Coronavirus:

the issues for shipping

and their impact.

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Coronavirus:
the issues for shipping
and their impact.

Welcome
Speakers

Richard Meade
Managing Editor
Lloyd’s List, Moderator

Christopher Pålsson
Head of Consulting
Lloyd’s List Intelligence

Michelle Wiese Bockmann

Markets Editor
Lloyd’s List and Lloyd’s List Intelligence
Christopher Pålsson

Head of Consulting
Lloyd’s List Intelligence
GDP forecasts are all over the place

• OECD 2 March
• Assuming that the epidemic peaks in China Q1-20 and a contained
outbreak elsewhere;
• 2.4% in 2020 and 3.3% in 2021.
• The global economy will take years to recover.
• IMF 23 March
• The downturn this year will be at least as bad as the financial crisis
• Recovery in 2021
• “…the faster the virus stops, the quicker and stronger the recovery will be.”
Activity – no. container port calls by vessels 5,000 teu and above
Not as many port calls, but capacity is back – more large vessels
Inactive container carriers
Doubled recently, but still half of financial crisis levels
Activity – large dry bulk carrier arrivals in China back to normal
Inactive dry bulk carriers
Steep increase by the Chinese New Year. 17M dwt = 1.9% of fleet
Activity – VLCC arrivals. Much more at play here than Covid-19.
Idle capacity in decline in Q1.
Demand and Supply overview
• Total seaborne trade
• 2019 zero growth, down from 3.0%
• Recovery in 2021 & 2022
• General cargo falls 5%
• Container cargo grows marginally full year; intra-Asia, stacked up cargo ...
• Vehicle trade drops 10%
• Fewer fleet changes 2020 than planned, still;
• Delayed deliveries, but 16M dwt delivered so far,
• Sharp drop in new ship orders. 8M dwt ordered to date,
• Delayed scrapping
In short
Economic growth has the potential to
become the worst post-WWII, but if the
downturn stops in Q2, recovery could be
strong.

China is largely back in business, but the rest

of the world is far from that point.

Absent full-year volume trade growth is

rare. In some trades, we should expect a
decline.
Michelle Wiese Bockmann

Markets Editor
Lloyd’s List and
Lloyd’s List Intelligence
Tankers in the Time of the Coronavirus
• Crude tanker rates, the Saudi/Russia oil price war
• Floating storage/oil market contango
• Saudi exports – what is Lloyd’s List Intelligence vessel tracking data telling us?
• VLCC deployment/crude floating storage levels (who is hiring and at what cost)
• Scrubbers: marine fuel oil price spreads erode premium, who is impacted
• VLCC deployment/crude floating storage levels (who is hiring and at what cost)
• Trade routes to watch (US Gulf oil exports – how quickly will production curbs
affect shipments – vessel categories affected)
Freight Rates Seeking Floating Storage Floor
Record breaking rates already over

OPEC-plus agreement collapse, Saudi & Russia oil price

war ramps up exports, coinciding with catastrophic March
crude demand collapse (15-25%)

Saudi shipping co. Bahri charters ~25 VLCCs March 9-17

igniting tanker market equivalent to toilet roll hoarding,
lifting rates. Loading over next 10 days?

9 of ~ 75 VLCC charters failed; 9 had daily earnings

exceeding $200,000; 17 were chartered at rates that
equated to earnings above $100,000 daily *
Saudi pledge ~10m bpd exports –is there appetite?
Bahri-chartered VLCCs on their way
Crude floating storage at record
CRUDE oil stored on tankers
highest in records going back
to 2009 as oil prices plunge
to a 17-year low

Some 131.2m barrels tracked

on floating storage for week
ending March 20. (130.6m
barrels, May 2016)

85 tankers: 53 very large

crude carriers (38 owned by
Iran’s NITC) &18 suezmaxes.
(loaded but have remained at
anchor for more than 20
days)
But by how much….?

• Oil market contango – crude, jet, diesel,

gasoil – promotes floating storage

• Current spread profitable at ~$100k/day

VLCC (latest 6-12 month period deals $52k-
$82k); Suezmax ~$56k/day ($40k)

• Koch, Shell, Trafigura, Vitol already

chartering.
Land-based storage… 390m bbls from peak
Refined and crude surplus on unprecedented scale
• Estimates: 15-25% fall in crude demand last month = 5m bpd average fall in
2020 = 600 million surplus barrels right now. (implies surplus 1.8bn bbl for
2020 (not allowing for production shut-ins)
• Land and air transport fuels account for 55% of oil demand (55m bpd of
100m bpd) Aviation 5%; marine fuels 6%, heavy vehicle (normally diesel)
18%; light vehicle (gasoline & diesel) 26%.
• Refinery throughput already down 7m bpd/crack spreads negative for
transport fuels
• Air passenger revenues (jet fuel demand proxy) estimated to fall 44%,
costing $252bn (IATA). Translates to ~2.5m bpd lost crude demand. (250m
bbls = 125 VLCCs)
Trade flows to watch
* East-to-West/transatlantic/Mediterranean short-haul
middle distillate trades key employment for LR2 tankers
(23.4m tonnes jet fuel, 45m tonnes 10ppm diesel
imported by EU28 in 2019.) (cargo sizes from 90kt to 35kt)

* Jet fuel flows – Asia Pacific. Record Chinese exports seen

from state-owned refineries (with export licences) to
offset falling local demand. Independent refineries (aka
teapots) that serve as swing suppliers for domestic
demand likely to be cutting output – and crude imports --
first.

* US Gulf crude & product exports: aframaxes to EU28 &

VLCCs to Asia; MRs to LatAm; diesel 2 EU28
Scrubber investments redundant (for now)
• 0.5% VLSFO vs 3.5% HSFO: $278% plunge in Singapore VLSFO price since January
3, spread now at $64.50 per tonne ($114.25/tonne in Fujairah

• Singapore spread above $300 per tonne in Jan 2020.

• $103/tonne spread = $4,000 daily difference in VLCC earnings

LLI estimated Scrubber Penetration (% of Fleet on DWT/TEU Basis)

Crude Tankers: 16.4%

Products Tankers: 7.5%
Dry Bulk Vessels: 12.2%
Containerships: 12.7%
Scrubber uptake by beneficial owner
Tanker Twists & Turns Expected

• Every day estimates are torn up and revised as each new twist of the coronavirus
outbreak revealed.

• Mercifully, the fullest picture may only emerge once the worst is over.

• THANK YOU
Speakers

Richard Meade
Managing Editor
Lloyd’s List, Moderator

Christopher Pålsson
Head of Consulting
Lloyd’s List Intelligence

Michelle Wiese Bockmann

Markets Editor
Lloyd’s List and Lloyd’s List Intelligence
Ask the Analyst Q&A session

James Baker Anastassios Adamopoulos

Lloyd’s List Reporter
Containers Editor Lloyd’s List (London)

Janet Porter David Osler

Chair of the Lloyd’s Law and Insurance Reporter
List Editorial Board Lloyd’s List (London)

Nidaa Bakhsh, Sebastian Otterstad Villyn

Senior Reporter Lloyd’s List Intelligence
Lloyd’s List (London) Entity Analysis Manager
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