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July 6 2020

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26 The Journal of Commerce | July 6 2020 Latin America Trade and Logistics Special Report CARRIERS OPERATING BETWEEN the East Coast of South America and Asia will continue to make selective blank sailings in the coming weeks amid ongoing lackluster trade, maritime executives said, although the number of blanked services could fall as trade picks up. That prediction comes even as currency devaluations by both Brazil and Argentina are boosting exports to Asia, particularly of refrigerated goods, fueling an imbalance in vol - umes on east- and westbound legs. Singapore-headquartered carrier Pacific International Lines withdrew about 50 percent of its weekly capacity from the end of April to the week of June 22, a senior shipping executive told The Journal of Commerce. The executive said Maersk Line has cut about 34 percent, Hapag Lloyd roughly 45 percent, and Cosco Shipping and CMA CGM about 15 percent. "From what we've seen of our competitors, total capacity on the ECSA–Asia trade has been reduced by around 34 percent," the executive said. Gustavo Fonseca Paschoa, Maersk's head of sales for East Coast South America, told The Journal of Commerce the carrier is "blanking sailings to avoid rapid rate deteriora - tion as seen in the past." "The main demand challenges faced on the trades are related to imports into Brazil and Argentina, whose economies are heavily affected by the COVID-19 crisis," Paschoa said. But James Frew, director of research at Maritime Strategies International (MSI), said carriers are unlikely to be able to make deeper cuts in services. "Relatively stable Latin American exports to Asia in the second half of this year mean that there is limited scope for service blankings, even as the backhaul trade — imports to Latin America — collapses," he said. Ocean Network Express (ONE) confirmed in its June 19 sailing schedule it is operating a full slate of weekly services from East Coast South America to Asia in July. Outlining the issues faced by South American economies, the senior shipping executive said, "We are not seeing demand returning to normal levels. Brazil and Argentina are struggling quite a bit. Their GDP expectations are not good at all. My feeling is the downturn is going to persist until the end of this year." On track for contraction Brazil has forecast its gross domestic product will slip 8 percent this year, the sharpest fall since at least 1990, the Economy Ministry said. Argentina has seen GDP contract nearly 2 percent so far this year. "Latin American economies were hit later by the virus than, say, Europe and North America, and therefore locked down later — or not at all, in the case of Brazil," Frew said. Rates from Asia to East Coast South America have "fallen like a stone" to around $700 per container from around $1,200 earlier this year, with the possibility of a further fall to as low as $300 per box, the shipping execu - tive said. That is despite some carriers, including CMA CGM, having introduc- ing a general rate increase from Asia to the East Coast South America of $600 to $1,000 per container in May. Off kilter ECSA–Asia trade imbalance creates blank sailing headache for carriers By Keith Wallis

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