Transport capacity adjustments of shipping lines : chartering decision before and during COVID-19 pandemic

Abstract

The shipping industry is a crucial part of transport systems and value chains, but managing large fleets of container vessels is challenging due to high investments, operational difficulties and various risks that can impact a company's profitability (Cariou & Wolff, 2013). The COVID-19 pandemic has further highlighted the impact of sanitary policies and health protocols set by countries, causing disruptions in both demand and supply that have affected national and regional economies (EMSA, 2021), as well as international logistics and containerized trade. As a result, shipping lines and logistics operators have had to adjust their strategies by modifying sailing frequencies and levels of maritime connectivity between different regions (UNCTAD, 2020). The ability of shipping lines to remain resilient during economic and financial disruptions is considered one of their biggest strategic challenges. The COVID-19 pandemic was an unexpected event that had a significant impact on the flow of goods in international supply chains. For example, global ship calls decreased by 8.7% in the first half of 2020 compared to 2019, primarily due to lockdowns and economic and social restrictions (UNCTAD, 2021). Therefore, the commercial success of shipping lines depends on achieving an optimal balance between reliable operational services and financial sustainability. Fleet optimization and asset management have become essential areas for the competitiveness and survival of a shipping line in a highly competitive market environment (Cariou & Wolff, 2013; Chang et al., 2015; D’agostini et al., 2019; Shin et al., 2019). While previous research has investigated the resilience of shipping through the lens of such strategies, this study focuses on the chartering behaviors of liners before and during COVID-19, aiming to extend the research on transport capacity management adjustments during a crisis. The research aims to investigate whether short-term chartering strategies of shipping lines showed any fundamental changes due to the COVID-19 pandemic. It is important to confirm whether and how shipping lines reacted to an unforeseen external shock that may repeat in the future. From a theoretical perspective, the results can provide a deeper understanding of the pandemic with respect to chartering strategies of shipping lines. As crises recur in the shipping context, the results can contribute toward enhancing the resilience of shipping lines during unexpected future events and can help learn from past events. It can also help these market players hedge against pandemic risks and take more datadriven decisions to improve their strategies and use the results as a benchmark against competitors’ behaviors.