This time last year, many bulker owners were looking optimistically towards 2020 as a year that would see the sector mount an upswing. That is not what they got. Although the spot market was more buoyant in the second half, it was not enough to make up for the dismal opening quarter of 2020, as Covid-19 raged in China — a dry bulk demand driver — and became a global pandemic.

Data from Clarksons and the Baltic Exchange shows that average spot earnings in 2020 were the worst they have been for at least five years across all main bulker segments. On 24 December, the Baltic Exchange reported the year’s last assessment of the Baltic Dry Index — the benchmark spot indicator for the bulker business — at 1,366 points, up from 1,090 at the same time in 2019. This came as the component Baltic Capesize Index reached 2,006 points, which was the highest year-end level in seven years, noted Breakwave Advisors, the financial firm behind the Breakwave Dry Bulk Shipping ETF. However, the BDI averaged just 1,066 points for 2020, down 21% from 2020’s average and the lowest level since the indexed averaged 673 points in 2016.

Behind that slump was a broad-based decline in earnings for the sector. Clarksons data shows that capesize earnings have averaged just under $10,700 per day so far in 2020, which is a 31% plunge from the prior year. Capesize rates were “not that bad” in 2020 despite Covid-19 disruption, Breakwave Advisors founder John Kartsonas said. “Obviously, the first quarter was a tough quarter, given the pandemic started in China,” he told TradeWinds. “That is the main demand centre for dry bulk shipping, but given that China recovered fairly rapidly and was back in business by the second quarter, dry bulk shipping remained quite resilient for the year.” China’s rekindled demand for dry bulk shipping was offset, however, by other regions such as India, Europe and rest of Asia taking in less dry commodities amid the pandemic, he said.

The story was much the same for panamax spot rates in 2020, although the freight rate decline was less pronounced. The sector, which includes kamsarmaxes, saw average rates dip 20% to just over $10,400 per day, Clarksons data shows.

Supramax time-charter equivalent spot rates across 10 benchmark routes averaged at just $8,190 per day for 2020, which is a decline from nearly $9,950 according to a Clarksons calculation based on Baltic Exchange data. Rate assessments for key route baskets in the handysize sector showed similar trends.

In all sectors, the year’s average rates are at their lowest level since 2016. Futures are pointing to a modestly better 2021. The Baltic Exchange’s forward assessment for the BDI shows that predictions are for the index to average 1,189 points in 2021 — a nearly 12% boost — according to a TradeWinds analysis of the data. The first quarter of the year, at least, is expected to not be dismal. In the opening three months of 2020, the BDI hit negative numbers and averaged just 93 points. Kartsonas said 2021 is shaping up to be better for the dry bulk sector, barring unexpected events. “But the first half of the year should see more ‘normal’ rates versus the last two years that were full of extraordinary events such as the Brazil dam rapture and Covid-19,” he said. “That by itself should help averages outperform 2020.”

Brazil will once again be the sector’s main focus, Vale being the driving force behind the country’s iron-ore exports, Kartsonas said. “The company once again is guiding towards significant export growth, but it remains to be seen how much of such growth will actually materialise,” he said. But dry bulk shipping should benefit from relatively low deliveries that are expected to keep supply growth below 2% for the whole year. Meanwhile, demand from other regions outside of China should also pick up as vaccines are rolled out and their economies recover amid robust economic stimulus packages, he added. “All in all, supply and demand should tighten and that means higher rates, on average,” Kartsonas said. “With futures pricing basically a similar to 2020 year, it seems the risk-reward balance for 2021 is tilted towards being more constructive rather than cautious for sector.”

While many dry bulk market participants are optimistic — bullish, even — about 2021 prospects, given low fleet growth amid expectations of rebounding demand post-coronavirus, some are citing concern because of the uncertainty related to this recovery, combined with ongoing geopolitical tensions. Demand growth pegged at somewhere in the region of 4%-5% was positioned against fleet growth of 2%: a scenario that is supportive of higher freight rates next year.

