Idle vessels increased to 2.7 million TEU in May of this year due to the plunge in demand of the onset of the great lockdown but have recently decreased its laid-up vessels to 430,000 TEU, according to Alpha Liner. The container shipping companies reduced supply of shipping services in preparation for deteriorating container transportation demand in 2nd quarter, increasing the proportion of idle ships to 11.6% of total fleets.
However, as the lockdowns are starting to ease (lifting the blockade), the demand of trade is surging, filling up container ships across the Pacific and operators are restoring cargo-vessel sailings that were cut by as much as a third at the height of the pandemic closures from March to June.
Increased demand is believed to be due to the reason below.
1. Increased demand for medical products as people starts to consider their healthcare.
2. The conversion of some air cargo to maritime cargo.
3. The conversion of expenditure of the service sector due to Corona 19 into consumable goods.
Moreover, WSJ indicates, shipping executives pin much of the rebound on e-commerce. “The service industries are still paying the price of the lockdowns but there is a surge in online shopping,” said Mikkel Elbek Linnet, a spokesman for Denmark’s A.P. Moller-Maersk A/S, the world’s biggest container operator. “People may not go out for a drink, but they will spend money on a pair of sneakers or to get home appliances.”
The rebound in demand has pushed up freight rates since U.S is restocking its depleted stocks ahead of holiday season. Please see my blog.
https://techongstudy.blogspot.com/2020/08/container-shipping-companies-create.html
If demand growth continues in fourth quarter, vessel supply can increase both ocean and air. The current low fuel price is expected to have a positive impact on shipping firm’s profit.
Source: WSJ, FT
https://www.ft.com/content/4a77fe08-edb4-46b6-a030-f32a404ccdce
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