Mar 05 | 2020
(Global) Covid-19 Impacts to Hit Recovery
Demand growth for multipurpose and heavy-lift vessels has been revised down by research consultancy Drewry Maritime, as a result of ongoing impacts of the coronavirus outbreak.
The firm predicts that a previously anticipated recovery in the sector now looks unlikely, as contractions in the first part of the year weigh on profits for breakbulk operators.
“It is our opinion that for the short term the knock-on effect from container and dry bulk segments will be detrimental to the breakbulk sector, as the supply of vessels able to carry general cargo will increase. At the same time multipurpose cargo demand will be weaker due to the loss of Chinese exports and investor confidence is likely to soften as well, due to concerns for the global economy,” said Susan Oatway, senior analyst, multipurpose and breakbulk shipping at Drewry.
Increased Competition
Data from Drewry suggests that increased competition from the dry bulk and container shipping sectors is expected to slow any recovery in breakbulk demand, as a weakened global economy drives competitors to seek business in the project cargo segment.
“For the MPV sector, steel and renewables are some of the largest cargoes for this region. Chinese domestic demand for steel is not expected to pick up before April, but this has led to historically high inventory levels at many mills and an increased interest in exports,” Oatway said.
The firm noted that construction of wind and solar projects in China has slowed over the last two months, but that turbine production is reportedly on the increase again in the country.
Pent-up Demand Reverses 2021 Outlook
While many aspects of the virus outbreak main uncertain at this stage, Drewry states that "there is clear momentum" for projects, with some return to export demand, however overall levels will be significantly dampened.
Despite the gloomy outlook for the near term, the firm predicts "it is possible that the pent-up demand in 2021" could remove some extra competition, effectively reversing a previously forecast drop in MPV/HL demand next year.
Headquartered in London, Drewry provides maritime research consultancy, market insights and advisory services across the global shipping sector.
The firm predicts that a previously anticipated recovery in the sector now looks unlikely, as contractions in the first part of the year weigh on profits for breakbulk operators.
“It is our opinion that for the short term the knock-on effect from container and dry bulk segments will be detrimental to the breakbulk sector, as the supply of vessels able to carry general cargo will increase. At the same time multipurpose cargo demand will be weaker due to the loss of Chinese exports and investor confidence is likely to soften as well, due to concerns for the global economy,” said Susan Oatway, senior analyst, multipurpose and breakbulk shipping at Drewry.
Increased Competition
Data from Drewry suggests that increased competition from the dry bulk and container shipping sectors is expected to slow any recovery in breakbulk demand, as a weakened global economy drives competitors to seek business in the project cargo segment.
“For the MPV sector, steel and renewables are some of the largest cargoes for this region. Chinese domestic demand for steel is not expected to pick up before April, but this has led to historically high inventory levels at many mills and an increased interest in exports,” Oatway said.
The firm noted that construction of wind and solar projects in China has slowed over the last two months, but that turbine production is reportedly on the increase again in the country.
Pent-up Demand Reverses 2021 Outlook
While many aspects of the virus outbreak main uncertain at this stage, Drewry states that "there is clear momentum" for projects, with some return to export demand, however overall levels will be significantly dampened.
Despite the gloomy outlook for the near term, the firm predicts "it is possible that the pent-up demand in 2021" could remove some extra competition, effectively reversing a previously forecast drop in MPV/HL demand next year.
Headquartered in London, Drewry provides maritime research consultancy, market insights and advisory services across the global shipping sector.
