquid Crystal Display (LCD) and mobile phone spare parts.

“If the epidemic outbreak there escalates further, as Japan and South Korea are China’s important trading partners, factory shutdowns, the suspension of logistics and reduction in exports would directly hit the supply to our upstream, midstream and downstream companies,” analysts at CITIC Securities said in a report.

Major South Korean exporters including Hyundai Motor (005380.KS) and Samsung Electronics (005930.KS) have partially shut their production lines after workers tested positive, while LG Display (034220.KS) closed a display module plant for disinfection work until Tuesday.


Despite some companies restarting operations, many small firms in China are still struggling to find enough workers to run plants, compounding the problems of manufacturers across Northeast Asia.

“Even though the situation in China seems to be improving, while Japan and Korea are getting worse, Chinese firms have suffered greater pain,” said Gavekal Dragonomics’ Wang.

“China-based production makes up a larger proportion of the work, so the challenges are still deeper in China.”

Eulsung Auto Pack, a South Korean manufacturer of food packaging machines, cannot get its Suzhou factory in eastern China back to work since the extended Lunar New Year holiday ended in mid-February, its CEO Oh Pil-jae told Reuters.

The company imports components from Suzhou and assembles them in South Korea to make auto packaging machines, which are then exported to about 10 countries.

About a third of its 50 workers have been taking turns to operate the plant.

The company has not been able to supply each worker with two masks everyday as required by authorities due to shortages, Oh said, as pharmaceutical supplies are being diverted to hospitals.

“Other workers are not coming back due to the presence of South Koreans at the factory,” he said, as rising infections in North Asia fanned anti-South Korean sentiment among some of his staff.

Oh said the firm is considering permanently relocating its Suzhou factory to South Korea, but that move would be costly and could take more than eight months to complete.


Coronavirus could be the end of China as global manufacturing hub

The new coronavirus Covid-19 will end up being the final curtain on China’s nearly 30 year role as the world’s leading manufacturer.

“Using China as a hub...that model died this week, I think,” says Vladimir Signorelli, head of Bretton Woods Research, a macro investment research firm.

China’s economy is getting hit much harder by the coronavirus outbreak than markets currently recognize. Wall Street appeared to be the last to realize this last week. The S&P 500 fell over 8%, the worst performing market of all the big coronavirus infected nations. Even Italy, which has over a thousand cases now, did better last week than the U.S.

China on Hold

On January 23, Beijing ordered the extension of the Lunar New Year holiday, postponing a return to work. The coronavirus was spreading fast in the epicenter province of Hubei and the last thing China wanted was for that to be repeated elsewhere. Travel restrictions and quarantines of nearly 60 million people drove business activity to a standstill.

The most frightening aspect of this crisis is not the short-term economic damage it is causing, but the potential long-lasting disruption to supply chains, Shehzad H. Qazi, the managing director of China Beige Book, wrote in Barron’s on Friday.

Chinese auto manufacturers and chemical plants have reported more closures than other sectors, Qazi wrote. IT workers have not returned to most firms as of last week. Shipping and logistics companies have reported higher closure rates than the national average. “The ripple effects of this severe disruption will be felt through the global auto parts, electronics, and pharmaceutical supply chains for months to come,” he wrote.

That China is losing its prowess as the only game in town for whatever widget one wants to make was already under way. It was moving at a panda bear’s pace, though, and mostly because companies were doing what they always do - search the world with the lowest costs of production. Maybe that meant labor costs. Maybe it meant regulations of some kind or another. They were already doing that as China moves up the ladder in terms of wages and environmental regulations.

Under President Trump, that slow moving panda moved a little faster. Companies didn’t like the uncertainty of tariffs. They sourced elsewhere. Their China partners moved to Vietnam, Bangladesh and throughout southeast Asia.

Enter the mysterious coronavirus, believed to have come from a species of bat in Wuhan, and anyone who wanted to wait out Trump is now forced to reconsider their decade long dependence on China.

Retail pharmacies in parts of Europe reported that couldn’t get surgical masks because they’re all made in China. Can’t Albania make these things for you? Seems their labor costs are even lower than China’s, and they are closer.

