Not all shipping lines will be able to withstand the shocks of the coronavirus pandemic and some may have to “go down”—which will lead to consolidation, as is being witnessed in the aviation industry, but at the expense of the Ghanaian shipper.
It is feared that the shipping lines that will remain in business might skew the market in their favour, since there will be fewer lines to ship an estimated surge in cargo and that could drive up the cost of freight.
“Maybe it’s when things settle; when the havoc of the virus crisis is settled, there will be some consolidation just as is being witnessed in the aviation business. By the time this whole thing is over, we will have some shipping lines collapsing, Adam Imoru Ayarna, Vice President of the Shipowners and Agents Association of Ghana (SOAAG), told Business24 in an exclusive interview.
“But to be honest, as to whether it will affect the cost of freight, that will be a commercial decision that shipping lines will be taking independently and each one will handle it differently. Some will use it as a marketing tool, while others will have to face reality or go down.”
Shipping lines are currently reeling from the pandemic, with containers locked up at ports and general cost increases aside other huge investments to keep their vessels moving on the seas as the virus scourge rages.
According to Mr. Ayarna, measures including liners putting in place precautions and spending heavily on crew onboard vessels to enable them load at origins and destinations are huge costs that shipping lines will want to recoup when the situation is brought under control.
Another factor that will drive up the cost of shipping is the proposed establishment of a Port Development Fund that will primarily finance the construction of town roads within the Tema Port enclave.
Business24 gathers that a law is being sought to enable the fund secure a loan from A.P Moller Capital—a fund management company affiliated to A.P. Moller Holding A/S—to carry out the proposed road projects. The expenditure will subsequently be levied to cargo—even though the construction of those roads was originally captured under the MPS deal.
“Once this comes, then we know that there is going to be an increase in shipping costs because it will definitely be passed on; the shipping lines will pass on that cost to the shipper,” Mr. Ayarna noted.
Already, most shipping lines have introduced a surcharge to make up for the cost of acquiring low-sulfur fuel in compliance with the IMO 2020 directive which took effect in January this year.
German shipping liner Hapag-Lloyd introduced an IMO 2020 Transition Charge (ITC) for short-term contracts as of December 1, 2019.
Danish shipping major Maersk has already decided to increase its bunker surcharge; the tariff increases will be implemented across all trades and will range between US$50-200 per box.
As the coronavirus sweeps across Europe and the US, causing widespread disruption and lockdowns, container shipping could see a loss of 17m TEUs of cargo in 2020, according to the latest newsletter from Analyst Sea-Intelligence.
The report said container shipping could be looking at developments similar to the global financial crisis in 2009—which implies a volume loss of 10 percent—and warned that there was a “realistic risk of bankruptcies”.