It has been a tumultuous six months since Lloyd’s List published its outlook for 2020, with not just shipping but every aspect of life affected by the pandemic. The world as we knew it has changed, perhaps irrevocably, and many of the forward-looking statements we made in December last year now look like they were made in another age. So, as we reach the halfway point of 2020, marking the next instalment in our outlook series, the Lloyd’s List team has once more been tasked with second-guessing what we as an industry can expect in the coming months.

At face value, the coronavirus pandemic has devastated almost every segment of the shipping industry. Economic shutdowns have killed demand for goods, which depressed the requirement for shipping capacity, leading to weak rates. Yet look under the headlines and there are interesting observations to be made about resilience — about adapting to the circumstances — in each sector. The impact of the pandemic has been so severe and widespread that understanding the past, even the very recent past, appears not to offer much consolation.

Forecasts for the whole of 2020, made just six months ago, have been ditched in favour of assessments lasting a few weeks. Short-termism is no good for investors. However, it does reveal an industry inching its way towards new solutions. The financial analyst Ted Petropoulos believes that, all things considered, shipping has “actually performed quite well”. The container lines have maintained an unusual spirit of discipline that has kept rates healthy, although not robust. Even in the deeply troubled dry bulk market, analysts believe an historically low newbuilding orderbook and a strong rebound in third-quarter demand will combine to ensure rates climb. Market analysts are fond of direct comparisons. They are accurate in suggesting that rates in the second quarter of 2020 were significantly lower than in the corresponding period of 2019, but that doesn’t tell us much. This pandemic has done more than sweep forecasts aside; it has reshaped the landscape.

The shipping markets of 2019 and 2020 are so different. However, it is plain that China — the driver of almost all markets — is still being considered as the great hope for economic recovery. Yet even in a coronavirus crisis, during which all shipping sectors and all maritime companies have been hit hard, the other ‘known known’ is trade tension, especially with the US. How Washington and Beijing act and react to statements and pronouncements, particularly with a US presidential election in November, will influence the smooth flow of trade between the world’s two largest economies. Besides political decisions, the most significant factor influencing the profitability of shipping in the second half of 2020 and the first half of 2021 will be the delivery from Asian shipyards of vessels ordered before the pandemic.

There were very few new orders during the second quarter of 2020, while ships scheduled for delivery have been delayed. However, the spectre of overtonnaging was active throughout 2019 and has not been exorcised with a few months’ respite. The pandemic has exacerbated longstanding supply problems in container shipping, but the fleet is continuing to grow with every delivery. The sector is essentially kicking the problem down the road. It is still a major concern, only it is one for 2021 or 2022.

This mid-year outlook is heavily influenced by the pandemic, but Covid-19 has also exposed longstanding weaknesses that have never been properly addressed. Chief among these are the dependence on China; the obsession with market share; the continuing importance of coal in spite of its environmental impact; and the inability to pass on to the consumer the costs associated with green shipping. Nevertheless, what has also been revealed a resilience in shipping markets, with shipowners working with charterers to overcome the obstacles.

There can be no doubt in anyone’s mind that the second half of this year will be stronger than the dismal levels seen during the first six months. That is, if no new wave of infections forces key consuming countries such as China into calamitous lockdowns again. The biggest driver for the July-December market is a recovery — albeit small — in China, where iron ore inventories are lower than usual. Long-haul shipments are keeping freight rates buoyant for the larger sizes, while some bright spots in certain regions are keeping smaller-sized bulkers busy.

Elsewhere, however, things do not look so rosy. Slowing economic activity, following coronavirus closures, is looking likely to lead to a contraction in global demand for dry bulk commodities this year, by up to 3%. “The economic damage from Covid-19 now — and in the coming months and years — leaves a huge hole,” BIMCO’s chief shipping analyst Peter Sand said. “China’s stimulus packages, announced after its lockdown restrictions were lifted, are unlikely to boost the dry bulk market as they did a decade ago,” he said, adding that the higher spot rates expected in the second half will not be enough to offset the heavy losses experienced earlier in the year. Fleet growth, meanwhile, is expected around the 3% to 4% mark this year, which, when combined with lower demand expectations, makes for a toxic cocktail.The uncertainty in the market right now is feeding into investor sentiment, with most publicly listed dry bulk companies trading below net asset values. Banking analysts, who have a bullish view on the market for the coming months, say this is a good time to invest in the sector. However, while the outlook for the second half is encouraging, full-year earnings estimates will most likely sit below the 2019 average in all segments, according to analysts, who envisage brighter prospects in 2021 on even lower fleet growth — around 2% — and an anticipated rebound in demand.