Shipping In 2020: The Year of Covid-19

 In Articles

By Solis Marine Chairman Nigel Clark

For everyone around the world, 2020 will be looked back upon as the year when Covid-19 arrived to drastically change our lives and the way we live and work, in some respects temporarily but in other respects the changes will be permanent.

No one could have had predicted 12 months ago that we would find ourselves living through a global pandemic that would bring whole cities to a standstill, cause nations to go into lockdown and see governments emptying their treasuries to provide financial support on an unparalleled basis. But as we are all too aware, this has been the reality in 2020.

The consequences for our health and the health of others from the pandemic is our chief concern, but the impact on world trade and national economies has also been causing us all sleepless nights.

However, while some industries have had to effectively shut down entirely for periods during the pandemic, with many businesses sadly closing their doors forever, shipping has in the main continued to operate, as it always does, adapting to the new restrictions and responding to the challenges faced whilst continuing to innovate.

CMA-CGM Jacques Saade copyright@CMACGM

During the year we have seen the shipping industry making further progress towards decarbonisation and the goal to cut CO2 emissions from shipping by 40% by 2030, with the new IMO 2020 regulations coming into force in January.

To “scrub or not to scrub?” That has been the question. Within 2020, an increasing number of ships running on LNG fuel have come into service, including the impressive 23,112 TEU capacity CMA-CGM Jacques Saade, one of nine sister ships to be built at the CSSC Shanghai Shipyard.

On a somewhat smaller scale, but also with the aim of reducing emissions, electric powered vessels are continuing to be developed. More investors and finance providers have also been voting in favour of greener shipping by, for example, signing up to initiatives such as the Poseidon Principles.

poseidon-principles

MASS Development

Autonomous shipping has continued to feature high on the agenda throughout the year and in the UK the MCA commissioned and published a study looking into how data could be used to help in the further development of autonomous shipping within UK waters. Solis Marine was pleased to deliver part of that study.

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The MARLab data study photo copyright @Solis Marine

Also within the year, an alliance of major ports, including Rotterdam and Singapore, was formed for the purpose of investigating how these ports can make themselves ready for autonomous vessels.

Meanwhile, a very modern version of the Mayflower will set sail next year for the New World, but this time absent any pilgrims or indeed anyone at all on board.

Despite the pandemic, and in some cases because of it, owners have generally experienced decent returns in the year. Towards the end of 2019, VLCC rates peaked at $300,000 a day and while they fell away from those levels in 2020, tanker rates enjoyed a mini boom in the early part of the year as vessels were used to store surplus oil.

The container markets have recently hit an all-time high in the run up to Christmas and while bulkers suffered from the lockdown in the first quarter, freight incomes have recovered as the Chinese economy has started to bounce back.

mayflower-modern-1

The Modern Mayflower

The newbuilding and second-hand markets have been held back by Covid-19, but the consensus is that prices are likely to rebound as latent demand feeds through. However, the one area of shipping that has been devastated by the pandemic is of course the cruise ship industry and unfortunately it is hard to see this market fully recovering for some time.

Scandinavia supersedes London’s hull insurance market

There are many sectors that exist to support the shipping industry, including of course the insurance markets. As offices have largely closed to be replaced by working from home and in-person meetings have been put on hold, the insurance industry has continued to provide the cover necessary for the industry to operate.

During the year, both P&I and Hull insurers have declared that 2019 was another relatively benign year for casualties and claims and to date 2020 appears to be going the same way.

Against this trend, fires on board container ships have been reported to be on the increase and flagged by insurers as an area of increasing concern, along with the new(ish) threat of cyber-attacks.

A notable statistic that emerged during the year was that following some significant withdrawals in recent years London was no longer the largest marine hull insurance market in the world, with the Scandinavian market taking over the mantle. It will be interesting to see if this remains the case going forward.

New Ways of Working

Marine consultants and marine surveyors also exist to service the shipping industry, providing independent technical support and advice to insurers, owners, maritime lawyers, offshore developments and cargo interests, to name but a few.

For these firms, 2020 has clearly been a challenging year with fewer casualties to investigate, reduced movements of project cargo and offshore oil and gas projects being cancelled or put on hold. In addition, consultants and surveyors have had to adapt to periods in lockdown and travel restrictions that have meant attending a vessel to carry out a survey, oversee cargo loading or inspect damage has been anything but straight forward.

However, new ways of working have been identified and this hasn’t stopped consultants and surveyors from responding to the needs of their clients. Meanwhile, and not surprisingly, the concept of remote surveys using various forms of new technology including drones has come back into focus.

Within the shipping industry, a much reported human cost of the pandemic has been the impact on crews. With crews in a lot of cases unable to disembark or to be changed out for extended periods, some seafarers have not left their ships for nearly a year.

The potential negative effect on their mental health can only be imagined and it is to be hoped that the industry continues to find ways to deal with this problem. Meanwhile, and on a more positive personnel and staffing note, during 2020 diversity within all areas of shipping has become a more actively debated topic.

Conferences, exhibitions, and networking events are an essential part of shipping, bringing together representatives from all sectors to inform and be informed about latest developments within the industry, and to build and maintain contacts.

2020 has seen the majority of these events either temporarily moved online, such as this year’s IUMI conference, or being cancelled altogether. A big hole in many of our diaries was created by the cancellation of Posidonia, held bi-annually and one of shipping’s biggest exhibition and gatherings.

Long Range Shipping Forecast

Looking ahead to 2021, I think we can expect to see many of the key issues of 2020 continuing to take centre stage, i.e. the progress towards greener shipping, more vessels coming into service using LNG as a fuel, China’s demand for imports and exports, the further development of autonomous shipping and the long term decline in the demand for oil.

I wouldn’t presume to try and forecast vessel charter rates or likely trends in values, I’ll leave that to the experts, the brokers and researchers, who will have to factor into their models the recent and surprisingly strong recovery in the Chinese economy, Brexit, the outcome of the US elections and the impact on China/US trade relations, and the ongoing effect of Covid-19, amongst various other macro-economic considerations.

One thing that is certain is that 90% of everything will continue to be transported by ships and the industry will continue to play a vital role in our everyday lives.

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