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The Impact of COVID-19 on Ocean Carriers – How BlueX Can Help

Tomas Swinburne
Jun 17, 2020
Containers on a yard

2020 has been a turbulent year for ocean shipping.
Ocean carriers are expected to lose 10% of their shipping volume due to COVID-19.

Despite the challenges presented by the virus, we at BlueX are confident that the global economy will steer towards more favorable waters once lockdowns are lifted.

Until then, we can help ocean carriers to minimize the impact of COVID-19, or at the very least, prepare you for the new reality after COVID-19 recedes.

How?

We offer the following pathways for safeguarding your operations and customer pipelines by reducing the impact of COVID-19 with:

  • Container monetization tools
  • Digitalization that allows you to retain customers
  • New digital channels to reach more customers

Ocean carriers need to prepare for the post-COVID-19 reality. Specifically, they need to digitalize to remain operationally viable in the near to far future. COVID-19 has only acted as a catalyst for this process, and BlueX can help with a pathway to digitalization.

The Impact of COVID-19 on Ocean Carriers

The shipping industry as a whole was recently downgraded by Moody’s. There are fears that profits could drop as much as 30%.

In response to COVID-19, 1,675 ocean carriers canceled many sailings. This equates to roughly 11% of total sailings, which, according to Safety4Sea, breaks down to:

  • 13% of 2M sailings
  • 17% of Ocean Alliance sailings
  • 17% of THE Alliance sailings
  • 8% of non-alliance sailings

This has had a significant knock-on effect for the industry with issues ranging from supply-demand imbalances, demurrage problems, and container and equipment shortages.

As a result, ocean carriers may not be able to take full advantage of the post-COVID-19 shipping boom.

Supply-Demand Balance Issues

It’s difficult to say when, but there will be a return to demand for ocean carrier services. When this occurs, carriers will need to ensure their supply-side can satisfy demand.

Supply-side issues are somewhat inevitable as container and equipment shortages will require carriers to take more time to jumpstart their operations to full capacity after carrying out blank sailings and reducing operations to counteract the effects of COVID-19.

According to Logistics Management, carriers can mitigate some risk of a supply-side imbalance, by laying up owned vessels in the event of a prolonged downturn in demand.

We can be confident that demand will return, and ocean carriers need to prepare to ramp up their services to meet the coming post-COVID-19 boom.

Container and Equipment Shortages

The uneven distribution of containers and equipment is causing a global shortage.

Container and equipment imbalances account for $20 billion annual losses. COVID-19 will further exacerbate this problem.

Even as trade between Asia and Europe increased by 25% in May 2020, the shortage of containers is hindering the recovery, with an estimated 6 million new containers needed to meet demand. This presents a problem as factories that manufacture containers remain closed.

Demurrage and Detention Issues

With businesses failing to pick up their imports due to warehouses being full or closed, demurrage and detention are presenting challenges for everyone in the industry.

For carriers, freight fluidity is being hit hard, and higher rates of demurrage and detention are compounding other problems such as equipment and container shortages.

As stated by Safety4Sea, ocean carriers will continue to place a high priority on incentivizing shippers to collect cargo. In other words, demurrage and detention charges are likely to remain in place.

However, the Federal Maritime Commission recently issued new guidance. They are investigating whether demurrage and detention charges actually “incentivize” freight fluidity. The onus of responsibility of demurrage and detention could switch from shippers to ocean carriers.

Such a move could further reduce margins for ocean carriers.

Preparing for the Post COVID-19 Boom with BlueX

While the impact of COVID-19 on shipping has been substantial, the post-COVID-19 shipping boom will be an opportunity to regain losses.

For ocean carriers, revamping freight fluidity to pre-COVID-19 levels will be important for offering space to as many customers as possible. However, it may take some time to resolve as container and equipment imbalances could hinder the recovery of operations during the boom.

Ocean carriers need to plan for various scenarios, depending on the customer demand for shipping.

For example, if lockdowns continue, blank sailings will continue. Likewise, if lockdowns are lifted across continents and regions simultaneously, carriers may find they lack the supply-side needed to match demand. Such a situation may result in shippers searching for guaranteed space options from other ocean carriers.

How BlueX Can Help – Your Pathway to Digitalization

Regardless of whether or not ocean carriers have the scalability to increase space, equipment, or containers, 2020, and perhaps beyond, will see significant losses for the shipping industry.

We at BlueX understand these issues.

We’re leading the charge for ocean carrier digitalization through our CarrierX Solution that can enable container monetization.

Container Monetization Strategy – Diversify Revenue Channels

According to our research, non-digitalized carriers are missing out on an estimated $45 billion of market cap value. By embracing digitalization and enabling container monetization, ocean carriers can also drive two times more shareholder value.

The BlueX Freight Commerce Platform (FCP) allows ocean carriers to monetize containers through our white-label solution with trade services hosted on our platform.

Rather than relying solely on fluctuating rates in the market, carriers can diversify their revenue channels by adding services to their containers, and by not simply having them viewed as commodities. Some featured services that are planned to be launched by BlueX include:

  • Customs
  • Insurance
  • Payment terms

Many more services will be added in the future as ocean carriers continue to join the CarrierX Solution.

An Online Booking Platform to Enhance Customer Experience

While container monetization can drive greater profitability, offering an online booking platform that helps customers find rates, make faster bookings, and have more access to information is invaluable.

By signing up for BlueX’s platform, ocean carriers can offer customers the following benefits through our white-label solution:

  • Faster bookings with up-to-date rates
  • Accurate shipping information
  • A platform to offer trade services

Evergreen Line’s BlueX-enabled online booking platform, GreenX, already showcases these benefits and has already garnered more than 4,000 sign-ups since launching.

Adapt to the Post-COVID-19 Reality

Nobody could’ve predicted 2020 would be such a tumultuous year for shipping. What matters now is how carriers execute on their operations during the COVID-19 crisis, post-pandemic shipping boom, and beyond.

By joining the CarrierX Solution, your enterprise will be in an advantageous position to digitally leverage services and monetize containers.

Learn more about how BlueX can help here, or feel free to message us at sales@bluextrade.com if you have any questions.