Why coronavirus outbreak is causing a shipping container shortage

Yahoo Finance Video

Jefferies Equity Analyst & SVP Randy Giveans joins Yahoo Finance’s Seana Smith to discuss why the coronavirus pandemic is creating a shipping container shortage.

Video Transcript

SEANA SMITH: [? Welcome ?] back to Yahoo Finance. The coronavirus outbreak is triggering a shipping container shortage. We've been talking about the fact it's impacting nearly every single industry. And it could get worse, actually, as countries do step up their coronavirus precautions, just in terms of what they are doing for incoming vessels and the amount of time.

So for more on this, let's bring in Randy Giveans, a Jefferies Equity analyst. And, Randy, I just want to get your assessment here of the current situation. How big of a deal is this, and how big of a shortage are we seeing at this point?

RANDY GIVEANS: Hey, Seana. Yeah, thanks for having me.

So yeah, the first delay we saw was from China, obviously extending their Chinese New Year, shutting down a lot of ports. Workers weren't there to offload a lot of the containers.

And then manufacturing activity slowed. We saw it down to below 50% of what it was prior to the Chinese New Year, right. So that requires much fewer ships to export much fewer goods.

Now you're starting to see a slowdown in the importing nations, right. China has rebounded. You're seeing up to 75% to 80% of economic activity back.

However, Europe, slowing dramatically. US, slowing dramatically. So now the importing nations are causing the delay for the supply chain.

So looking at containers, we saw [? upwards ?] about 10%, almost 11% of the container ship fleet idle. That means, not shipping, not sailing. So you had a lot of blank sailings, meaning, instead of three, four voyages a week from Shanghai to Long Beach, you may have had one, maybe two the last few weeks.

Plus, the ships that did leave, instead of being 85%, 90%, 95% utilized, they were maybe 65%. So obviously, that means a lot fewer containers coming in.

And then for the exports coming out of these regions, you know, coffee from Brazil and Thai Curry from India and all these other products, going back to Asia, they don't have the containers to do so. So you're seeing that supply disruption. Now it's been about three or four weeks. And then we're expecting another three, four, five, six weeks thereafter as the US and Europe is now slowing.

SEANA SMITH: Yeah, Randy, I want to ask you, just in terms of the timeline, [? that ?] the capacity situation is expected to normalize. Is it on that timeline where you said by five or six weeks, it's expected to at least reach the levels that we should be seeing around this time of year?

RANDY GIVEANS: Yeah. You know, historically, it's only a two to four-week kind of dislocation. Now the new estimate is four to six weeks.

Ask me again in a month, though, right, as you're seeing more cases, and as a lot of the guests before me we're talking about just shutting down the country for 30 days. Tack on another 30 days to the end of that, right.

So it depends on how deep the shutdowns get throughout Europe, throughout the US.

But yeah, you're seeing at least four to six weeks as things stand today.

SEANA SMITH: [? Yeah, ?] disruption across all industries, really. Randy Giveans, Jefferies Equity analyst. Thanks so much for joining me today.

RANDY GIVEANS: Absolutely. Thanks for having me, and stay healthy. God bless.