In Dry Bulk Market,Hellenic Shipping News 01/05/2020
W
ith the global economy expected to be in recession mode from the second quarter onwards, expectations for a shipping industry rebound in 2020 are practically non-existent, with the sole silver lining being the low oil price environment, which has tempered operating expenses for ships. In its latest weekly report, shipbroker Intermodal said that “the “unprecedented events that have taken place since the beginning of the year have already shaped expectations for the rest of 2020. The global crisis that hit the world over the last four months will seriously shrink the world’s economic growth and damage financial stability leaving a deep negative imprint on the already disturbed shipping industry”.
Source: Intermodal
According to Intermodal’s Research Analyst, Mr. Yiannis Parganas, “starting with the energy market, the demand for such products has been exceptional soft during the past month, leading the future contract of May ’20 WTI to the historical subzero price of -37.63 $/barrel on 20th of April 2020. This rapid decline is a result of the supply glut combined with no availability of storage space. More specifically, with more than a third of the planet’s population being under self-isolation in an effort to slow the spread of the coronavirus pandemic, holders of futures WTI papers, in view of high storage expenses rushed to sell their contracts and were even willing to pay to get rid of them, which led to the shocking negative price”.
While the price of June paper is now trading higher, Parganas said that “the fact that on 21st of April it reached values below $10/barrel indicates the very pessimistic feeling regarding the future energy product demand. As far as the tanker market is concerned, freights enjoyed strong momentum with VLCC rates reaching close to $200,000/day, while some owners found profitable opportunities in floating storage. However, it seems that the boost on rates is likely to evaporate in the next quarter as the OPEC+ agreement to cut off production by 9.7 million/bpd will shrink supply and consequently leave a huge negative mark on the tanker freight market”.
Intermodal’s analyst added that “the WTI price was not the only one that fell below zero for the first time in history. In the dry bulk market, the BCI dropped at -20 points on 31st of January. It was not before the 31st of March that the index became positive again after having reached -372 points (the new record low). This rapid decline was mainly forced by the dampened Chinese demand amidst the Corona virus crisis during the first quarter of this year. While we can agree that it is not the first time that the dry bulk freight market suffers great loses during recent years, the macro-economic fundamentals appear very unpromising, leaving very small room for a decent rebound in the rest of 2020”.
“With demand for commodities suffering as a result of the global lockdown and depressed growth estimations, supply seems to be pointing to the same direction. Russia, the world’s biggest wheat exporter, announced that will cease grain exports until July 1 once its export quota is exhausted and it seems that Ukraine considers following the same pattern. On the other side of the Atlantic, Vale announced revised cut-rate projections for its 2020 output due to delays in some facilities reopening. Without knowing when theCovid-19 crisis will be over, the substantial economic instability will increase uncertainly due to the immeasurable possible future restrictions on demand and supply having an unpleasant effect on the shipping industry”, Parganas concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