In 2020, bulk commodity demand is seen contracting, pulled lower mainly by global coal trades, and mirroring estimates for the global economy. The International Monetary Fund sees a drop of 4.4% in global GDP this year, rebounding by 5.2% in 2021. China was the only country to record growth this year and the lift seen in dry bulk rates in the second half of the year is testament to that, with port calls way above that of the past year, according to Lloyd’s List Intelligence data. The country’s stimulus policy, aimed at infrastructure projects, saw steel production soar, leading to higher imports of iron ore and coking coal, key ingredients in the steel-making industry. It also saw higher soyabean imports as its pig herd gradually recovered from devastating swine flu. According to Arrow Research, China is charging ahead, with the rest of the world trying to catch up. It expects a “healthier” supply-demand balance next year but it does not expect “outsized gains” because although the recovery is gaining momentum, headwinds persist.

In October, China produced 92.2m tonnes of steel, up 12.7% on the same month last year, according to statistics from the World Steel Association. The global total rose 7% as some countries recovered. In the first 10 months of the year, China’s output was 874m tonnes, up 5.5% versus the same period in 2019, while the global total shrank by 2%. Given China’s dominance and importance in dry bulk trades, all eyes will be on Beijing’s next five-year plan, which is due to be approved and detailed in early 2021.

2021 should be “pretty nice” for dry bulk owners, said Shipping Strategy’s founder Mark Williams. The dry bulk market has been on a four-year cycle, and the downturn that started in 2016 should have ended in 2020, were it not for the pandemic. That could mean a slight delay in the start of the new upcycle, the UK-based consultant said, adding that he expects a peak to occur in the latter half of 2022. “Everyone is excited about a post-coronavirus recovery, seen as a ‘super-bump’, with latent demand coming to the fore,” he said. While China’s steel industry is of paramount importance, Mr Williams said he would be interested to see what China’s coal policy will be, given the trade tensions of late that have seen it ban coal from Australia. It also inked a $1.5bn deal with Indonesia, a potential sign of Beijing moving away from its largest trading partner.

Oslo-based Cleaves Securities also noted how China’s economy was normalising, evidence of which lay in record steel production and a drop in steel and iron ore inventories. Cleaves’ research head Joakim Hannisdahl does, however, see seasonal factors weighing on the market in the first quarter, while annual consecutive gains are expected until at least 2023, based on a record low orderbook. Dry bulk was his top pick within shipping. “We expect that Chinese authorities’ stimuli efforts will continue into 2021, and believe that a net restocking will follow as soon as the global commodity market finds a new equilibrium at a higher supply level,” he said. “This could be highly supportive for dry bulk shipping.” Higher iron ore exports from Brazil and Australia gave some respite to the dry bulk market this year, and the hope is that volumes can continue that trend in 2021.

Brazil’s mining giant Vale is looking to steadily resume operations following the aftermath of the Brumadinho dam collapse in early 2019, which forced the closure of several mining sites. The miner said it was targeting iron ore production in the 315m-335m tonnes range in 2021, lower than analysts had expected. That compares with a downward revision to 300m-305m tonnes this year. It is aiming for output of 400m tonnes by the end of 2022. Australian supplies could reach 897m tonnes next year from 875m tonnes in 2020, which itself is a rise of 4% from 2019, Cleaves estimates. While headwinds for coal trade remain, strong demand for agri-products and minor bulks, including bauxite, should bode well for the market. The optimistic sentiment has reached shipowners, with all leading listed companies citing strength in 2021. They are also bullish for the long-term prospects of the sector.

Maritime consultants Drewry is expecting higher earnings across all segments, according to its base case scenario, with the one-year time-charter rate for a capesize forecast at $17,100 per day in 2021 versus $14,900 this year. Similarly, panamaxes are forecast to achieve $11,900 per day next year from $10,500, while supramaxes should fetch $11,100 compared with $9,800. Handysizes, meanwhile, should increase by $900 on year to average $9,900 per day.

Shipping association BIMCO is, however, urging caution. Its chief shipping analyst Peter Sand expects another challenging and trying year to come, given the steep commodity import drops across advanced economies in 2020, combined with the uncertain path of trade tensions and questions about the pace of recovery,  in view of new daily coronavirus infections. He advised patience until at least 2022 for some seasonal normality to return. While an expected increase in iron ore exports from Brazil was “an upside” for the market, promises by Vale in the past have been “disappointing” due to various incidents that have curtailed output. The one overwhelming factor in dry bulk’s favour is that the pace of fleet growth is expected to slow to 2% in 2021, marking the lowest increase in capacity since the turn of the century, according to Mr Sand, who anticipates demand growth at 3% to 4%. BIMCO expects 23.5m dwt to be delivered in 2021, versus demolitions in the range of 5m-10m dwt.  “To some extent, the fall in bunker prices has protected dry bulk earnings from performing even more poorly than they otherwise would have done this year,” he said, adding that he expects a “slow” recovery in 2021.

