Container capacity cuts permanent in a prolonged downturn?

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Container shipping

Carriers face the potential of taking drastic action – including permanent cuts in capacity and increased scrapping – if there is a prolonged downturn in demand caused by successive outbreaks of the coronavirus disease 2019 (COVID-19), according to maritime consultancy Drewry (July 14)

“The Band-Aid of blank sailings won’t cut it,” Drewry research manager Simon Heaney told a webinar audience.

Heaney said a lengthy downturn, potentially of five years, would see “withdrawal of capacity on a more permanent basis, demolition ramp-up, and an end to new builds.”

‘Huge’ downside risks

While Drewry expected the container shipping industry to see modest demand growth up to 2024 with a compound average growth rate of 3.5 percent per year, there were “huge downside risks from a larger virus outbreak this year and new outbreaks next,” Heaney said.

As a result, Drewry forecast negative demand growth this year, ranging from minus 7 to 8 percent assuming a global economic recovery, to a 12-percent drop in demand if further virus outbreaks occurred.

IHS Markit, parent company of JOC.com, is predicting a 10.1 percent year-over-year drop in global container volume in 2020.

Source: Keith Wallis, JOC / IHS Markit

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