Logistics

Global container shipping lines rebound from Covid-19 impact

TE Raja Simhan Chennai | Updated on November 27, 2020 Published on November 27, 2020

Maritime activity is likely to be more sustained than during the third quarter due to the ongoing increase in volumes   -  REUTERS

AP Moller-Maersk, CMA-CGM see improvement in business activity during Sept quarter

Finally, global container shipping is showing a strong rebound, leaving behind the Covid-19 pandemic, going by the financials of the world’s two largest container shipping lines — AP Moller-Maersk and CMA-CGM.

During the third quarter ended September 30, 2020, both the global shipping companies showed improved volumes when compared to the previous two quarters. Both of them are active in India. Any impact on the global shipping will have a cascading effect on Indian trade too, said industry experts.

During the fourth quarter, maritime activity is likely to be more sustained than during the third quarter due to the ongoing increase in volumes. This momentum is particularly marked in the US and Latin America and allows the fleet to continue operating at full capacity as during the third quarter.

The CMA-CGM group while announcing the third quarter financial results said that volumes carried during the third quarter of 2020 continued to recover and were up 16.8 per cent compared with the second quarter of 2020. Volumes were also up one per cent compared with the third quarter of 2019.

Easing of lockdowns

The increase in volumes transported was due to the pick-up in global economic activity following the easing of various lockdown measures; the strong momentum in terms of the consumption of goods encouraged, in some locations, by support packages; strong e-commerce growth with inventory rebuilding and the usual seasonal variation in business activity in preparation for both the September and Christmas peak consumption periods in western countries.

During the third quarter A.P. Moller-Maersk improved profitability across the business and delivered strong free cash flow, despite the negative impact on global economies from the Covid-19 pandemic.

The global demand growth for containers is expected to contract by 4-5 per cent in 2020 due to pandemic. Organic volume growth in Ocean is now expected to be slightly below the average market growth from previously in line with or slightly below the market.

“Our progress in earnings and in our transformation allows us to look confidently past the extraordinary 2020. However, we remain well aware of the high level of uncertainty the pandemic and associated lockdowns continue to pose in the coming quarters,” said Søren Skou, CEO of A.P. Moller - Maersk, in a statement.

Charter rates improve

Commenting on the rebound, Sai Krishna, Assistant Vice-President, ICRA Limited, the global container shipping sector has witnessed significant improvement in charter rates in the current fiscal, despite the impact of Covid-19. This can be attributed to the ability of the global container shipping companies to manage supply better during the downturn, aided by the consolidation that has happened in the sector in the last few years and the top 5 companies controlling around 65 per cent market share.

In Q3 FY2021, the rates have remained healthy and the demand has also started witnessing recovery, especially in the Transpacific routes. Nonetheless, there are limited Indian players in this segment and they mainly operate in the coastal trade. They are also expected to benefit from the high rates in the segment, he said.

The third quarter outstanding is only regained over the last six months shortfall, now there is a vacuum for empty equipment thus the escalated freights.

“Overall, we have observed 10 per cent degrowth in imports and 5 per cent degrowth in exports. Having seen the worst, now it is time for rebound for positive growth, which is a good sign for India as well as for the global trade,” said Ennarasu Karunesan, Founder & CEO, UMK Group, an International Ports & Logistics Expert.

 

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Published on November 27, 2020
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