The coronavirus is China’s swan song. There is no way it can be the low-cost, world manufacturer anymore. Those days are coming to an end. If Trump wins re-election, it will only speed up this process as companies will fear what happens if the phase two trade deal fails.

Picking a new country, or countries, is not easy. No country has the logistic set up like China has. Few big countries have the tax rates that China has. Brazil surely doesn’t. India does. But it has terrible logistics.

Then came the newly signed U.S. Mexico Canada Agreement, signed by Trump into law last year. Mexico is the biggest beneficiary.

It’s Mexico’s Turn?

Yes. It is Mexico’s turn.

Mexico and the U.S. get a long. They are neighbors. Their president Andres Manuel Lopez Obrador wants to oversee a blue collar boom in his country. Trump would like to see that too, especially if it means less Central Americans coming into the U.S. and depressing wages for American blue collar workers.

According to 160 executives who participated in Foley & Lardner LLP’s 2020 International Trade and Trends in Mexico survey, released on February 25, respondents from the manufacturing, automotive and technology sectors said they intended to move business to Mexico from other countries – and they plan on doing so within the next one to five years.

“Our survey shows that a large majority of executives are moving or have moved portions of their operations from another country to Mexico,” says Christopher Swift, Foley partner and litigator in the firm’s Government Enforcement Defense & Investigations Practice.

Swift says the move is due to the trade war and the passing of the USMCA.

The phase one China trade deal is a positive, but the coronavirus - while likely temporary — shows how an over-reliance on China is bad for business.

There will be fallout, likely in the form of foreign direct investment being redirected south of the Rio Grande.

“Our estimates of possible FDI to be redirected to Mexico from the U.S., China and Europe range from $12 billion to $19 billion a year,” says Sebastian Miralles, managing partner at Tempest Capital in Mexico City.

“After a ramp-up period, the multiplier effect of manufacturing FDI on GDP could lead Mexico to grow at a rate of 4.7% per year,” he says.

Mexico is the best positioned to take advantage of the long term geopolitical rift between the U.S. and China. It is the only low cost border country with a free trade deal with the United States, so there you have it.

Thanks to over 25 years of Nafta, Mexico has become a top exporter and producer of trucks, cars, electronics, televisions, and computers. Shipping a container from Mexico to New York takes five days. It takes 40 days from Shanghai.

They manufacture complex items like airplane engines and micro semiconductors. Mexico is the rank the 8th country in terms of engineering degrees.

Multinational companies are all there. General Electric is there. Boeing is there. Kia is there.

Safety remains a top issue for foreign businesses in Mexico who have to worry about kidnappings, drug cartels, and personal protection rackets. If Mexico was half as safe as China, it would be a boon for the economy. If it was as safe, Mexico would be the best country in Latin America.

“The repercussions of the trade war are already being felt in Mexico,” says Miralles.

Mexico replaced China as the U.S. leading trading partner. China overtook Mexico only for a short while.

According to Foley’s 19 page survey report, more than half of the companies that responded have manufacturing outside of the U.S. and 80% who do make in Mexico also have manufacturing elsewhere. Forty-one percent of those operating in Mexico are also in China.

When respondents were asked about whether global trade tensions were causing them to move operations from another country to Mexico, two-thirds said they already had or were planning to do so within a few years. A quarter of those surveyed had already moved operations from another country to Mexico on account of the trade war.

For those considering moving operations, 80% said they will do so within the next two years. They are “doubling down on Mexico”, according to Foley’s report.

Of the companies that recently moved their supply chain, or are planning to do so, some 64% of them said they are moving it to Mexico


British ports seeking funds to fight coronavirus spread

The British ports industry is requesting further support for port health authorities to prevent coronavirus spreading and impacting businesses.

As the number of new confirmed cases of the Wuhan COVID-19 grows, particularly in mainland Europe, the British Ports Association (BPA) has today written to the Health Secretary, Matt Hancock MP to outline the UK port sector’s growing concerns.

In the letter, the BPA’s Chief Executive Richard Ballantyne requested that the UK government find additional resources so that port health authorities, working in conjunction with public health bodies, are fully prepared for any emergency controls that need to be implemented as a result of the coronavirus.

