Container carriers announce more ‘blank sailings’ through September

By Bruce Abbe, SSGA strategic adviser for trade and transportation

Last week, two of the three global container shipping alliances announced more planned “blank sailings” in the third quarter of 2020 out through September. While reportedly there are signs that some ocean carriers are bringing a bit more capacity on line, general indications are that the carriers are finding it difficult to match supply with unpredictable demand and are holding onto their newfound ability to maintain higher shipping rates by limiting capacity.

Two vessel-sharing alliances, the 2M Alliance, made up of Denmark-based Maersk and Swiss-headquartered Mediterranean Shipping Company (MSC), and The Alliance, made up of Germany-based Hapag-Lloyd, Japan-based Ocean Network Express (ONE), Taiwan’s Yang Ming, and South Korea’s Hyundai Merchant Marine (HMM) announced they are planning to cancel a combined 75 sailings scheduled for the third quarter.

“Blank sailings” have appeared to be the root of so many of the disruptions and challenges shippers have faced throughout the first half of 2020 as international trade has experienced unprecedented volatility due to the fallout of the global coronavirus pandemic.

A Freightwaves report provides more detail. The 2M cancellations noted more Asia-Europe cancellations, although one service from Thailand calls on the East Coast U.S. The Alliance carriers are major Trans-Pacific service providers. Industry experts are said to expect the Ocean Alliance, the third major alliance consisting of APL (now part of CMA), France-based CMA/CGM, Taiwan’s Evergreen Line, and China-headquartered COSCO Shipping to soon announce their planned blank sailings.

Denmark-based shipping consulting firm Sea-Intelligence indicated that Trans-Pacific ocean carriers cancelled more than 120 sailings since April running into July, according to a Journal of Commerce report.

Sea-Intelligence CEO Alan Murphy explained to Freightwaves the challenges ocean carriers have had trying to predict demand during the volatility of global trade as an outgrowth of the coronavirus – from shutdowns of manufacturing in China, to rapid surge in demand to restock goods, to the current uncertainty over prospect for the economy due to unemployment, business failures and potential declines in spending.

Some positive signs
Murphy projected that ship cancellations in July are likely to be down 10-15% from scheduled — a smaller decline from May and June, which were down 20%. He also noted a positive development that some blank sailings have been “unblanked,” and “extra loaders” or added sailings have also occurred.

Other freight industry reports out the past few days are indicating a strong upturn in trucking volumes that could be a precursor to a stronger recovery underway – another factor in the difficulties of projecting demand in the volatile global economy.

While the ocean carriers are learning the advantages of protecting higher rates, they also need to fill the ships they have moving on the water. So too is there a cost for parking the behemoth container ships too long.

SSGA shippers
Exporter shipper members of the Specialty Soya and Grains Alliance (SSGA) regularly use ocean carriers in all three of the major alliances to serve overseas customers. Much of the disruptions in the first part of 2020 have stemmed from late-changing vessel sailing schedules and inadequate notice time for canceled sailings for inland shippers whose containers take 10-14 days on the railroads to reach the ports on the West Coast.

Also challenging for exporters has been tighter ship space causing container bookings to be pushed back weeks longer than normal, plus longer transit times to reach customers on ships that are making more port stops.

Veteran shipping experts know that ocean-carrier container shipping decision-making is primarily driven by the “head haul,” higher-value consumer products demand. U.S. container exports, with the exception of high-value meat and poultry refrigerated product exports, are the back haul, and container availability depends upon the volume and movement of inbound import containers.

U.S ag exports increase
Despite all these disruptions, it is worth noting that, according to a Journal of Commerce report, total U.S. agriculture exports increased 12.5% in the first quarter of 2020 compared to a year ago. U.S. export to Asia increased 11.6% during the first quarter, with exports to China up sharply after a thawing of the U.S.-China trade war that was at its peak in 2019.

One more worry – as if we didn’t have enough – there are fresh industry concerns that the U.S.-China trade war might heat up again in the coming months during the U.S. election year and concerns that China may not live up to commitments made under the Phase-One Trade Agreement.