DHL GF: Ocean freight market update

Carriers financial performance continued to be positively impacted by stable freight rates and low bunker prices in Q1 2020 while volumes were down only marginally at the beginning of the year.

Rates are however coming under pressure as volumes are negatively affected by the COVID-19 lockdowns across all regions which will hit the second quarter. Maersk expects total liftings to fall by 20-25% in that quarter.

Also higher variable costs including storage costs resulting from the COVID-19 pandemic will impact earnings.

So far carriers were able to avoid the collapse of freight rates by reducing capacity. Drewry therefore observed that decrease in rates is much less than the steep slide during the 2008 financial crisis.

Although some unblankings are now announced, SeaIntelligene Consulting founder Lars Jensen does not believe that this is a sign of returning demand but rather a sign that the enormous amount of capacity withdrawals was slightly overdone.

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