Page 15 - Annual Review 2020

Annual Review 2020
Indian vessels lost demurrage and detention charges due to the directive of the Directorate Gen- eral of Shipping (DGS) which again was adhered to by Indian flag companies but not by foreign ships.
Further, some vessels were released during the lock down by charterers since there was not enough coastal movement. With the gradual easing of lock down rules, there has been a steady rise in coastal movement which is a positive sign.
Going ahead, as and when the COVID fears ease off, an increase in the import of crude into India and increase of coastal product movement is expected.
LPG Tanker market
In the LPG carrier market, VLGC earnings weak- ened significantly during May and June, before returning to more healthy levels in Q3. The LPG market had a difficult 2020 so far as pressure on trade volumes although improvements material- ized through August and into September.
While initial expectations for 2020 had suggested growth of 7% in seaborne LPG trade this year, po- tential negative impact on imports into some re- gions owing in part to the economic fallout from the coronavirus outbreak, and likely pressures on US exports as a result of the impact of low energy pric- es on shale production, have led to expectations being downgraded to 3% this year. However, the situation remains fluid and uncertain.
Clarkson’s September 2020 says that following the global spread of Covid-19 and sharp fall in oil and gas prices, LPG carrier demand projections have been subject to downgrades, with significantly in- creased uncertainty over the outlook. For now, impacts from the Covid-19 outbreak on econom- ic activity and the energy markets will be the key determinant of how LPG carrier market trends will evolve in the rest of 2020 and 2021.
LNG Carriers
The LNG market has had a difficult 2020 so far due to pressure on trade volumes as the sector has been significantly impacted by Covid-19. One of the major effects has been a ‘pause’ in the rapid expansion phase seen in the sector in recent years.
LNG trade was robust Q1 2020 but stalled in Q2 on lower global gas demand and weak LNG pric- ing, particularly from the US. Global LNG trade is estimated to have declined in the first 3 quarters of 2020 but improvements began to be seen in Sep- tember. Across full year 2020, LNG trade is now projected to increase by 2-3%.
Coastal Shipping
Indian coastal shipping continues to suffer due to the policy shift brought in by the Directorate Gen- eral of Shipping (DGS) order Nos. 1 of 2018, 2 of 2018 and 3 of 2018 which permitted foreign flag vessels to transport EXIM laden containers, agri products, horticulture, fisheries, animal husbandry commodities and fertilizers between two or more Indian ports without obtaining a license from the Di- rector General of Shipping.
These orders are detrimental to and damage the interests of the existing Indian flag industry and Indian seamen with not a single commensurate benefit to the Indian economy or India. It has been reported by the press and by the trade at large that the objectives as stated in the said Orders have not been fulfilled at all. These orders have not resulted in any fall in freight rates nor has it see any diver- sion of traffic from Colombo to Indian ports in the past 2 years. A clear failure.
We expect the government of India to reverse these orders at the earliest. Further, to increase the cargo on the coast there is a need to strictly implement the revised Department for Promotion of Industry and Internal Trade Public Procurement (Preference to Make in India) 2017 dated 4th June 2020 that states that orders below Rs. 200 crore have to be floated among Indian companies only with no inter- national competitive bidding.
Offshore market
In the international offshore sector segment, the day rates being offered have been under pressure through the year till date and both rates and utiliza- tions continue to remain depressed. With oil prices being down, demand has been down too.
The Indian offshore sector too faced a difficult mar- ket. This has resulted in some Indian Offshore ves- sel owners shutting shop and others being under severe financial stress.
In a difficult market, the Indian offshore compa- nies have seen several asset purchases in the year despite demand being down. Most of these pur- chased assets have been laid up for some time and are being sold at competitive rates. These additions to the Indian fleet has added further pressure onto the rates.
Meanwhile, the impact of COVID-19 has resulted in the operating costs having gone up by as high as 10-15% while freight levels continued to remain de- pressed. Some vessel owners have also suffered a loss of revenue due to vessels being off hired for want of COVID free manpower.
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