The COVID-19 pandemic came in the blink of an eye, took more than 300 thousand lives in just 4 months, brought trade to its knees in just a month and it crashed the global economy in two months. The after-effects of this unprecedented situation are still not known but estimations point to a global deep recession for 2020 with recovery in 2021.
The majority of the sectors have been hard hit, some more than others like shipping, which is one of the most vital industries but also one of the most sensitive.
Shipping companies have all been hit in every part of their business with world merchandise trade volumes estimated to drop between 12-32% in 2020 according to WTO. “Container shipping sector has been hit the hardest, as the manufacturing sector in China quickly went into the “emergency room” under the lockdown and demand could easily drop by 10% this year” said Mr. Peter Sand Chief Shipping Analyst at BIMCO, the largest international shipping association. The Dry Bulk Shipping sector has been a close second as the drop in demand from China, which accounts for 39% of the global demand, have reduced the freight rates to unsustainable levels. The oil tanker sector, having done exceptionally well during the pandemic with freight rates above US$ 250,000 per day, is expected to join as the worst performers for the next year or so. “As the oil production cuts are now in place, the magic is gone. The destruction of global oil demand is setting the scene for the coming year, year-and-a-half, and it is not a nice scene to look at” explained Sand.
The drive towards a sustainable and environmentally-friendly industry is unchanged. But as no money is made in the industry, during times like this, opportunistic investments in break-edge technology to solve the issues of tomorrow is going downPeter Sand, Chief Shipping Analyst at Bimco
While the shipping sector and the maritime-related companies are fighting for survival will we see the ripple effect hurting in the industry’s sustainability goals and investment in environmental technologies?
“The drive towards a sustainable and environmentally-friendly industry is unchanged. But as no money is made in the industry, during times like this, opportunistic investments in cutting-edge technology to solve the issues of tomorrow is going down” said Sand, reassuring that while sustainability priorities have moved down, it is by no means forgotten. “For many companies, making profits and running a sustainable business is a part of the same DNA and the pendulum does swing during the high and low tide in our industry. Nevertheless, sustainability is an integrated part of it, today, as it will be tomorrow” he said.
While we have no previous experience on how this situation will unfold, Sand believes that it is not all gloom and doom and by 2021 the shipping industry will be back to growth as demand will increase and rates will stabilize. “BIMCOs expectations are for a slow and gradual recovery of global economics and shipping demand in 2020. Assuming, that all measures to contain the virus are lifted before the start of 2021, the recovery of the shipping sector will start to show by then. But only slowly and gradually are we expecting rates to become profitable again. Shipping industry overcapacity is increasing throughout 2020 – and demand is unlikely to outstrip fleet growth by a large margin in 2021” he concluded.