- The peak of the crude oil storage crisis may now be over as production cuts have come in ‘harder and larger’.
- This is reflected in falling spot rates for both crude and product tankers.
- Spot rates have dropped from stratospheric rates of $150,000 to $200,000 per day for some tanker types over the week.
- The outlook for container shipping remains grim this week, with little prospect for any signs of recovery.
- There was some slightly better news for some of the dry bulk market this week.
- As Fortescue Metals Group signalled it would be shipping higher quantities of iron ore to China.
- The latest survey issued by the Seafarers Happiness’ Index shows increased fatigue and stress.
An article published in Lloyd’s in this week briefs sector-by-sector coverage of the coronavirus outbreak and its impact on shipping. Let us take a look into the developments in the sectors mentioned below.
Floating storage, defined as laden tankers at anchor for 20 days or more. It is at record levels as producers seek avenues to store surplus crude. This is amid an estimated 30% drop in oil demand over the past two months and shortage of land-based tanks.
Spot rates have dropped from stratospheric rates of $150,000 to $200,000 per day for some tanker types over the week and are now at half the levels seen in late April.
Six-month period charter rates for a VLCC are at $75,000 per day but in the long term, 12-month period rates are down by $15,000 over the week at $67,500, according to shipbroker Braemar ACM. Long range tanker period charters remained steady, as gasoline, jet fuel and other cargoes remain unsold as road and air transport demand remains in the doldrums.
India’s oil minister Dharmendra Pradhan revealed this week that some 7m tonnes of crude is bought by Indian refiners. And it is currently in floating storage due to an acute lack of land-based alternatives.
With the first quarter reporting season just getting under way, the early impact of the pandemic is becoming visible. Ocean Network Express, which published its year-end figures, which closed on April 30, reported a full-year profit but a loss in its latest quarter.
It warned that the global economy was deteriorating owing to the coronavirus-led slowdown, which was affecting the global supply chain. It had already begun large-scale blankings but uncertainties would remain after May.
Hong Kong’s Orient Overseas Container Line, now part of state conglomerate China Cosco Shipping, saw volume on the main east-west trade lanes increase in the first quarter of this year, despite the coronavirus fallout, but total volumes were still down by 0.4%.
Results due next week from sector leader Maersk and from Hapag-Lloyd will give further indications of the damage being done to container shipping, but only two months of the first quarter were affected by the pandemic, and only one month by the collapse of demand as economies around the world began to shut down.
The second quarter will likely see the full scale of the damage done when lines report again in August.
There is little likelihood of a major container line going bankrupt in the fashion of Hanjin Shipping, but smaller regional lines could face questions over their future if they fail to secure funding.
There was some slightly better news for some of the dry bulk market this week.
- Fortescue Metals Group signalled it would be shipping higher quantities of iron ore to China.
- The Australian miner now expects to ship 175m to 177m tonnes from its previous guidance of 170m to 175m tonnes.
- Danish dry bulk company Norden said the current situation, however, presented opportunities for those who had a long history of operating ships well.
- Brazil’s mining giant Vale said it would phase-out 25 of its converted very large ore carriers.
- The Polaris Shipping-owned 2016-built Stellar Banner VLOC is stranded off Ponta da Madeira in Brazil since end-February.
- It has so far had 3,500 tonnes of iron ore removed from its cargo holds.
Crewing and regulation
The latest survey issued by the Seafarers Happiness’ Index shows increased fatigue from prolonged service on board vessels and stress from living under fear of contracting coronavirus.
“Seafarers reported feeling that not enough is being done to ensure the safety of those on board. They reported feeling physically exhausted, mentally disturbed, homesick and anxious,” it said.
Obstruction of crew changes — both from governments who are not allowing people to come onshore under national lockdown rules and from companies who have barred personnel changes to halt the spread of the virus and minimise disruption to their vessels — is one of the most pronounced challenges in the maritime sector today, the poll shows.
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