Lloyd’s List Intelligence also forecasts lower fleet expansion over the next few years, with a compound annual growth rate of 4.3% from 2020-2024, dropping to 3.6% in the five years to 2029. That compares with 6.4% in the 2010-2019 period. Views on the market recovery are based on continued restrained ordering of new vessels, but higher freight rates during an expected upcycle that may lead to higher contracting, tipping the supply-demand balance once again.

Dry bulk shipping should improve modestly in 2021 amid robust demand from China and a post-Covid-19 recovery, experts say. Global trade of commodities such as iron ore, coal and grains stands to grow by 7%, offsetting a 2% decline in 2020, according to UK-based Maritime Strategies International (MSI). Fleet employment should also improve, although it fell to only 83% this year despite lengthy crew changes and virus lockdowns, MSI added. Tonne-mile demand, which grew 2% in 2020, is set to expand by 8.2% next year. “This helps to explain why time charter markets have not been as badly impacted this year as might have been expected,” MSI director of product development Will Fray told TradeWinds. “It is also an extraordinary outcome in a world impacted by a global pandemic.”

MSI cautioned that enhanced fleet productivity in 2021 may cause tonne-mile demand to rise by only 4.7% against a 4.1% boost in supply. “Our analysis of the latter reveals that whilst the dry bulk orderbook is very low in historical terms, it is also heavily front-loaded,” Fray said. “In summary, increasing fleet productivity will dampen the impact of strong trade growth next year, and demand growth will only marginally exceed supply.”

Spot rates should recover by 25% to 30% next year, and period charter rates — at a sharp premium to spot — should improve by less than 5%, according to MSI. The Baltic Dry Index (BDI) began 2020 at 976 points and landed at 1,211 points on 11 December, reaching 1,956 points on 6 July and 2,044 points on 7 October. The weighted time charter equivalent average for capesize spot rates entered 2020 at $11,976 per day and came in at $11,889 per day on 11 December, according to Baltic Exchange assessments. This metric, which often drives BDI results, bottomed out at $1,992 per day on 14 May but attained a high for the year of $34,876 per day on 6 October.

MSI bases its optimism on an expectation that Brazil will export more iron ore after two years of disruptions that began with the catastrophic breach of Vale’s Brumadinho dam in January 2019. “Brazil’s recent guidance for 2021 is cautious and there is upside risk,” Fray said. “But overall indications are that 2021 will see another year of growth building on a 3.3% year-over-year expansion in 2020.”

Capesize rates should fare better next year with a sparse orderbook that is expected to grow only 1.5% and strong iron-ore demand from China, John Kartsonas, founder of Breakwave Advisors, said. “Yet a lot depends on factors that are familiar with shipping … while Vale will continue to dominate the news flow for capesizes as most of the projected growth depends on them to deliver on their promises,” he added.

China’s iron ore appetite may ebb slightly, however, as economic-stimulus impacts diminish, but it should remain in need as demand from Europe and Japan picks up post Covid-19, MSI said. Coal trade should also improve next year as effective vaccines allow global commerce to start returning to normal, Fray added. “Meanwhile, grains trade has been supported by easing tensions between the US and Chinese governments, and this will continue to support soybeans trade next year,” he said. “Finally, a number of minor bulks have encountered Covid-19 related issues this year, such as mine closures in the Philippines, and we expect a much better year for trade in 2021.”

China’s rejection of Australian coal may hurt panamax demand by 3.5%, but this should be offset by Chinese sourcing of coal from Indonesia, Fray believes. “Around 60% of shipments on this route are in panamax vessels, albeit on a shorter-haul route than from Australia,” he said. “India will also import more trade from Australia in panamax ships should a price differential emerge.” Capesizes may not benefit from China getting its coal elsewhere because Australia will probably export to India on supramaxas and panamaxes, he said. “In summary, the impact will be a bit of a merry-go-round but overall impact would be negative, on the basis that coking coal prices would rise and additional material would likely be sourced from Mongolia,” Fray said.

A few Australian coal shipments are finally making it onto Chinese soil after months of political impasse between the two nations. Citing data from Kpler, Bloomberg has reported four bulk carriers offloading Australian coal at two different ports in China this week.

