• ARI Media

COVID lockdown sequel threatens shipping demand

Europe locked down in March. Many U.S. states followed suit in April. Demand for containerized cargo and oil evaporated overnight. Now, much of Europe is closed down once again. U.S. business restrictions are tightening. COVID hospitalizations are reaching new heights. And ocean shipping demand is at risk of a relapse.

There is “significant uncertainty given rising lockdowns,” warned Clarksons Platou Securities in its shipping outlook this week.


Craig Stevenson, CEO of tanker owner Diamond S Shipping (NYSE: DSSI), said during a conference call on Monday, “Almost all the answers that [shipping] shareholders and analysts want come down to: When are you going to get on the other side of COVID? Because until you get a handle on COVID, it’s very, very difficult to predict what markets are doing to do.”


Lockdowns and shutdowns


Nationwide restrictions are in place in France, Germany, the U.K., Poland and much of Europe. Italy and Spain have regional lockdowns.

In the U.S., business restrictions are increasing by the day. They range from bans on indoor dining to capacity limitations at retail stores and closures of theaters and gyms.


According to Evercore ISI head of economic research Ed Hyman, the COVID crisis is “really grim and set to get worse. … cases and fatalities have blown through our estimates and no doubt are headed higher.


“The COVID crisis is likely to intensify in the coming weeks, leading to more shutdowns but not lockdowns,” he wrote in a client note. As a result, Evercore ISI cut its Q1 2021 GDP growth forecast to 3% from 5% previously.


Jarring juxtaposition

It is an increasingly jarring juxtaposition: record container numbers at the ports and record COVID numbers at the hospitals. Ports and hospitals are simultaneously nearing maximum capacity.


The Port of Long Beach handled 806,603 twenty-foot equivalent units (TEUs) in October, a monthly record. The Port of Los Angeles handled 980,729 TEUs in October, up 27% year-on-year and an all-time high. Los Angeles expects 900,000 TEUs this month, up 23% year-on-year. According to The McCown Report, inbound containers to the top 10 U.S. ports jumped 18.8% year-on-year in October.


Note: Change is year-on-year. Magenta line is three-month trailing average. (Chart: The McCown Report)

Meanwhile, U.S. COVID cases have spiked 73% over the past 14 days and deaths are up 63% in the same period, reported The New York Times. According to the COVID Tracking Project, the country has just hit a new single-day hospitalization record.

The risk for tanker shipping is that demand for diesel, gasoline and — in particular — jet fuel will decline. That would make an already bad rate environment even worse. “A lot of issues are tied to travel,” said Stevenson.


The risk for container shipping is that U.S. goods consumption will drop off due to non-service business restrictions and/or declining consumer confidence.

An enormous number of box cargoes are already en route. The Port of Los Angeles’ preliminary estimate is for 835,000 TEUs in December, up 12% year-on-year, after which it expects a pre-Chinese New Year bounce in January.

This raises the question: What if COVID slashes consumer demand in the middle of the ordering cycle and importers wind up with too much inventory in 2021?



Borrowing from the future

Panjiva, the supply chain research unit of S&P Global Market Intelligence, cited evidence that container transport could already be borrowing from future demand. Panjiva warned Wednesday that the risk of a “retail inventory balloon” is rising.

“Panjiva’s data shows that U.S. seaborne imports of consumer discretionary products appear to be wildly out of kilter with sales,” it said.


“Shipments of consumer electronics and household appliances jumped 21.1% and 71.6%, respectively, in October compared to retail sales for electronics stores, which fell 3.3%.


“Even in apparel and textiles — where imports only expanded by 10.1% after being largely unchanged in September — there was an imbalance with the 11.3% slide in sales,” said Panjiva.


Analyst: Importers are not overbuying

“Importers are not overshooting,” countered Deutsche Bank transportation analyst Amit Mehrotra in an interview with FreightWaves. “Same-store sales are higher than per-store inventories by over 700 basis points for Walmart [NYSE: WMT] and by 1,100 basis points for Target [NYSE: TGT].


