The Covid-19 pandemic has had a dramatic impact on the shipping markets this year. Although there were some signs of improvement a few weeks back, shipping experts are warning for a bumpy road ahead. Shipping is accustomed to a long history of managing disruption and constant market cyclicality. Projections suggest that global seaborne trade will contract by -4.0% throughout 2020, a similar fall to that seen after the global financial crisis of 2009 (-4.1%). A slight correction is shown compared to the expectations due to marginally better economic indicators, but this won’t be enough to turn things around.. On the positive side is the assumption that we are past the negative “peak” stage. But is this the case?
According to Drewry report the charter rates for Dry Bulk vessels may see some improvement in the coming months. Expanding manufacturing activity in China, which can be seen by the manufacturing Purchasing Manager’s Index staying at around 51 points in 3Q20 shows coupled with the latest economic plan depicting the next five years of growth point towards a rising demand of crude steel production. This spells optimism for the large vessel operators, who had to face strong headwinds in 1H20 due to COVID-19 pandemic.
For the Crude tanker shipping companies reported record earnings in 1H20 on the back of exceptionally high spot rates due to surge in demand for tankers. Historic production cut of ~10 mbpd by OPEC+ coupled with curtailed production by major oil companies restored the supply-demand balance in the market. Additionally, increasing oil demand with gradual opening up of economies also facilitated the inventory drawdown from on-the-water crude oil stocks and eased supply of tankers. High supply of vessels and weak demand in summer combined with production cuts led to a sharp decline in vessel earnings over the past five months. However, TCE rates on major trading routes are expected to improve in 4Q20 across vessel classes due to improved demand during winter. Not likely to see the spike in daily rates of March and April.
Shipowners seem to hold on to their vessels further, extending their lifecycle, hence demolition market numbers are not improving, In its latest weekly report, shipbroker Clarkson Platou Hellas said that “with Halloween taking place across the globe this weekend, it comes at a time when the market feels particularly eerie in terms of lack of activity and tonnage that is available and concluded. It seems we have been saying this for weeks now, with no real momentum being built up at all and owners interests remain elsewhere”.
According to VesselsValue, apart from containers, newbuild to secondhand Tankers and Bulkers sale value drops from 0.4%-3.2% with the only exception the value of Handys which remains steady.
Investment-wise, ship owning becomes more intriguing especially for those who can afford to wait for the right opportunity and for the market to recover. Handysize to supramax are preferable sizes in dry bulk sector.