Ro-ro operators tighten belts as new demand melts away

Ro-ro operators tighten belts as new demand melts away

Siem Car Carriers has taken delivery of the 7,500-CEU deep-sea car carrier Siem Confucius even as uncertainty grows over cargo volumes. Photo credit: Siem Car Carriers.

Leading roll-on, roll-off (ro-ro) operators are grappling with mounting uncertainty over the future of automotive and high and heavy cargoes, with some pushing to substitute more breakbulk and project cargo shipments. The global supply of new vehicles and equipment is freezing up as the coronavirus disease 2019 (COVID-19) pandemic extinguishes end-user demand. 

“It is very hectic and the only thing that I can tell you currently is that the times are difficult and that there is a lot of uncertainty,” Bjorn Gran Svenningsen, sales and marketing director at European short-sea operator United European Car Carriers (UECC), told JOC.com.

UECC is reviewing its sailing schedules and trading network, which covers Europe from the Baltic Sea to the eastern Mediterranean, in anticipation of a fall in demand for its services due to vehicle factory closures.

Ford, Volkswagen, Nissan, BMW, Toyota, and construction equipment makers JCB and JLG have announced factory closures or cuts in production due to COVID-19.

“Almost all the original equipment manufacturers [OEMs] in the European automotive industry have now, or will within the next few days, suspend their production,” Svenningsen said in a customer notice last week.

“It is uncertain when the production will resume, but UECC’s view on this is that it will take some time. The production stoppage will have a significant impact on UECC’s liner trading network,” Svenningsen said in the notice. “We will continue to operate our network as long as there is sufficient cargo, but with reduced sailing frequency.” 

He said UECC would issue a new fleet schedule as soon as possible. “We are monitoring the situation closely and will resume our normal liner trading network when the production resumes,” Svenningsen said in the notice.

Wallenius Wilhelmsen Group on Thursday announced it was temporarily laying off 2,500 production employees in the US and Mexico, three days after the company said it would reduce its fleet by 10 to 15 vessels through a mix of cold lay-up, ship scrapping, and returning chartered-in tonnage to their owners. 

Eukor pushes for substitutes

South Korea-headquartered Eukor Car Carriers indicated it was seeking alternative types of cargo to its more traditional automotive shipments, especially from Europe to Asia. The carrier, which is 20 percent owned by South Korean vehicle makers Hyundai and Kia and 80 percent by Wallenius Wilhelmsen, operates about 80 pure car and truck carriers (PCTCs).

“Eukor has not seen any significant changes yet,” a Eukor spokesman told JOC.com. “However, given the impact of the spread of COVID-19 and the necessary actions taken to limit its progress, the future is more uncertain. In the coming months, service demand is unlikely to follow normal patterns and we will adjust schedules and capacity accordingly. We see that both frequency and lead-time will be impacted, but together with customers we will work hard to keep operations going the best way possible.”

In a series of promotional videos released in the last two weeks, the carrier highlighted its breakbulk business transporting non-self-propelled cargoes. Eukor operates four sailings a month from Europe to Asia, and six to eight from Asia to Europe. Eukor's routes also call the US East and West coasts, South America, Africa, and the Middle East.

Norway’s Siem Car Carriers is bracing itself for a drop-off in cargo shipments from the US in the next few weeks as COVID-19 dampens economic activity. That comes after Siem saw volumes drop out of China earlier this year as the country went into lockdown to control the spread of coronavirus.

The carrier, which specializes in vehicle and high and heavy cargoes, did not rule out changes to its existing services.

“For North American exports, we are still waiting to see the impact now that auto OEMs have closed their plants,” Tim Rufus, Siem’s general manager for North America and Asia, told JOC.com. “We expect to see a decline in volumes from mid-April onwards.”

Commenting on the situation in China, Rufus said the company experienced some “minor” delays with Chinese exports, but volumes have now “more or less” returned to normal. “However, we are waiting to see what the impact on demand will be from North America if the economy continues to crash,” he added.

The vast majority of Siem’s high and heavy shipments are exported out of China into Japan, South Korea, Southeast Asia, Russia, and Mexico. 

New LNG-powered ship delivered to Siem 

The uncertainty facing Siem and other operators comes as Siem is enlarging its fleet with the delivery of the first of two deep-sea car carriers fueled by liquefied natural gas (LNG). The vessels will handle vehicle shipments exclusively for the Volkswagen Group.

Siem Confucius, the first of the two 7,500-car equivalent unit (CEU) ships, was handed over to Siem Car Carriers by its Singapore-based ship leasing affiliate, Seven Yield Holding, in mid-March.

Contact Special Correspondent Keith Wallis at keithwallis@hotmail.com.