American freight turnaround consultancy Alix Partners (AP) has warned that container shipping is under the cosh, burdened by bankruptcy risk measurements curving up on the back of volumes tapering off and fuel costs going up.
The IMO2020 restriction that came into play on January 1, forcing the sulphur content of bunker fuel down from 3.5% to 0.5%, has substantially contributed to industry debt growing to $21 billion, AP has said.
But whereas the International Maritime Organization’s sulphur-curbing measure was last year regarded as the single biggest challenge to the industry’s bottom line, no one could have predicted the effects a virus outbreak in China would have on international shipping.
Since the emergence of last year’s coronavirus (Covid-19), AP indicated, shipping was finding itself in troubled waters, with China’s ports industry battling to contain a virus that is affecting the entire industry.
Regarded together, IMO2020 and Covid-19 have the shipping industry on the back foot, which has led AP to call for standardised responsiveness, at least in an attempt to cushion the impact of a costly fuel restriction.
This view, it claims, has become apparent as lines adopt different approaches to factor in price changes by referring to IMO2020-related expenses in different terms.
It is just one example, AP argued, of how rising costs are couched in different ways between lines.
Ameliorative synergies across the board, AP believes, could go a long way to calming the industry as volumes look set to fall by 12-15% year-on-year in the first quarter and IMO2020 affects the industry.
Early indications are that earnings before income, tax, deductions and amelioration (Ebitda) could dip by as much as 4%.
