Will there be a calm after the storm for ports?

TOC Digital Webinar 26th May

Presenters

Lars Jensen: CEO, Partner, SeaIntelligence Consulting

Peter Sand: Chief Shipping Analyst, BIMCO

TOC Digital have taken the welcomed step to use webinars to discuss extremely pertinent topics affecting the shipping and container industries right now. We believe at AIDrivers that understanding the entire port industry and needs is paramount. With this knowledge we can position our ai enabled autonomy technology strategically to aid recovery as we ease out of the current Covid-19 situation.

Lars Jensen kicked off the presentation with an overview of the container shipping industry in 2020 and described this present moment as the eye of the storm. Pre Covid-19, global container demand had been in decline for several years so 2020 did not start with the healthiest of backdrops. At the start of the year concerns regarding low sulphur fuel and the impact on costs for the industry were at the helm. However, as Covid-19 hit hard, the rapid escalation in ‘blanking’ or cancelling sailings took hold across the entire industry swamping any previous concerns over fuel costs. The key part of his analysis was that only now in May, 2020 are we seeing the full impact of the Covid-19 demand drop as the time lag of sail time takes effect.

There is no sign yet as to how Q3 will unravel as bookings for July,2020 only start 4 to 5 weeks out. Currently spot freight rates have been maintained despite the collapse in the volume of routes. The best-case scenario in his opinion, is that the container industry sees an $800million loss in 2020. Worst case he estimates a loss of $23billion. The carriers he believes, have the choice at this point to opt for maintaining freight rates with less routes to exit this situation in the least-worst form. So we should expect to see less routes with prices unchanged or increasing.

Peter Sand’s talk addressed whether world supply chains will be the same after Covid-19. He started his talk by running a poll to ask the participants what type of recovery they expected. A majority of 64% chose a slow and gradual recovery as opposed to L-shaped, V-shaped or swoosh-shaped progress.

The WTO have indicated there will be a 13% decline in world merchandise trade in 2020 which shall bounce next year, however, as highlighted in by Lars Jensen, it is accepted that there has been low demand in global merchandise volumes. So Peter emphasised that any bounce next year will not encompass any real growth, merely a recovery to already depressed levels.

Similarly, global manufacturing levels are key to indicating what may come next economically. We have seen unprecedented contractions in manufacturing in H1 this year due to the pandemic. So much so, that spot rates for containers are actually higher for the back haul from North Europe to China than in reverse which is a rarity. Demand is exceptionally low and will continue to be so until we are out of lockdowns. Unemployment figures globally and especially in the USA will dampen demand recovery somewhat also.

Supply chains have already changed to combat the effects of the US China trade issues. Vietnam and Cambodia have seen huge increases of inward investment in the last 2 years. There has been trade diversion to offset the China tariff problems and this is set to continue as we navigate out of Covid-19 instability.

The glimmer of hope that sticks within the industry is that container ship down-time has been used to retrofit ‘scrubbers’ to convert fuel to low sulphur. This indicates that there must be some small confidence that investing into the future is worthwhile.

With systemic overcapacity and low margins, the shipping and container industries are squeezed. Finding cost savings and higher efficiencies while increasing productivity levels will be part of the next phase as we rebound out of 2020. Part of that solution is using the technology on offer to streamline ports and shipping to build more resilient operations and products for the future. AIDrivers stands in a strong position to offer industry solutions for automation with AI enabled technology. The Covid-19 crisis has put the focus on the future and AIDrivers is well-placed to deliver solutions to leverage the industry into the next phase.

Aidrivers is accelerating the world's transition to autonomous vehicles and robotics.