The BPA has also noted that some UK ports feel they have been put in the position of having to make decisions on health matters for which they are not qualified.

In the UK, port health authorities, who are managed and resourced by local authorities, are responsible for developing health controls at seaports and airports and are tasked with preventing the introduction of dangerous epidemic diseases through shipping activity without creating unnecessary disruptions to world trade.

Commenting on the letter sent to the Health Secretary, Richard Ballantyne, Chief Executive at the BPA said:

“UK ports have been working closely with relevant authorities to prepare for and guard against the spread of the Wuhan coronavirus. Ports have highlighted though that it is acutely obvious local port health authorities, who are resourced by local authorities, are in real need of additional resources to prepare for such emergency situations.”

“The current risks from direct traffic arriving from Chinese ports is relatively low… However, ports are acting vigilantly and as the virus appears now to be spreading around Europe, the sector is bracing itself for new risks and challenges. Short sea sailings and flights could be subject to new measures but some UK port health authorities are frantically attempting to prepare,” he added.

While approximately 70% of the UK’s immigration is facilitated by air, a sizeable 30% of passenger movements are handled by seaports. Along with domestic ferry services, there are over 60 million passenger movements each year and the BPA represents all the UK’s ports who facilitate this traffic.

“Current market data shows that the impact of the Coronavirus is expected to be greater than SARS given the service sector has a greater share of the Chinese economy, China accounting for a significant amount of global seaborne imports and global shipbuilding, and the majority of ship repair,” Ballantyne added.

“Currently we understand that there are expected to be 6 million fewer global shipping container movements and a 20% decline in Chinese-Europe trade. This along with further potential disruptions to logistics chains in the UK lead to certain product shortages for British businesses and consumers,” he concluded.


Alphaliner: Cargo volumes at Chinese ports to drop by 6 Min Teu due to coronavirus impact

The extended Chinese Lunar New Year holidays and ad hoc measures aimed at curbing the spread of the coronavirus are expected to reduce cargo volumes at Chinese ports, by over 6 million TEU, according to Alphaliner’s estimates.

The analyst said in its weekly newsletter that the volume contraction is expected to reduce global container throughput growth by at least 0.7 percent for the full year.

“The full impact of the Chinese coronavirus outbreak on container volumes will not be fully measurable until ports announce their throughout numbers for the first quarter, but data collected on weekly container vessel calls at key Chinese ports already shows a reduction of over 20 percent since January 20, 2020,” Alhaliner’s newsletter further reads.

Carriers are continuing to blank sailings in February accounting for reduced cargo volumes.

Voiding of sailing is expected to continue until mid-March, hence, Alphaliner expects that any cargo volume recovery could be negatively affected even after the end of the holidays.

Despite the ongoing situation, carriers are continuing normal cargo loading and unloading operations at all Chinese ports except at the port of Wuhan, amid the city lockdown.

Wuhan handled 1.7 million TEUs of container cargo in 2019, accounting for o.6 percent of total Chinese port throughput.

The coronavirus threatens not only the Chinese economy but potentially that of the entire world.

“The Chinese government will need to initiate far-reaching stimulus measures to counteract the economic effects of the virus once it has been contained. China has already halved tariffs, from 5% to 2.5%, on USD 75 billion worth of imports from the US, originally implemented in September 2019,” BIMCO predicts.

“Other countries in the region, such as Japan and South Korea – both of which saw low growth in 2019, with Japan’s falling by 6.3% in Q4 2019 on an annualized basis – could feel the knock-on effects of the coronavirus crisis. It has the potential to harm both countries’ exports and disrupt supply chains, given the interconnectedness of manufacturing in the region.”

As factories and offices in China remain closed for prolonged periods BIMCO believes this might also affect the implementation of the Phase One agreement between the US and China, especially if China finds itself unable to increase its imports from the US by the amounts detailed in the deal.

“While demand for containerized exports out of China depends on other countries, the prolonged shutdown in the country’s manufacturing sector limits its ability to meet this demand, thereby harming the containerized shipping sector,” the association said.

