Monday, March 23, 2020

Covid-19 fallout

Cruise ship operators are certainly hurting as are most other ship owners as the pandemic cuts into trade patterns. Bad news will become all too common as the squeeze continues.
Container lines have announced "blanked" sailings in the Pacific, and all operators are dealing with reduced quantities of cargo. Particularly hard hit in this area is the automobile business as manufacturing has shut down and sales dried up.

Wallenius Wilhelmsen Lines has announced that they will be sending four ships off for recycling and will place ten more ships in cold layup. All the ships bound for the scrappers are reported to be 24 years old. This would include regular Halifax callers Don Juan and Turandot and the Eukor charter Asian Vision.

Putting a ship in layup is a serious business. Warm layup means that the ship has a skeleton crew aboard for basic maintenance but the the ship can be re-activated on fairly short notice. Cold layup on the other hand means that only the most critical maintenance is carried out and the ship might need months to reactivate. Cold layup normally means the ship could be laid up for a year. This gives the owners time to decide if they should keep, sell or scrap the ship.

The decision on which ships to put in cold layup could be more difficult than just choosing ships by age. Newer, larger ships may be more costly to operate, particularity if running at well under capacity. Removing assets of little value may not help the bottom line very much either. By my reckoning W-W has about 10 ships that are 20 years old, so it is more likely in this case that the choice will be made by age.

Mignon, built in 1999 may be a cold layup candidate.

As a footnote, both Indian and Pakistan have closed their scrap operations to ships arriving from abroad due to fears of virus transmission. Bangladesh is reported to be still open for business so far.


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