Reintroducing tonnage – Oscillating Sways

reintroducing tonnage

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News has been in rounds making a buzz that liners are severely impacted due to reduced cargo demand and reintroducing tonnage has further resulted in pressure in rates.

Ship liners quandary

  • As per container shipping latest news and Alphaliner’s latest data, the idle container fleet plummeted to 313 ships – equal to about 1.555.959 teu since July 20, reflecting 6.6% of the total shipping container fleet capacity.
  • Addressing operational rates is a precarious decision-making call for the shippers. Their predicament lies in the introspective question of reintroducing tonnage or withholding the services.
  • Ship tonnage is a criterion used for vessel to carry goods. The two key divisions include quantity by weight and tonnage respectively. At its highest, the inactive boxship fleet reached a record 2.72 m teu in late May as liners struggled to shore up prices by shrinking capacity.
  • When carriers carry more ships back to the operations, rates face the weakening pressure. Alphaliner cautioned that with this time of year the current 1.56 million teu figure continues to rise since the busy season is anticipated to be in packed bloom. Xeneta platform based in Oslo, which monitors freight prices, has also raised SOS for weakening rates.
  • Alphaliner in its latest weekly article reported scarier figures in contingent terms, when 10% of the fleet rested idle in connection with the financial catastrophe that can be depicted out of the shot of July 20, 2009, 11 years back. Carriers faced a tough judgment.
  • Many of the Pacific International Lines (PIL) ships that were unproductive at the start of the month now have resumed their jobs on the heels of monetary assistance from Heliconia Capital Management, a subsidiary of the Temasek Holdings Singapore government.
  • As per to Xeneta CEO Patrik Berglund, “the updated intelligence reveals that market levels have eventually started to fall on foremost trades typically in the East – North Europe and the Far East – US West Coast, signaling that the current re-establishment of routes and tonnage is dragging prices down.”

Pandemic blues

  • In its newest reports Xenta (XSI), which studies the ocean freight market based on crowd-sourced data from prominent shippers, stated that the carrier sector seems to be navigating the coronavirus outbreak with some momentum in protecting its key long-term ocean freight rates.
  • After Examining above 200 million data points, wrapping more than 160,000 port-to-port pairings and main shipping comprising ABB, Electrolux, Continental, Unilever, Lenovo, Nestle, L’Oréal, and Thyssrepopp, inter alia, Xeneta reported that the index snuck up favorably in July.
  • The report emphasizes after two months of little rate retreat, there have been resilient efforts for encountering scourge of Covid-19 pandemic, the index remained somewhat constant for 2020, though less than 1% down on a year over year basis.

Conclusion

Ship carriers are putting their best of the enduring efforts to cope with the weakening rates despite the force majeure circumstances. Proper due diligence of the market can serve as one of the keys to tackle and achieve value in this distressed and complex situation.

Read this article also: MSI analyses impact of COVID-19 on Time Charter Markets

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