Downturn Threatens Further Disruption

(Global) Oil Price Posts Record Gain

Global economies should prepare for “an extended downturn along with lower-for-longer oil prices,” creating multiple downside risks for breakbulk operators across sectors, according to industry analyst firm ICIS.
A recent survey by consultancy Oxford Economics, suggests that more than one-third of participants expect three or more quarters of negative global GDP, casting serious doubts on major spending for breakbulk projects as all sizes of company reassess cash flow.

“The zero growth we now project for 2020 will mark the second-weakest year for the global economy in almost 50 years of comparable data, with only 2009, in the depths of the financial crisis, worse,” Oxford Economics noted in a recent report.

Supply Chain Disruptions

Benchmarking firm IPA has cautioned that supply chain disruptions due to shutdowns are already having “major ripple effects,” as project developers around the world are suspending, and in some cases, cancelling major capital projects and shutting down plants.

“The COVID-19 pandemic crisis has revealed major flaws in the capital project industry’s delivery model. While the pandemic will eventually pass, success in the short-term depends on how well owner companies understand how to effectively mitigate the risks presented in the current landscape,” a spokesperson for the IPA said.
The firm notes that capital projects in execution have seen major delays with delays in the procurement of equipment and fabricated modules of 20 percent.

Oil Price ‘Biggest One-day’ Leap

A surge in oil prices has provided some positivity for project cargo operators in the oil and gas sector, as prices posted the biggest one-day leap on record. A tweet from U.S. President Donald Trump, suggesting that Saudi Arabia and Russia may be close to agreeing on an historic 10 million-barrel production cut.

Despite the market rally, industry commentators remained skeptical, with Stewart Glickman, analyst at CFRA Research, noting that “the benefits from a likely modest reduction in global crude oil supply are still likely to be swamped by the decline in crude oil demand that we see today, courtesy of the coronavirus.”