Analyst Weighs Competition, Government Stimulus
As China and other global markets experience some degree of reopening from the Covid-19 pandemic, Peter Sand, Chief Shipping Analyst at BIMCO, describes some of the landscape in the breakbulk, bulk, container and project cargo industries navigating a way forward.
Q: What is your view on decreasing volumes of single-cargo shipments? Will the present environment lead to increasing quantities of small-volume goods transport, and how does that impact dry bulk shipping?
I believe, that scale will always matter to shipping, as economies of scale push for larger quantities in every aspect. For high-value cargoes, you may want to put more focus on due diligence to limit credit risk on the shipment.
Q: What about coastal bulkers – they always seem in the shadow of bigger sizes? How is the coastal trade doing?
When the overall market is going down, Handysize bulkers may start fighting for coastal bulker cargoes, though there would be draft and other restrictions. But coastal bulkers don’t live in isolation. They surely do not experience the same volatility, but in my view they will remain in niché sector.
Q: How likely will governments invest in infrastructure to spur their local economies, which would benefit shipping sectors including breakbulk and heavy-lift?
We see stimulus plans announced everywhere in the world. The largest one from China recently, US$667 billion in infrastructure spending. How much it would impact breakbulk and heavy-lift remains to be seen. Most likely, more general cargo sectors would benefit directly from this. Even though this investment is crisis-based – and you’d rather be without both – markets would likely be worse off without the stimulus.
Multipurpose vessel operators have faced downturns rivalling container lines for several years, and the latter, along with roll-on, roll-off carriers, have tried to encroach upon MPV business. Will that competition continue in the current climate and with efforts to rebound? Does it change the advantages/disadvantages of the different carrier sectors?
The container industry will surely increase cannibalizing other sectors’ traditional cargoes, as the container business could fall by 10 percent this year, and feel the pain of it for much longer. Increased competition is surely going to be a result of the crisis.
Regardless of Covid-19, do you think the economy and oil producers would have faced an equally daunting 2020, solely on the basis of the oil price war leading up to the OPEC+ deal?
At face value the high tanker freight rates were amazing. But I don’t think anyone really benefitted from this fallout of OPEC+ alliance. Oil demand is fairly price inelastic – it’s merely redistribution of wealth that takes place between oil producers and consumers when prices move.