More than 50 ships remain stuck at Chinese anchorages waiting to offload their shipments however with hundreds of seafarers stuck in limbo for many months. “The speed of domestic coal price increases in China will to some extent decide how soon we could expect more Australia coal shipments to be discharged,” Monica Zhu, a dry bulk analyst with Kpler, told Bloomberg.

Local Chinese coal prices have soared in recent days thanks to mine closures and also a Covid-19 outbreak in key supplier Mongolia slowing down border crossings. “The unwinding of the effective blockade may come because of diplomatic pressure, or because of commercial reasons. Steam coal futures are at the highest levels on record. Coking coal prices have also soared to a four-year high,” brokers Lorentzen & Stemoco noted in an update to clients today.

Canberra and Beijing have seen relations sour significantly this year with Australia leading the charge to investigate the origins of the coronavirus.

In 2019, China’s global purchases of coal totalled $18.9bn, with almost 50% coming from Australia. As well as coal, Australian barley, wine, lobster, copper, sugar, fruit and timber have all felt the wrath of Beijing this year with informal bans put in place.

Tankers and bulkers over 12 years old will have to improve fuel efficiency by up to 20% to comply with new efficiency standards for existing ships, according to the Japanese government. The Energy Efficiency Existing Ship Index (EEXI), agreed by the International Maritime Organization last week, is set to enter into force from 2023 and require existing ships to match the fuel efficiency of newbuildings. In announcing the new rules, Japan’s Ministry of Land, Infrastructure, Transport and Tourism detailed the mandatory improvements in energy efficiency required, based on ships built between 1999 and 2008.

This is a critical period for the regulation, because it comes before shipping’s eco-ship boom and the Energy Efficiency Design Index for newbuildings, both of which improved the fuel efficiency of ships. According to the figures, bulkers and tankers now over 12 years old and between 20,000 dwt and 200,000 dwt will have to improve fuel efficiency by 20% and by 15% for ships over 200,000 dwt. However, the largest improvements may have to be made in the containership sector, where ships in the 40,000-dwt to 80,000-dwt range will be required to improve efficiency by up to 30%. Exceptions have been made for ferries and ro-ro ships, which have limited scope to improve efficiency. Ships in this sector will only be required to improve efficiency by up to 5%.

The UK Chamber of Shipping’s director of policy, Peter Aylott, said the regulation would play an important part in improving shipping’s environmental performance until a new alternative fuels technology is ready. He told TradeWinds: “We are going to squeeze the energy efficiency out of the existing fleet that we have now and then move on to a new age.” Ships that fall short of EEXI standards will be required to adopt engine power restriction to meet the EEXI requirements or use other efficiency measures.

One outcome is that many shipowners will find the cost of economic upgrades too expensive or will be forced out of the market because they will have to operate at lower speeds. The consequence could be that the scrapping of the older tonnage is accelerated. Brokers pointed out that generally the tanker fleet is likely to be more impacted by the regulation than the dry bulk fleet because it has an older age profile. According to broker Clarksons, 30% of the tanker fleet is between 10 and 14 years old and 19% between 15 and 19 years old. That compares with 22% of the dry bulk fleet that is between 10 and 14 years old and 10% between 15 and 19 years old.

Although the potential fuel efficiency upgrades are higher for older containerships, many were fitted with highly efficient hull forms for slow steaming following the economic crisis of 2008 and already meet the IMO requirements. Some pundits suggest the impact on the lifespan of vessels might be limited. They cited previous environmental regulations, such as the Ballast Water Management Convention, that also brought operational changes and investment but did little to hasten the demise of the older fleet.

Is the “rotation” finally moving in shipping’s direction? An investor rediscovery of growth or “value” stocks helped shipping outpace the broader US stock market indices for a second straight week, and could be a preview of things to come in 2021, says investment bank Jefferies. This sort of rotation by stock buyers away from tech names and listings that were boosted by Covid-19 lockdowns has been in effect for at least the past two weeks, according to Jefferies lead shipping analyst Randy Giveans. The 30 shipping stocks under Giveans’ coverage were up an average 7% on the week at Friday’s close of trading in New York, outpacing the Dow Jones Industrial Average, the S&P 500 and the Russell 2000 for the second straight week. The S&P 500 was down 0.8% on the week while the Russell had gained about 2.3% over the five days.