BIMCO: Coronavirus comes at worst time for shipping

The outbreak of the coronavirus, originating from Wuhan, China, comes at one of the worst time for the shipping industry, which is currently struggling with the additional fuel costs from IMO 2020 and the switch to low-sulphur fuels, according to BIMCO.

“Demand is destroyed in China due to the coronavirus. Demand stemming from consumer spending, power generation and industrial production is lost every day that large parts of China remain quarantined. That demand will not necessarily rebound once the virus is contained,” Peter Sand, BIMCO Chief Shipping Analyst, said.

Even though there is a veil of uncertainty hampering the ability to predict the outlook for the shipping industry, BIMCO’s Chief Shipping Analyst analysed three scenarios:

• In BIMCO’s Scenario 1, it is assumed that the virus in large parts will be contained by the end of February and that the Chinese workers will return to work during early March, prompting a subsequent pick-up in manufacturing, industrial production and refinery throughput, as well as shipping demand.

• In Scenario 2, it is assumed that in the medium-term large-scale quarantines will continue until mid-March, but hereafter economic activity picks up and reaches a state of normalisation by April-May.

• Scenario 3 is the worst-case scenario, where the spread continues until an indeterminate point in time. However, with the massive uncertainties related to this scenario, it remains outside the scope of this analysis to make long-term projections. As such, BIMCO’s analysis primarily focuses on the short to medium-term implications.

Shipyards in China, many of which would otherwise be busy with IMO 2020 scrubber retrofitting, have remained closed and declared force majeure in many cases. An estimated 150 vessels are currently under retrofit at Chinese yards, according to Clarksons.

“The lockdown of newbuilding yards may prove to be the only silver lining to the outbreak as inflow of more ships are temporarily stopped,” BIMCO said.

Container shipping is inextricably tied to China with the main trade lanes, China-Europe and China-North America, linking China’s manufacturing capabilities with the rest of the world.

First, many of the producers of containerised goods have halted production or are producing at lower levels.

Second, the Chinese hinterland transportation of containers, in the shape of trucking, is in massive labour shortages.

Faced with the lower container volumes, container carriers have started large-scale blanking of sailings. On the Asia-North Europe trade lane, 40 sailings have been blanked in the eight-week period after Chinese New Year, compared with the 15 sailings blanked last year, according to Alphaliner.

The blanked sailings have partially safeguarded the freight rates from the coronavirus with the composite SCFI index, dropping a modest 93 index points from 981.19 on January 23 to 887.72 index points on February14 2020.

However, BIMCO believes the blanked sailings will only fend off the downward pressure for so long.

The intra-Asian market is expected to be the first to feel the blow with fewer semi-finished goods, such as parts used in car manufacturing, being transported to manufacturers in nearby countries like South Korea and Japan.

Should the regional manufacturers slow production due to supply shortages, the long-haul trades will soon hereafter start to feel the pressure, the association said.

“Currently we are seeing carriers trying to mitigate the low container volumes in Chinese ports by blanking sailings. If the situation continues, we could start to see global supply outages in retail stores. Manufacturing in Europe and North America could also start to decline, as some supply chains are reliant upon the Chinese semi-finished goods,” Sand added.

In which ways does it impact liner shipping?

In the Scenario 1, the impact on the long-haul trades will remain largely unaffected, according to BIMCO, given the capacity management measures already exercised. February traditionally brings with its declining freight rates and in this scenario, the month will unfold largely within the scope of usual seasonality. Yet, volumes will remain lower this time around, especially on the Intra-Asian trades, which could bring a minor disruptive interference to global supply chains.

In Scenario 2, more dark clouds will start to gather. A temporarily obstructed active labour force, caused by a continued wide-spread quarantine, will extend disruptions to manufacturing, hinterland transportation and port operations. Given the lower container volumes, the disruption could extend into a global supply shortage of retail and manufactured goods.

In this case, manufacturers in Asia and the rest of the world, reliant upon semi-finished goods imported from China, will have to temporarily cut production, creating a dent in manufacturing activity on a global scale. If that happens, container ship freight rates and time-charter rates will come under massive downward pressure, BIMCO predict.

