Page 14 - Annual Review 2020

Indian National Shipowners’ Association
spike in volumes in some commodities due to backlog.
The Indian EXIM container trade was also severe- ly affected by COVID as India’s import volumes dropped 26%. As a result several port calls were cancelled with services withdrawn or merged. Meanwhile export of certain essential commodities like food grains including wheat continued along with other items like steel. This has posed a new problem to the Indian trade - that of shortage of container inventory which is impacting India’s ex- ports. Freight rates for export ex India into Europe and USA have reached stratospheric levels and despite the same, containers are just not available today to the Indian trade. However, normalcy is ex- pected to return by the end of the year with EXIM volumes also returning to pre COVID levels.
The lack of a long term vision of the government of India in having a home grown Indian container in- dustry has led to Indian trade being held to ransom at the hands of foreign container shipping lines. Coming close on the heels of the pandemic, this has caused untold damage to Indian exporters and importers.
Dry Bulk
The bulk carrier market has seen a very challenging 2020. The Covid -19 pandemic has resulted in a 3- 4% year on year decline in dry bulk trades between January - August 2020. The first half of the year saw earnings decline due to lower Brazilian iron ore ex- ports, and a sharp fall in coal trade with Capesize earnings averaging just $4,907/day. Improvements began after June 2020, with Capesize earnings peaking at $28,500/day in early July, before eas- ing back. Nevertheless, in January–August 2020, bulker earnings averaged $8,024/day, down by a substantial 30% from 2019, according to Clarksons Research 2020.
While iron ore trade has been ‘shielded’ from the worst impacts by record Chinese imports, coal trade is projected to decline by as much as 8% across the full year on the back of a sharp con- traction in demand in key regions - notably Europe and India. Grain trade is said to be on track to grow by a robust 5% this year, while minor bulk trade is projected to decline by 5-6%, with trade in some economically sensitive commodities coming under significant pressure. However, some improvements have been seen since mid-year as Chinese demand for raw materials has remained strong, trade trends have picked up seasonally and as the ‘peak’ initial impacts of the Covid-19 pandemic have appeared to ease. Improved trade trends have allowed the fundamental balance in the sector to improve somewhat and market conditions have seen clear gains, with ‘windows’ of even more positive market conditions materialising.
Meanwhile Indian dry bulk fleet continues to be short changed on coastal trades as foreign ship- ping companies continue to dump freight in India on the return journey when carrying Indian imports. Indian shipping companies continue to lose Indian cargoes to foreign ships and it is believed that at least about 30% of the coastal cargo on the East coast of India is carried on foreign ships.
At the beginning of the early days of the lockdown, dry bulk cargo continued to flow into Indian ports. However, charterers and receivers slowed down on fixtures which began to taper. However, now things are back to normal and cargo volumes have begun to move but are a long way from 2019 volumes.
The policy of the Government of India to stop im- port of coals for the power industry has reduced import of coal considerably and the Indian dry bulk fleet has sought business elsewhere.
Tanker and Product Refining
The tanker market has seen significant volatility in 2020 but has yielded good earnings. The tanker earnings soared to historically high levels in March -April 2020 after Covid-19 negatively impacted global oil demand. The subsequent sharp fall in oil prices, initial surge in oil output from Saudi Arabia and Russia, and strong demand for floating storage helped to push up freight rates.
The weighted tanker earnings averaged $61,644/ day in March-April (VLCC earnings averaged $165,198/day), with the share of tanker fleet capaci- ty employed in storage rising from 4% at start March to 11% by early May. Thereafter, due to cuts in oil output by major oil producers beginning May 2020, tanker earnings slid and stood at a two year low of just $9,126/day by early September. Nevertheless, in January to August 2020, the weighted tanker earnings averaged $32,105/day, up 45% from full year 2019, according to Clarksons Research 2020.
In the Indian oil tanker business, January, Febru- ary and March 2020 saw record imports (compared to 2019). However, post lockdown, the imports fell and below 2019 imports. This heavily impacted the spot freight rates and earnings. Vessel supply out- numbered import cargoes into India.
As of date, the demand continues to be sluggish and earnings are below operating levels for crude tankers.
Almost all the Indian coastal crude products trade is performed on time charter vessels. Therefore, Indian oil tanker business was relatively unaffect- ed. However, idle time for almost all vessels has increased significantly at ports (either waiting for discharge due to discharge issues or waiting for loading cargo).
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