Shipping Industry May Go through Big Change in Aftermath of Pandemic

The global Big 3 shipping alliances — 2M, Ocean Alliance, and The Alliance — are scaling back their operations to prevent freight rates from going down due to a steep decline in cargo volumes.

The market situation is unfavorable to HMM, which joined The Alliance to rebuild its shipping business.

Temporary cancellations of container ships reached 212 from April 6 to 10, a sharp increase from 45 in the preceding week, said Sea Intelligence, a shipping industry consulting company on April 13. The Asia-Europe route suffered the largest decreases of 29 percent to 34 percent in container transport volume.

By shipping alliance, 2M plans to cut its services 21 percent in the Asia-Northern Europe route and 22 percent in the Asia-Mediterranean route during their scheduled services in the second quarter. The Ocean Alliance announced that it would cut 5 percent of its planned voyages in the Asia-North Europe and Asia-Mediterranean routes. The Alliance including HMM announced that it will cancel 10 percent of its scheduled operations in the Asia-North Europe and Asia-Mediterranean routes.

Under these circumstances, industry analysts are expressing concerns about HMM, which planned to aggressively increase the amount of holds by putting large 24,000-TEU container ships in service beginning April. Some experts say that HMM will be able to take the lead in determining costs or shipping charges by expanding its fleet at a time when other shipping companies are faltering. But others say that HMM may worsen a supply glut, adding to difficulties.

Experts say that the world's shipping market will clearly see the rise and fall of shipping companies in the aftermath of the novel coronavirus spread. “Payments for February shipments begin from late March and early April. There is a high possibility that companies with cash flow problems come out at this time,” said Ryu Je-hyun, a researcher at Mirae Asset Daewoo. In fact, Singapore shipping company PIL (Pacific International Lines) is currently in the process of selling off 12 ships as it has difficulties repaying debts due to cash flow problems.