“However, in this scope of influence, the effects will only be transitory, and we are likely to see a gradual rebound back to normal market conditions after weathering the storm,” BIMCO adds.


Nine shipping and port companies sign up to global digital collaboration

Nine shipping companies and terminal operators have signed an agreement indicating their intention to become shareholders of the proposed Global Shipping Business Network (GSBN).

The nine comprise some of the world’s largest terminal operators and container lines: CMA CGM, Cosco Shipping Lines, Cosco Shipping Ports, Hapag-Lloyd, Hutchison Ports, OOCL, Port of Qingdao, PSA International and Shanghai International Port Group (SIPG).

GSBN, established by logistics technology provider CargoSmart Limited, acted as a not-for-profit organization that operates and facilitates a secure and trusted data exchange platform for all stakeholders along the supply chain.

The signing of the agreement symbolized the fortified cooperation among the consortium as well as the conclusion of an important step towards the GSBN’s official establishment. Once all regulatory approvals have been obtained and the GSBN is formed, it will lead the development of innovative applications to create value to stakeholders in the supply chain, said CargoSmart.

CargoSmart will be the technology solutions provider and platform operator for the GSBN.

Martin Gnass, managing director IT of Hapag-Lloyd, said, “The signed shareholders’ agreement symbolizes an important milestone towards securing an industry-wide secured digital collaboration platform that aims to benefit all parties in the global supply chain.

“We expect the trusted blockchain platform will accelerate the sharing of verified logistics and cargo data, streamline business operations across the whole supply chain, and create value to each stakeholder.”

Ding Songbing, manager of strategy & research department of SIPG, said, “Existing data exchange and practices in the shipping industry do not adequately address all terminal operational details, leading to missed opportunities to improve overall efficiency. With terminal operators being founding members of the blockchain platform, we believe the GSBN will capitalise on new and existing opportunities on the terminal side and expedite digital transformation in the industry.”


Container lines add more backhaul and reefer surcharges

Container lines are continuing to add surcharges for the backhaul into Asia and Chinese reefer imports as the coronavirus (COVID-19) impact schedules and reefer slot availability.

As lines continue to blank more sailings from Asia due to lower volumes from China caused by the shutdown factories due coronavirus outbreak it is putting pressure on space on the backhaul on the mainline trades.

CMA CGM is adding a $300 per container peak season surcharge on dry cargo between North Europe to China and North and South Asia base ports from 15 March. Hapag-Lloyd has already announced a similar surcharge at $325 per box from 1 March.

Meanwhile as the availability of reefer plugs at major Chinese ports has worsened according to Maersk Line. The Danish line already has a $1,000 per reefer container congestion surcharge for shipments to Shanghai and Xingang and this is being extended to Ningbo from 28 February for non-FMC trades and 22 March for trades covered by the FMC.

Maersk recommends shippers choose other destination ports in China for reefer shipments and is offering free destination change to another port in China for reefer cargoes already in transit.

 Container lines facing pressure over complex IMO 2020 surcharges: report

Container lines are facing growing pressure to standardise surcharges, which have become ever more complicated with the introduction of IMO 2020, a report by Alix Partners highlights.

Long a source of dissatisfaction for shippers the bunker adjustment factor (BAF) has become even more complex with the introduction of IMO 2020 with each line having its own variation on a basic formula covering a range of areas including fuel price, ship size and trade.

“The lack of transparency and standardisation of those variables is a constant irritant to shippers, freight forwarders, and non-vessel-operating common carriers (NVOCCs) and gives rise to the suspicion that some carriers are using the BAF as a revenue-raising tool as well as a cost-recovery and risk-sharing mechanism,” the report said.

“The uncertainty can lead to fraught negotiations and frayed relationships that take a toll on both sides and add to the headwinds the container shipping industry faces as it sails into what could be one of the most complex and consequential years in its history.”

Alix Partners said that the negative perception was likely to lead to new pressure for container lines to standardise pricing formulas, including BAF, with a pressure campaign potential being led by mega-shippers on the eastbound transpacific trade.

