Dive Brief:
- MSC is implementing a blank sailing program to help it better manage capacity as the industry deals with changing "market demands amid the evolving COVID-19 situation," the company announced Friday.
- The carrier is starting with the cancellation of two sailings that were serving routes between China and Europe or the Mediterranean. Other blank sailings could be announced in coming weeks "depending on the market demand," the company said.
- MSC's decision came the same week Maersk announced it was canceling multiple trips. The capacity reduction by these 2M members alone is equivalent to about a "21% capacity reduction in [Asia-Europe] trade," Sea-Intelligence Shipping Analyst Imaad Asad said in a release emailed to Supply Chain Dive. 2M is an alliance between Maersk and MSC that includes partnerships with other carriers.
Dive Insight:
Blank sailings peaked earlier this year as a result of factories in China being shut down by the coronavirus outbreak, but with factories now beginning to restart production, the new batch of ship cancellations is due more to the drop in consumer spending that is leading retailers to cancel orders.
With consumers not spending money at shuttered retail locations, retailers are canceling orders with suppliers. Many of those suppliers are shuttering as a result and ocean carriers are blanking sailings to keep supply in line with demand.
There have been 45 blank sailings along the "main deep-sea trades" that can be attributed to the decline in demand, according to Sea-Intelligence.
"2M was especially active as they made a full temporary withdrawal of the AE2/Swan and AE20/Dragon services on the Asia-Europe trade for all of 2020-Q2," Asad said. "Albeit with the caveat that if demand picks up earlier than expected they might also resume service earlier."
He said the short notice for seasonal blank sailings reflects a decline in customer booking activity. "It should therefore be expected that this week will see a further rapid escalation in the amount of blank sailings both by other carriers as well as in other trade lanes," Asad said.
Another challenge for carriers will be ensuring their crew, sequestered at sea, don't become infected with the coronavirus. Multiple members of one Maersk ship tested positive, according to Lloyd's List reported last week.
"[G]iven the high uncertainty in the world markets no-one knows exactly how long this will last and hence the new arrangements will all be ad-hoc," Asad said