Containerships and LNG led the way with 9% average gains, followed by dry bulk at 8%, tankers at 6% and LPG at 4%. Only four of the 26 stocks lost ground. This comes after the maritime group jumped 9.2% in the week ending 13 November, outpacing a strong 6% gain by the Russell and 2.2% climb by the S&P 500. Meanwhile, Jefferies data shows daily trading volume for shipping stocks measured in dollars increased an average 51% from one month ago, to an average of $5.9m per day from $3.9m.

Most experts point to 9 November as the day the shift toward growth stocks began in earnest, as Pfizer announced the overwhelming effectiveness of its Covid-19 vaccine in human trials. A market surge that day marked the biggest flow into value stocks since 2008, according to data from JP Morgan. “There’s certainly been a shift into cyclical, energy related stocks, but also a more general shift into small-cap stocks,” Giveans said in an interview Friday. “Our small-cap specialist at Jefferies has been harping on this big shift into value and small caps, and away from tech mega-names that had been driving the S&P.”

Even though there also has been some wobble in the broader market’s rally on escalating shutdowns in the US and across Europe as the virus surges, it’s been balanced by a series of positive vaccine-related announcements. “Every time you see a vaccine announcement there’s a big uplift in the commodity-driven names. If there is a vaccine, people will get more comfortable flying, driving, travelling and inventories will start to get drawn down,” Giveans said. “Shipping will benefit from that.” Because the sector has an orderbook over the next 18 to 24 months that is near historically low levels, any improvement in demand will benefit shipping, he said. “You pretty much know what your supply is going to be for the next 18 months. So even with a demand rebound starting in summer 2021, you should have a solid year if not more of good rate levels,” Giveans said.

Any relief is welcome for an industry that has performed much worse than the broader market in 2020. Only two of the stocks in the Jefferies index have gained ground year to date, with containership owners Danaos Corp up 62% and LNG’s Dynagas surging 23%. Danaos once again led the pack in the past five days with a 31% gain through Friday morning in New York. The share has been a Giveans favourite based on its willingness to repurchase stock, splashing out $31.1m for 4.4m shares that constitute 17.5% of its overall float. Danaos also has benefited from the unexpectedly strong recovery in boxship rates. With many shipping stocks trading at barely 50% of their net asset values, Giveans has been an advocate of share buybacks like the one Danaos executed.

Still, some owners like Scorpio Tankers and Star Bulk have stressed the security of cash on their balance sheets as long as the Covid-19 shadow lingers. “We’re trying to put a strong wall behind our back here,” said Scorpio president Robert Bugbee. Or as Star Bulk president Hamish Norton put it, “The last I looked, we had a pandemic.” Even if owners expect their shares to rise organically from investors newly friendly to a sector, there’s still an argument to use buybacks now, Giveans contended. “If you think your stock is going to be up 30% in three months, wouldn’t you want to buy back shares now?” Giveans asked.

As TradeWinds has reported, boutique investment bank HC Wainwright has entered shipping in recent weeks with the hire of Magnus Fyhr, the veteran shipping analyst who once did his research at Jefferies. Fyhr said the bank recognised a countercyclical play, as did his boss, HC Wainwright chief executive Mark Viklund. “HCW has had success taking a contrarian view of certain sectors, looking to build out while competitors are retrenching. We believe that the maritime sector is at that point and that we have the opportunity to create one of the leading franchises,” Viklund said in a message to TradeWinds.

Coal trade should see growth return in 2021 following a contraction this year as the coronavirus pandemic slowed manufacturing, while supply lines were shut in. Economic activity is expected to at least start to get back to normal, even if the virus continues to impact daily life, according to consultant Drewry. There will be a “robust” growth in coal trade in 2021, with increases in imports in several countries, mainly in Asia. Even the European Union is forecast to see imports rise to 87m tonnes from 71m tonnes this year, said maritime research analyst Rahul Sharan. Thermal coal imports, for power generation, are projected to rebound by 5% to 991m tonnes, according to Drewry estimates. That compares with a 10% drop this year to 943m tonnes. Coking coal imports, for steel-making, will meanwhile recover by 6% to 275m tonnes, compared to the 14% drop to 259m tonnes envisaged for 2020.

Maritime Strategies International also sees growth of about 9% next year to 1.265bn tonnes, underpinned by a recovery in Indian and European demand, which is at risk from further coronavirus restrictions and government policy shifts. Without this recovery, trade growth would be closer to 3%, the London-based consultancy said. The increased trade flows should support the bulker market, especially panamaxes and capesizes, and to a lesser extent supramaxes.