“Carriers could see their hard-fought financial gains of recent years totally evaporate if they fail to control costs, including how they manage fuel costs and customer expectations around fuel costs,” said Esben Christensen, global co-leader of the transportation and infrastructure practice at AlixPartners and a managing director at the firm.

The pressure of IMO 2020 is now being further compounded by the influence of the coronavirus.

“IMO 2020 was already going to make this a year of huge disruption for the entire maritime industry,” said Marc Iampieri, a managing director in the transportation and infrastructure practice at AlixPartners. “Throw in the coronavirus, the recent deterioration of some key financial measures and whatever other unforeseen disruptions lie ahead, and it’s clear that preparing for the worst may be the best way to avoid the worst.”

Seaspan splashes out $367m on four 12,000-teu containerships

Seaspan Corporation is splashing out $367m in cash to buy four modern containerships of 12,000-teu in capacity, backed by long term time-charters with an unnamed global liner.

The purchase price of $367m is expected to be financed from additional borrowings as well as cash on hand.Seaspan said it expects to take delivery of the boxships during March and April 2020.Amongst the four 12,000-teu containerships, three were built in 2018 and one in 2017.

Upon the completion of this latest acquisition, Seaspan’s fleet capacity will exceed 1m teu at 123 ships and 1,023,000 teu, bringing its total contracted revenue to $4.6bn with an average remaining lease period of around 4.2 years.

Chen Bing, president and ceo of Seaspan, commented: “The acquisition of four high-quality, young, sizeable, eco-modern vessels marks our eleventh containership acquisition in the past five months, in aggregate adding approximately 117,000 teu to our global fleet, which now exceeds one million teu.”Ryan Courson, Seaspan cfo, added: “With this transaction, we will have deployed over $2.6bn of capital across our shipping portfolio since 2018, meaningfully improving Seaspan's returns and increasing long-term contracted cashflows to $4.6bn.”

Port of Los Angeles expects 25% drop in Feb container volumes due to coronavirus

The Port of Los Angeles, the US’ largest container port, is forecasting a 25% drop in volumes in February due to the impact of the coronavirus (Covid-19).

The port reported a 5.4% drop in its January container volumes to 806,144 teu, which Port of Los Angeles executive director Gene Seroka attributed to mainly to the impact of tariffs on Chinese imports.

However, with the impact of the coronavirus on Chinese production, ports and exports the Port of Los Angeles is forecasting a 25% drop in container volumes for February and 15% for the first quarter of 2020.

The Port of Los Angeles, the US’ largest container port, is forecasting a 25% drop in volumes in February due to the impact of the coronavirus (Covid-19).

The port reported a 5.4% drop in its January container volumes to 806,144 teu, which Port of Los Angeles executive director Gene Seroka attributed to mainly to the impact of tariffs on Chinese imports.

However, with the impact of the coronavirus on Chinese production, ports and exports the Port of Los Angeles is forecasting a 25% drop in container volumes for February and 15% for the first quarter of 2020.

 “What we’re seeing right now is 40 cancelled sailings from February 11 through to April 1, that would amount to about 25% of our ship calls for the time of year post Lunar New Year,” Seroka told CNBC in an interview.Seroka, who was based in Shanghai for APL at the time 2003 SARS outbreak sees the impact of the coronavirus as greater than the situation in 2003.“This appears to be much worse because of the number of folks who were affected and the lack of productivity that is taking place throughout the supply chain, starting with the manufacturing base,” he said.

With the coronavirus spreading in Europe and the Middle East the next biggest concern after China for the Port of Los Angeles remains in Asia with surge in cases in Korea to over 900, and Seroka noted that Busan was a big hub for its business. The coronavirus has not impacted port operations in Korea as yet although has hit some industrial production due parts and components shortages from China.

Hundreds of China-origin containers lying uncleared at Indian ports

Hundreds of such containers that left China after the outbreak of the coronavirus (Covid-19) are stuck at various Indian port due to lack of documentation providing details of goods inside the boxes.

