Container vessel idling at 1-yr high as Covid-19 pandemic sinks sailing

Cancellation of sailing schedules in the container segment has taken idling of shipping vessels across the globe to a one-year high in May.

The highest sailing cancellation since the Covid-19 outbreak was in February, registering a spike of 105 cancellations across Trans-Pacific, Asia-Europe, and the Mediterranean trades.

On the Asia-Europe route, cancellation of sailing schedules — also called blank sailing — peaked to 46. As a percentage of total container vessels, idling is the highest in May.

“Cancellations go up annually in February on account of the Chinese New Year. This time, however, the Covid-19 outbreak has aggravated the situation,” said a senior executive with French container transportation and shipping company CMA-CGM (India operations).

The number of sailing cancellations decreased between April and May by 12 per cent, apart from the Trans-Pacific trade, where there is increased cancellation of sailings of 32 per cent, said a Drewry report.

“Usually, idling of container vessels is between 2 per cent and 3 per cent. Since the Covid-19 outbreak, idling (of vessels) has peaked to 10 per cent of the total (currently), making the situation grim,” Subrata K Behera, manager-ports and container research at Drewry Maritime Services, told Business Standard.

Industry officials remain divided on the extent of recovery in trade, including exports from India due to demand destruction and other issues like labour availability.

According to the Federation of Indian Export Organisations (FIEO), overall exports from India declined 60 per cent in April from the same period last year, while May has seen marginal improvement, with the drop being 50 per cent year-on-year.

“Container trade across the globe is beginning to come back from China, Far East Asia, including exports from India,” said Behera. The demand for vessels, however, will sustain if trade flow continues.

It could shrink to fewer vessels, based on experience from the earlier requirements, he added. “That should be the new trade pattern, at least for the next few months,” said Behera.

In March, container traffic at all major ports of India fell 12 per cent on-year and the TEU (twenty-foot equivalent units) traffic at Jawaharlal Nehru Port Trust (JNPT) — the country’s largest container port — fell 2 per cent. JNPT’s April container traffic was 37 per cent lower on-year, said a CRISIL report.

India has significant container volumes linked with severely hit Covid-19 countries, which is why there is sharp dip in container trade. The US (estimated 10 per cent share in laden volumes) and Europe, including the UK (around 18 per cent), are regions with very high traffic risk; West Asia (around 10 per cent) and Rest of Asia (about 23 per cent) have high traffic risk, while China (13 per cent) is in the moderate-to-high traffic risk category, said a CRISIL report.

India’s container cargo normally includes steel products, pharmaceuticals, engineering goods, yarn/fibre, readymade garments, and refrigerated food products, among others.

CMA-CGM executives, however, said exports should look up for India by July. “With industrial operations commencing in Maharashtra and to some extent in Gujarat, the picture should improve in the coming months,” he said.

The company is arranging to hire locals in the region to replace migrant workers in order to come back to original volumes. ”Replacement can happen to the extent of 15-20 per cent, but dearth of migrants is going to pose an issue in the coming months, even if the industry is ready with its produce for exports. Local employment cannot help in 100 per cent replacement,” said Sharad Kumar Saraf, president, FIEO.

Some industry officials are of the view that migrant labourers would have to return to their jobs, given that the employment scenario is worse in their home states. “Most labourers are from Uttar Pradesh, Bihar, and Jharkhand. The hinterlands offer zero job opportunities. Realisation will dawn on them and they will return by July,” said an executive with Maersk India.