Torvald Klaveness likewise believes global coal imports “are likely to record quite a positive growth” next year as global economies recover from the black swan event of Covid-19. The company’s head of research Peter Lindstrom noted that coal’s share in the total dry bulk trade mix had dipped to 21% in the first nine months of the year from 24% in 2019, using its deadweight tonne-by-duration metric, which takes into account trade inefficacies. Measured by volume, coal’s share was 27% in 2019 and 25% year to date. Thermal coal was under “heavy pressure” he said in an outlook report, as investors pull out of coal-related companies in “fear of association, whilst local pollution together with global warming, is affecting the public’s and policymakers’ attitude towards coal negatively”. However, rumours about the death of coal have been “greatly exaggerated in our view”, he added.

The sentiment was echoed by BIMCO’s chief shipping analyst Peter Sand who said that “the end of coal will not be anytime soon”. Although peak demand was in 2019, coal has been stable over the last five years and would have seen growth this year had it not been for the pandemic. He does not expect a “massive comeback” next year, but restocking efforts will stimulate trade as the world, excluding China, gets back to normal.

Brokerage Braemar is also a bit more on the bearish side, forecasting growth of just 2% next year, from a contraction of 8% this year. Weaker demand in Europe, India, Japan and South Korea shape this year’s slump, combined with protectionist policies from China, which has seen it ban coal imports from Australia amid a trade brawl. Vietnam is one of the few bright spots, owing to both healthy steel production and growth in coal-fired power generation, Braemar’s dry bulk analyst Nick Ristic said. “But, in the grand scheme of things, it is not enough to buck the global trend. We still see growth into other developing countries such as the Philippines, Bangladesh, and Pakistan, but these forecasted volumes have been trimmed pretty heavily due to the pandemic,” he said, with Bangladesh, for example, scaling back its coal power ambitions.

With the pipeline of new coal-fired power plants slowing over the coming years, and capacity closures in the developed world keeping pace, coal is facing some pressure, according to Klaveness. “However, while we do believe that the net growth in coal fired capacity will slow down — both in percentage terms and absolute terms — we are less confident that we will see negative growth in the coming years,” it said. While developing countries in Asia are adding capacity, as is Turkey, Japan and South Korea should at least be stable given their project pipeline. “Taken together we are quite confident that thermal coal imports outside of China and India will grow in the coming 3-5 years as the growth in Emerging Economies more than offsets the falling imports in developed economies, mainly the EU,” it said, adding that the swing factors will continue to be China and India, that boast vast domestic reserves.

The move away from coal as investors and the public turn to greener energy sources will hurt trade, although renewables will not completely eat into coal’s share as electricity use is forecast to increase by 50% in 20 years’ time, according to BIMCO. Demand for coal in power sectors could drop from 3,854 terawatt hours to 2,990 TWh, equal to a compound annual growth rate decline of 1.3%, which is “no drama” and reflects a gradual change in the making, it said. The International Energy Agency said that renewable power is growing “robustly” around the world this year, contrasting with sharp declines for oil, gas and coal. The Paris-based agency said that new capacity additions, namely wind and solar, in China and the US, will increase output to a record 200 gigawatts this year. The pandemic “has catalysed a structural fall in global coal demand”, it said, adding that its share in the 2040 energy mix is estimated to fall below 20% for the first time since the industrial revolution. About 275 GW of coal-fired capacity is expected to be retired by 2025.

Coal imports into China have the potential to increase in 2021 as compared to this year as domestic coal prices are at a very high level, but this needs a policy change from the Chinese government, according to Torvald Klaveness. China usually restricts imports of coal to help domestic miners through a wider effort to reduce the fuel dependency of the country. They do this by enforcing coal import quotas on a yearly basis.

For a nation that consumes and produces half of the world’s coal, the strength of China’s import curbs may vary based on the competing priorities to protect domestic miners or power plants. The Chinese government has defined a green zone for coal prices ranging from Yuan500 ($75.8) to Yuan575 per tonne for the benchmark price. In this green zone the domestic coal producers and the domestic thermal coal plants are profitable. They have further defined a yellow zone and a red zone. When prices are in the red zone it will usually trigger a change in policy from the Chinese government.