Containers are piled up at terminals including the country’s primary container port, Jawaharlal Nehru Port Trust (JNPT), Chennai, Mundra, Visakhapatnam and Vallarpadam (Cochin),

Details such as the crucial Bill of Entry (BoE), which the Indian consignees require for Customs clearance, would normally have been provided by the Chinese consignors, whose offices have been shut since quarantine was imposed in Wuhan and in sections of some other Chinese port cities.

“The consignee or his agents need to file BoE with the Customs within 24 hours of the container’s arrival in the port,” said a Mumbai-based C&F (clearing and forwarding) agent. “If not, the authorities levy a penalty of INR5,000 ($70) per day for the first three days from the date of arrival, and INR10,000 per day thereafter. The penalty could run into millions of rupees if the cargo is not cleared in a few days.”

It is understood that, in a recent post-Budget interaction with Finance Minister Nirmala Sitharaman in Chennai, S Nataraja, president of the Chennai Customs Brokers’ Association (CCBA), had apprised her of the difficulty in obtaining BoEs, and urged her to waive off the late penalty charges for China-origin goods arriving at Chennai port.

“Importers are unable to produce/receive the documents from their suppliers as Chinese offices were closed, first during the Chinese New Year holidays, and then, due to the virus outbreak,” Nataraja is reported to have told Sitharaman. “It is a genuine case, and the minister has asked me to give details of the affected parties to the Customs Department for waiver of penalty.”

A circular issued by the Commissioner of Customs, Chennai, on 14 February 14 could give some reprieve for those seeking a penalty waiver for goods landed from China. To avoid recalling and reassessing the procedure for waiver of late fee, a separate option has been provided for waiver of late filing charges to de-link it with assessment.

The entire global supply chain has been badly impacted due to the coronavirus outbreak, which has led to large-scale disruption in shipping services. Sectors that are most likely to be hit immediately are mobile phones and pharmaceuticals, since India imports vast quantities of raw materials and components for these from China.It could cause a short-term rise in the prices of simple items of daily use, such as paracetamol; and a serious shortage within a month or two, if the quarantine in China persists.

Global carriers, port operators plan to launch shipping blockchain network

Global carriers and port operators across the globe have signed a shareholder’s agreement to launch the blockchain-based Global Shipping Business Network (GSBN), according to media reports.

Parties involved in the deal include DP World, CMA CGM, COSCO Shipping Lines, COSCO Shipping Ports, Hapag-Lloyd, Hutchison Ports, OOCL, Port of Qingdao, PSA International, and Shanghai International Port Group (SIPG).

The blockchain-based Global Shipping Business Network aims to bring all stakeholders, such as carriers, terminal operators, customs agencies, shipping lines and logistics service providers under a single platform. It will allow all parties in the supply chain to work together with transparency and accelerate the digital transformation of the shipping industry.

The platform will be operated by CargoSmart, which is also the technology solutions provider, as a non-profit organisation. CargoSmart, which is headquartered in Hong Kong, leverages technologies such as AI, IoT, and blockchain to provide innovative solutions to transportation and logistics companies.

Ding Songbing, Manager of Strategy and Research Department of and Shanghai International Port Group (SIPG) told the media “Existing data exchange and practices in the shipping industry do not adequately address all terminal operational details, leading to missed opportunities to improve overall efficiency. With terminal operators being founding members of the blockchain platform, we believe the Global Shipping Business Network will capitalise on new and existing opportunities on the terminal side and expedite digital transformation in the industry.”

Martin Gnass, managing director at Hapag-Lloyd too believes the signing of the shareholders agreement marks an important milestone towards securing an industry-wide secured digital collaboration platform that aims to benefit all parties in the global supply chain.


Cambodia plans new container seaport in Preah Sihanouk

Cambodia is planning to build a new container seaport in Preah Sihanouk province with financial assistance from Japan, Minister of Public Works and Transport Sun Chanthol said last week.

A 14.5m-deep port, funded by the Japan International Cooperation Agency (JICA), will soon be built in the southern province, he told a press conference.

The container port will service about 93 percent of all large vessels travelling in the Asia-Pacific region, the Cambodian minister said, adding that cargo from Cambodia will be able to be shipped directly without having to stop at Singapore or Hong Kong (China).