Amit Mehrotra of Deutsche Bank (Photo: Chris Preovolos/Marine Money)

“What’s happening is that there’s a continued restocking need. They’re buying just to break even with their sales throughput,” said Mehrotra.


“There’s always a risk that sales will go down. But if you’re a supply chain manager at one of these retailers, and your same-store comps are up 5, 10, 15%, you’re not worried about whether they’ll go negative. You’re worried about having the supply to sell right now.


“Supply chain managers lose their jobs when they don’t have inventory on the shelves. So, sure, there could theoretically be a slowdown a few months from now. But the bottom line is that if the same-store comps are growing today while inventory is declining, that’s an equation that needs to be fixed right now.


“There are a few ways to fix that equation. One is if sales moderate and you reach equilibrium that way. But the only way to proactively solve the problem is to make sure inventory levels are appropriate.”


The vaccine is coming


Mehrotra looked past any potential demand pullback due to rising COVID hospitalizations and business restrictions and instead pointed to the vaccine effect beyond that.


“At some point in 2021, when there is a vaccine, you’re going to see an incredible pent-up demand release,” he predicted. “You saw it when the initial restrictions started getting eased back in May and June. And I think you’ll see the same thing on a much bigger scale at some point in 2021.”


Our source: https://www.freightwaves.com/news/covid-lockdown-sequel-threatens-shipping-demand

9 views
ARI shipping corporation, shipping corporation, heavy machinery shipping, warehousing, fulfillment, harzardos cargo, refridgerated cargo, oversized cargo, cargo, materia handling, shipping, boat transport
  • Twitter Social Icon
  • LinkedIn Social Icon
  • Facebook Social Icon
  • Instagram Social Icon
80 Sheridan Blvd
inwood, NY 11096
Tel: 877-371-7770
Fax: 516-371-7757
ilan@arishipping.com
7225 NW 25th St. # 210
Miami, FL 33122
Tel: 877-715-7058
Fax: 305-715-7059
info@arimiami.com

© Copyright 2017 ARI Shipping Corp. All rights reserved. 

ARI shipping corporation, shipping corporation, heavy machinery shipping, warehousing, fulfillment, harzardos cargo, refridgerated cargo, oversized cargo, cargo, materia handling, shipping, boat transport
ARI shipping corporation, shipping corporation, heavy machinery shipping, warehousing, fulfillment, harzardos cargo, refridgerated cargo, oversized cargo, cargo, materia handling, shipping, boat transport
ARI shipping corporation, shipping corporation, heavy machinery shipping, warehousing, fulfillment, harzardos cargo, refridgerated cargo, oversized cargo, cargo, materia handling, shipping, boat transport
ARI shipping corporation, shipping corporation, heavy machinery shipping, warehousing, fulfillment, harzardos cargo, refridgerated cargo, oversized cargo, cargo, materia handling, shipping, boat transport
ARI shipping corporation, shipping corporation, heavy machinery shipping, warehousing, fulfillment, harzardos cargo, refridgerated cargo, oversized cargo, cargo, materia handling, shipping, boat transport
ARI shipping corporation, shipping corporation, heavy machinery shipping, warehousing, fulfillment, harzardos cargo, refridgerated cargo, oversized cargo, cargo, materia handling, shipping, boat transport
ARI shipping corporation, shipping corporation, heavy machinery shipping, warehousing, fulfillment, harzardos cargo, refridgerated cargo, oversized cargo, cargo, materia handling, shipping, boat transport
ARI shipping corporation, shipping corporation, heavy machinery shipping, warehousing, fulfillment, harzardos cargo, refridgerated cargo, oversized cargo, cargo, materia handling, shipping, boat transport
ARI shipping corporation, shipping corporation, heavy machinery shipping, warehousing, fulfillment, harzardos cargo, refridgerated cargo, oversized cargo, cargo, materia handling, shipping, boat transport
ARI shipping corporation, shipping corporation, heavy machinery shipping, warehousing, fulfillment, harzardos cargo, refridgerated cargo, oversized cargo, cargo, materia handling, shipping, boat transport