This year, coal loadings to China started at very strong levels. In the first three quarters of the year, China imported 197.8m tonnes of coal, a decline of 2.5% compared to the 202.8m tonnes imported in the same period of 2019, but still higher than the 181.1m tonnes imported in 2018 and the 178.3m tonnes in the same period in 2017. However, energy demand this year was negatively impacted by the coronavirus outbreak. As a result, domestic coal prices fell quickly and moved into the lower red zone which triggered a policy response where import quotas were strictly enforced, head of Klaveness Research Peter Lindström noted. The consequence has been a sharp reduction in coal loadings to China since July.

Coal loadings to China in September and October are the weakest in five years and are down 44% from the same period last year, he said. The very low imports in the second half of the year have brought year-to-date coal loadings down 11% compared to last year. Still, a combination of curtailed supply and rapidly improving energy demand has led to surging domestic coal prices, which are now in the upper red zone.

“The arbitrage on coal imports are huge and the only limiting factor for imports to China today is the lack of import quotas,” Mr Lindström added, suggesting that the high domestic coal price will trigger a softer stance towards imports in the coming months.

In recent years the coal import quotas have been renewed at the start of each calendar year. “Given that the coal price currently is in the red zone we think it is unlikely that this renewal practice will be changed. We believe coal loadings to China will increase in November and December even in the absence of new quotas for 2020.”

The reason, he said, is that the current arbitrage on coal imports is enough to cover the demurrage for a vessel waiting to discharge for up to six months. Thus, traders are incentivised to load the coal today at low international coal prices and discharge in China in the new year when quotas are renewed.

Finally, we all have some hope. News that an experimental Covid-19 vaccine is more than 90% effective has offered a real chance the world can return to some sort of normality in the next year — something that just a week ago appeared a very distant prospect. Coming just a day after Joe Biden was confirmed as the US president-elect, it conjures up the opportunity that 2021 could be a year where the world’s economy moves on from recent trauma and shipping markets regain some stability. With nearly 51m Covid-19 cases recorded and 1.26m deaths, according to the latest data from Johns Hopkins University in the US, some glimmer of hope was desperately needed.

The impact on financial markets was upbeat immediately. Within minutes of the vaccine announcement, cruise and aviation share prices shot up. Oil followed, with tanker stocks lifted by the prospect of a rebound in fuel demand as travel and activity picks up. Such optimism is well placed, since the impact of the pandemic on trade has been only modestly tempered by the unprecedented monetary intervention of governments and central banks to stop the world’s economy imploding. Even with the massive direct financial support and indirect through bond purchases, trade has slammed on the brakes — and, with that, shipping demand has slowed. The impact is hard to overstate, and perhaps easy to pass over if you have been working in an isolated bubble at home for too long. The global economy is set to shrink by 4.4% this year, which will be the worst slump since the 1930s and twice as deep as the banking crisis of 2007/2008. As a specific example, the UK — as one of the worst-hit countries — is suffering its worst depression in 300 years.

According to the latest estimates from Clarksons Research, seaborne trade is now likely to be down 4% in 2020, with tonne miles 3% lower. Energy is bearing the brunt, with crude-oil trade down 6%, products down 7%, and coal down 9%. And, while grain is up 6% and iron ore has grown 3%, containers are down 3%. Those figures go a long way to explain why the global basket of shipping shares has fallen 30% so far this year, according to Kepler Cheuvreux. In contrast, the S&P 500 is up 12%.

No one is claiming the apparent breakthrough with the vaccine developed by Pfizer and German’s BioNTech can be an instant panacea. It first needs regulatory approval, and then scaling up of production. Delivery also will not be easy, as the vaccine requires two doses about two weeks apart kept at -70C until just before injecting. Yet epidemiologists worldwide appear in agreement that the method of how the new vaccine has been made should give encouragement that it and other treatments under trial will be successful in curbing the virus.

Meanwhile, Donald Trump’s loss of the US presidential election will herald an end to the damaging unpredictable and isolationist rhetoric on trade from the White House. As a long-standing multilateralist, president-elect Joe Biden and his team has pledged to bring a calmer and more sober approach. However, no one should be expecting them to be a pushover. Biden has been openly critical of China’s trade policies and President Xi Jinping. Biden has a track record as a conciliator and dealmaker in the past, even with Mitch McConnell, his next adversary, as likely Senate majority leader. This should give confidence that the US will look to enact policies that enhance trade over the next four years, rather than Trump’s ham-fisted attempts at damage.

