How coronavirus is changing global shipping routes | FT Trade Secrets
Coronavirus hits shipping
Maersk, the world’s largest container shipping company, warns of «very weak» the beginning of the year as the coronavirus epidemic disrupts production cycles of factories in China and reduces demand for freight.
The Danish shipping operator said Thursday that it has canceled more than 50 sailings from Asia as the Lunar New Year holiday has been extended due to an outbreak. Shipping costs are expected to decline as demand declines, the company said in a report..
«We estimate that factories and factories in China operate at 50–60% of its planned capacity», – said CEO Soren Skou (Søren Skou) in his income statement. Maersk expects production to rise to 90% by the first week of March, but Skow warned that «obviously there are still many uncertainties».
In an interview with Julia Chatterley, on the show «First move» (First Step) CNN Business, Skow said that since 30% of the company’s business is in China, the impact of the virus «very significant». What matters most, he said, is what happens in the coming weeks..
According to data announced at the UN Conference on Trade and Development, about 80% of world trade in goods is carried out by sea transport, and China has seven of the 10 busiest container ports in the world. This means the coronavirus could have a huge impact on global shipments..
Maersk said it expects revenues of about $ 5.5 billion this year, which is about 5% lower than analysts predicted..
Morningstar analyst Michael Field says the company forecast less than 1% increase in shipments «pretty depressing», but gives the company some breathing room if the impact of the coronavirus turns out to be worse than expected.
Shares traded more than 3% lower in Copenhagen on Thursday, pushing the decline to 14% this year..
The negative financial impact of the coronavirus on businesses around the world, from airlines and automakers to luxury goods companies and pharmaceutical companies is gradually becoming more evident. Qantas and Air France-KLM warned on Thursday the virus could cut profits by hundreds of millions of dollars this year..
Air France extends ban on Chinese flights until at least end of March, while Qantas will cut flights to Asia by 15% until end of May.
Australia’s Qantas said the coronavirus outbreak will cost the company A $ 150 million ($ 99 million). Air France-KLM estimates that from February to April, the coronavirus outbreak will cost the company between 150 and 200 million euros ($ 162 – $ 216 million).
But uncertainty about how the virus outbreak will evolve makes it very difficult for companies to calculate potential damage. While China on Thursday recorded its lowest number of new daily infections in weeks, South Korea reported a rise in the number of cases..
The virus epidemic adds an additional set of challenges facing ship operators, including overcapacity, a slowing global economy, weak production and a trade war between the US and China..
The coronavirus could also wreak havoc on global trade given how important China is to the global economy and supply chains.. Brokers and analysts say falling demand for shipping goods back and forth to China – the world’s largest consumer of many goods – will leave its mark on the shipping industry and merchandise trade in the coming months..
«Coronavirus affects all our businesses», – said Skow. «We also have a terminal business in China as well as a significant logistics and warehouse business. It’s not just an ocean».
Maersk said delays in reopening Chinese shipyards are preventing repair and maintenance work on its ships..
The company expects exports from China to be «very weak» in February, «rather weak» in March from «possibly strong recovery in April, May and June», said Skow, referring to «external consensus», that the virus will peak in the coming weeks. The company‘s forecasts also do not include major new outbreaks of coronavirus outside of China..