Page 13 - Annual Review 2020

Annual Review 2020
In Retrospect
The coronavirus pandemic has devastated almost every segment of the shipping industry. Econom- ic shutdowns have killed demand for goods which has led to depressed requirement for shipping ca- pacity and has resulted in weak rates. As the global economic activity has significantly slowed in 2020, this has certainly impact world cargo volumes.
As the prolonged shutdowns affected countries and their economic activities, all publications have revised their 2020 outlook for the shipping industry and have switched to more shorter term analysis. As today the only certain thing, is the uncertainty.
According to Lloyds List’s Half Yearly Outlook 2020, the shipping markets of 2019 and 2020 were so dif- ferent. It further stated that however, it was plain that China - the driver of almost all markets - is still being considered as the great hope for economic recovery.
In its revised outlook, BIMCO expects average freight rates for the tanker segment in 2020 to be above break-even levels given the lower prices of crude oil and higher demand for crude oil carriers.
In the dry bulk sector, BIMCO expects demand to be negatively impacted in 2020 as China – the main buyer of all dry bulk commodities – had limited purchases while the coronavirus outbreak is being contained. China has begun its imports as well as its exports and the market for the sector seems to be steadying.
In the container segment, BIMCO expects 2020 to be massively disrupted due to the out-of-sync impacts on export and import centres across the globe with freight rates at loss making levels. Cur- rently Indian trade faces shortages of containers for its export cycle and is paying freights of Himalayan proportions due to the shortage of space ex India.
The higher fuel cost arising from the IMO 2020 sul- phur cap implementation has also weighed in on international shipping even though the fall in oil prices has lessened some of the negative econom- ic impact.
Indian shipping is but a subset of global shipping and hence is impacted by all global events.
At the beginning of the pandemic, one of the big- gest challenges faced by Indian shipping was that
of managing crew change and the arrangement of supply of goods to ships at ports. The declaration of force majeure by Major Ports of India, perhaps a unique case worldwide, has worked to the detri- ment of Indian cargo and Indian ships but did not impact foreign shipping companies who refused to toe the line prescribed by the Indian maritime ad- ministration and the Ministry of Shipping.
Unsurprisingly, the budget also once again did not contain any specific proposals for growth of coastal shipping, inland waterways or EXIM shipping this year.
Indian shipping continues to grapple with struc- tural issues that make import of shipping services cheaper than providing shipping services as an In- dian company from India. Therefore, investments in the shipping sector continue to remain sluggish.
AN UPDATE ON SHIPPING IN
2020
Containers
The containership charter market began 2020 on firm footing as ships fitted scrubbers which limited tonnage availability. However, with ‘lockdowns’ and supply chain disruptions due to Covid-19 in Q2, rates fell steadily alongside a sharp contraction in box trade volumes. The average boxship earnings decreased by 24% in the quarter.
However, there was a surprisingly quick improve- ment in box trade and strong freight rates support- ed consistent improvements through July–August 2020 and the average boxship earnings returned to March 2020 levels by early September 2020. The January-August 2020 boxship earnings averaged $12,663/day, down 7% from 2019.
The Indian coastal container trade was also im- pacted by COVID-19. March was the most difficult month with idling vessels and cargo volumes down 45% as India declared a lockdown and factories were closed. However, movement of food grains like wheat from Gujarat to the rest of India, fertilisers and other essential goods continued through the lockdown and other volumes too picked up from the first week of June.
By mid-July, cargo volumes picking up and by Sep- tember it was business as usual as cargo volumes reached pre lockdown levels. In fact there was a
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