Chheang Pich, Director of the General Directorate of Logistics under the Ministry of Public Works and Transport, told the Phnom Penh Post that the project is now underway after JICA recently completed the study.

The port will facilitate import and export activities in the region and reduce costs, he said.

In a previous interview, Director-General of the Sihanoukville Autonomous Port (PAS) Lou Kim Chhun said the new port will cost around 203 million USD.

According to President of the Cambodia Freight Forwarders Association Sin Chanthy, the future port will expand the container handling capacity in the province.

It is good news for the shipping sector, he said, the new port will reduce traffic congestion at PAS and will help increase revenue for the government.

Chanthol said there is another port project in the pipeline. Although the study for this third port in the province has not been finalised, the minister was able to confirm that it will be 17m deep.

This port will allow Cambodia to conduct direct shipments to the US, he said.

A report by the Ministry of Public Works and Transport said PAS’ revenue reached 80 million USD last year, a year-on-year increase of 17.5 percent.

Total tonnage handled by the port increased by 22.6 percent, reaching more than 6.5 million tonnes, while the total number of vessels passing through rose by 15.5 percent to 1,661.

Port Name: Sihanoukville Autonomous Port (PAS)

Terminal Name: New Container Terminal of PAS

- Operator: Sihanoukville Autonomous Port

- Location: Preah Sihanouk City, Preah Sihanouk Province, Cambodia

- Quay Length: 350m Long

- Design Draft: -14.5m 

- Design Total Capacity (TEUs):   7,800 TEUs/time

- Expected Annual Container Throughput (TEUs): 450,000TEUs/year 

- Schedule of Development:

- Start Date of Construction: 2018 

- Completion Date: 2022

- Expected Operation Date: 2023

- Project Status: Loan Appraisal Mission

- Layout Plan (See attached figures 1.a & 1.b) 

- Container Gantry Crane Outreach (rows and/or meters): 03 Units (44m Outreach & 13 rows)

- Number of Yard Cranes (RTG, RMG, Straddle Carrier, etc.): 09 Units of RTG Cranes

- Container moves per crane-hour (optional): 25 box/QC/hour

Sri Lanka strikes deal to build new port 

The Sri Lanka Ports Authority (SLPA) will conduct a feasibility study into the development of the Colombo North Port, as it looks to substantially increase Sri Lanka’s capacity.

In a statement, the SLPA said it struck a deal with AECOM Infrastructure and Environment UK Limited on 20 February 2020 to study the project.

The project is central to the SLPA’s long term plan to increase the Port of Colombo’s annual capacity to 35 million TEU.

Capacity at the Port of Colombo is currently 12 million TEU but that is set to increase to 15 million once the West Container Terminal is completed.

Its South Port of Colombo is predominantly focused on transshipment and domestic container handling, however, according to the SLPA, it is congested.

The SLPA hopes that along with expanding its domestic shipping and logistics market, the Colombo North Port will also help Sri Lanka become a major trade point on the Indian Ocean. As well as containers, it will also be used for bulk, dry bulk ro-ro vessels.

Sri Lanka has become increasingly important to the shipping industry and has worked very closely with China in recent years to develop its infrastructure.

In July 2019, the government of Sri Lanka signed a deal with Japan and India to develop the Colombo South Port’s East Container Terminal.

Vietnam: Construction of My Thuy Seaport kicked off

The construction of My Thuy International Seaport in the central province of Quang Tri has been kicked off on February 27. 

The project costs VND14, 234 billion (US$613 million), including VND2, 143 coming from the My Thuy International Port Joint Venture Company and VND12, 091 billion loaned by strategic partners.

The harbor covering on an area of 685 hectares can receive 100,000 – ton ship. It has 10 ports that will be built in three stages, including 4 ports from 2018-2025; 3 ports from 2026-2031; and 3 ports from 2032-2036.

The seaport complex aims to provide transport services in industrial zones (IZs) in the Southeast Economic Zone and other IZs in the province, as well as goods in transit from Laos and Northeastern Thailand in the East-West Economic Corridor.

(Source: Forbes, Reuters, World Maritime News, American Shipper, Seatrade Maritime, Saigonport news)