U.S. retailers face $700 million hit as virus disrupts ocean shipping

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© Reuters. U.S. retailers face $700 million hit as virus disrupts ocean shipping© Reuters. U.S. retailers face $700 million hit as virus disrupts ocean shipping

By Jonathan Saul and Lisa Baertlein

LONDON/LOS ANGELES (Reuters) – U.S. retailers face an estimated $700 million sales hit from the coronavirus and some shipping lines are sending vessels to retrieve empty cargo containers from Los Angeles to prevent further supply disruptions.

The extended shutdown of factories in China caused by the virus, travel restrictions on workers and canceled sailings by shipping lines have thrown off the movement of containers, resulting in a surplus at the Port of Los Angeles and a shortage in Germany.

U.S. retailers’ cumulative losses from coronavirus-related production and transportation shortages could hit $700 million between March 9 and April 20, said Patrick Hasani, chief of staff for digital freight forwarder Zencargo.

U.S.-bound electronics, clothing and furniture have had the biggest supply chain interruptions, Hasani said.

A spokesman for the world’s biggest container line Maersk (CO:) said three large ships would be deployed to carry both full and empty containers from the United States back to Asia. It is too early to comment on further deployments, he said.

“We’re only weeks away from a real tipping point,” Port of Los Angeles Executive Director Gene Seroka said of the empty container backlog at the busiest U.S. seaport.

Robert Loya, vice president of port trucking firm CMI West, has nearly 1,000 empty containers in his yard and at customer facilities – significantly more than normal – as terminals cut gate opening hours to reduce labor costs. CMI’s clients include major retailers.

Lingering empties could jam up the vital Los Angeles trade gateway when China factory production rebounds – exacerbating the supply chain havoc from the COVID-19 outbreak that started in China and is spreading around the globe. 

China accounts for 55% of the “lifts” at the Port of Los Angeles – which expects to have 41 canceled ship calls during the first quarter, more than double the number in the same period last year. First-quarter container volume is forecast to drop 15% year-on-year.

The rise in so-called blank sailings means that fewer ships are docking to pick up empty containers.

Shipping consultancy Alphaliner expects further cuts to U.S. West Coast cargo capacity in April due to lingering coronavirus impacts.

Triton International (N:), the world’s largest container leasing firm, in February said it is positioned to have “150,000 containers sitting at the right ports in China” as the country’s factories ramp up.

China appears “well positioned for a return in demand,” Ken Hoexter, senior shipping analyst at BofA Global Research, said.

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