It will be in the energy transition arena that Biden may make his deepest mark on shipping. The Trump era saw investor and corporate attitudes and policies vault ahead of Washington’s agenda. While the US pulled out of the Paris Agreement on climate change, companies accelerated their plans to cut carbon emissions. Biden’s commitment to rejoin the Paris accord and drive a new green-energy transition is ambitious, and will face significant domestic political hurdles. It will also encourage other countries to move faster. Shipping can only look to benefit from this week’s turn of events. Confidence is always good for business, and the faster the pandemic is behind us, the better. In the short term, shipping’s carbon economy of oil and coal may feel an uplift. But, in the longer term, it will be the new green-energy revolution of low or no-carbon shipping that feels the strongest winds on its back.

The broader markets ripped higher out of the gates in New York on Monday on positive news surrounding a Covid-19 vaccine, and tanker shares in the Oslo market surged higher in earlier trading. Oil prices climbed 4% on Monday as traders prepared to see the highest Dow Jones Industrial Average since February — before coronavirus began to ravage nations outside of China. Tanker owner Frontline saw its shares rise 5% in European trading and Euronav was up 4%.

The Dow raced to just shy of a record 30,000 in the first minutes of trading, and plenty of shipping names piled on heavy gains. Among the companies surging 10% or more in early trading were Scorpio Tankers, Frontline, Diamond S Shipping and Ardmore Shipping, all in the tanker sector. The Dow fell back a bit in late-afternoon trading to 29,600, up about 4.5%. Meanwhile shipping stocks continued to hang onto their gains.

In mainstream shipping, two product tanker owners led the way, with Scorpio Tankers and Ardmore Shipping both up about 16%. Crude tanker owners ran close behind, with Teekay Tankers and Frontline both adding about 12%. International Seaways climbed just over 10%. In the cruise sector, Carnival Corp surged a whopping 35%, while Royal Caribbean Cruises and Norwegian Cruise Line both added 27%. All would figure to be helped by increased oil demand if a vaccine comes quickly and global lockdowns are shortened. They were joined by Scorpio Bulkers, which, although in the dry trade, is transitioning to the wind turbine installation vessel sector — a trade that could be buoyed by the other major catalyst in the market this week: the apparent election of Democrat Joe Biden as US president.

A vaccine developed by Pfizer and partner BioNTech SE has proved 90% effective in protecting the first 94 subjects infected with Covid-19, according to freshly released results. The broader market surge will be a new test for shipping stocks, with 10 owners reporting results this week. It was a test they did not pass last week. US-listed shipping stocks failed to keep pace with the strongest week for shares since April in the days following the presidential election amid mounting evidence of a win by Biden. While the 30 listings under coverage of investment bank Jefferies did manage an average 2% gain on the week, this was well behind the 7.3% rise in the S&P 500 and 6.9% by the Russell 2000, according to lead shipping analyst Randy Giveans. The strongest sector performance came from trades generally expected to benefit most from a Biden presidency: containerships, with gains of 7%; and dry bulk, which rose 5%. With the outlook far less certain for tankers and the rest of the petroleum energy patch, the gains were more muted at 2%.

Owners reporting this week include DHT Holdings and Teekay Tankers in the crude sector, Atlas Corp in the boxship market, Safe Bulkers in the dry trade and major gas names GasLog, Teekay LNG Partners, Dynagas LNG Partners and Navigator Holdings. The Jefferies Shipping Index remains down nearly 43% on the year, with owners across operating sectors trading at steep discounts to net asset values. Analysts expect a Biden presidency could boost containerships and dry bulk as tariffs against China and others come under review, with improved prospects for free trade.

Green energy projects, such as offshore wind, are also expected to benefit. One of the top risers last week has one foot in dry bulk and another in the wind sector. Scorpio Bulkers gained nearly 10% on the week after seeing its shares depressed immediately following announcement of ramping up a disposal of more than 40 dry bulk units.

Danaos, a popular play on the boxship market, led all gainers at 13.6%. Bulker and containership owner Navios Maritime Partners climbed 10.3%. Gas players brought up the rear on the week, Navigator Holdings shedding 9.8%, GasLog 5%, Dynagas 4.6% and StealthGas 3.7%.

This story has been amended to reflected trading prices in New York on Monday afternoon.