By: Hector Laserna,
Terlica General Manager
The beginning of the pandemic in the first half of
2020 caused maritime trade to decrease by 3.8% in 2020. But in the
second half there
was asymmetric recovery, and by the third quarter, volumes had returned
for
both, containerized
[JD1]
[EM2]
trade and dry bulk commodities. However, there has
yet to be a full recovery for tanker shipping.
Maritime trade has performed with diverging paths
across regions and markets. It has experienced increased consumer
spending on
goods, with a growth in e-commerce, especially in USA. This higher
spending was
also later supported by more general optimism in advanced regions based
on the
rollout of vaccines.
In 2021, in tandem with the recovery in merchandise trade and world output, maritime trade is projected to increase by 4.3% (figure 1). Over the past two decades, compound annual growth in maritime trade has been 2.9%; UNCTAD expects in 2022–2026 that rate will slow to 2.4%.
Hardest hit has been tanker shipping,
with less of an impact for containerized trade, gas and
dry
bulk
shipments.
Lockdowns, travel restrictions and production cuts have
compressed the demand for fuel. In 2020 shipments
of crude oil, refined petroleum products and gas together fell by 7.7%.
But the
impact was less for dry bulk commodity trade which fell by
only 1.5 %, and containerized trade fell
just 1.1%.
Maritime trade weathered the storm in 2020 and remains positive,
however, not all countries have been able to support recovery;
hindered by supply-chain
bottlenecks which have led to shortages in equipment and containers,
less
reliable services, congested ports, and longer delays and dwell times.
For shipping on the other hand, soaring freight rates surcharges
and fees have bolstered profitability. A compounding factor was
temporary with the blockage of the Suez Canal in March 2021.
[JD3]
The grounding of the massive container ship “Ever Given” blocked
the canal, delaying ships heading for Europe, and increasing the
constraints on
ship and port capacity. Some voyages had to be re-routed around the
Cape,
adding up to 7,000 miles to their journey.
On the other hand, COVID-19
[EM4]
has also accelerated megatrends that in the longer-term could
transform the maritime transport landscape. Emphasizing the importance
of
ensuring continuity in supply chains, some are arguing that reshoring
and
nearshoring will accelerate resulting in deep reconfiguration of supply
chains.
Instead, enterprises are likely to blend
local and global sourcing, modifying their strategies according to
product and
geography with a blend of reshoring, diversification, replication and
regionalization.
The pandemic has accelerated pre-existing digitalization and
environmental sustainability trends and new technologies have stimulated
the
rise of online commerce. All these developments are expected to generate
new
business opportunities for shipping and ports as well as for other
players in
the maritime supply chain, taking advantage of synergies between
technology,
environmental protection, efficiency and resilience, especially for
maritime
transport.
We have witnessed a notable rise in container freight rates. In
2020, lockdown measures and other impacts of COVID-19 suddenly cut the
demand
for containerized goods. April and May 2020 were the most difficult
months: by
the end of May 2020, a record 12% of global container capacity was idle
or
inactive – 2,7 million 20ft containers.
In the second half of 2020, demand for container shipping
started to pick up. Vessel supply capacity remained limited; container
shipping
capacity levels started to decline in line with growing demand as trade
continued to recover. By the end of 2020, freight rates had surged to
unexpected levels. This was reflected in the China Containerized Freight
Index
(CCFI). Towards the end of 2020 and early 2021, container shortages and
congestion at ports, along with other disruption, led to record
container
freight rates, notably on the routes from China to Europe and USA.
As Asia slowly began to recover, other countries remained under
national lockdown and restrictions so the importing countries could not
return
containers; these impediments led to higher container dwell times at
ports and
empty containers not returning to the system where they were most
needed; with
containers scarce and ports suffering from congestion, high
freight
rates have boosted the profits of global container shipping companies.
Dry bulk freight rates also reach new record highs
In the first half of 2020, the demand shock from the COVID-19 pandemic added downward pressure to an overly supplied market and led to a drop in dry bulk shipping freight rates.
See above the Baltic Exchange
Dry Index, which
measures the cost of shipping
various raw materials, such as
coal, iron ore, cement, grain and fertilizer (figure 3.5)
Tanker freight rates dip to the lowest levels ever
There was also a surge in tanker freight rates, boosting profits for tanker shipping companies. In the second half of the year, COVID-19 impacts weakened demand and rates started to drop in an oversupplied market. By January 2021, oil tanker spot earnings were $5,237/day, and by July had fallen to $2,753/day, the lowest levels ever (figure 3.7). Given current low global demand and future uncertainties short-term tanker freight rates will probably remain low.