Capesize bulker rates have fallen considerably in the past three weeks but should pick up next year on the backs of a robust Chinese economy and high iron-ore prices, experts say. The weighted time charter equivalent (TCE) average for capesizes reached $34,896 per day three weeks ago but have fallen by more than 50% before reaching $18,606 per day on Tuesday, according to Baltic Exchange assessments.

The drastic drop happened as a result of a “steep correction” amid slower cargo flow and high vessel supply in the Atlantic Basin, Breakwave Advisors said in a bi-weekly report. Capesize rates should head back up, however, at the start of 2020 if Brazilian iron-ore giant meets its expectation to fill a 9 MMT gap between sales and production, the latter reaching 11 MMT. “Such a discrepancy is highly unusual, and it represents the highest deviation for any quarter since at least 2011,” Breakwave Advisors said.

But Vale is also optimistic about raising production by about 40 MMT, boosting tonne-mile demand on Capes. Beyond that, iron-ore prices should stay above $100 per tonne and thus incentivise miners worldwide to ship as much of the commodity as possible, Breakwave Advisors said.

“With less than three months till year-end, the prospects for 2021 start to look promising,” it said. “China’s economy seems quite strong while stimulus continues to make its way through the system.” The country’s demand for coal remains “solid” amid low inventories and other countries might start reopening their economies might give an added boost to capesize rates.

“Freight futures remain skeptical of such scenarios, trading at significant discounts to current spot levels, especially for capesizes,” it said. “We view such price fundamentals disconnect as an opportunity with the risk reward tilted towards long positions.”

The freight-forward agreement (FFA) for capesizes stands at $11,178 per day for January and $7,763 per day for February, according to Baltic Exchange data. Those FFA estimates showed up as global steel production for August that excludes China came in at 63.8 MMT, 7% lower than a year earlier, Braemar ACM said in its weekly report on dry bulk shipping.

At least 13 countries are offering some sort of state aid to the shipping industry, often with few or no strings attached. Cruise and ferry operators have been the biggest recipients of aid packages, the International Transport Forum said in its Covid-19 Transport Brief report.

Of the 17 support packages it identified, nine were related to passenger shipping. Over €8.3bn ($9.8bn) in state support to shipping companies was identified ranging from the reduction of port dues to tax reductions and liquidity support. But the report warned that the support was being granted on the basis of the pandemic and had few conditions applied to it. “Aid schemes usually include safeguards to avoid that firms will be overcompensated,” it said. “Beyond that, however, governments rarely impose conditions designed to achieve public policy objectives other than the immediate goal of mitigating economic losses for the shipping sector due to Covid-19.”

The “missing link” between coronavirus-related subsidies and broader policy goals was part of a larger phenomenon, it added. “State aid for the maritime sector in general is subject to limited conditions only. Like aviation, the large majority of support measures for shipping include no conditions on economic, social or environmental objectives. Most countries do not even report on the impacts of their maritime state aid scheme.”

Container shipping is called out for what the ITF refers to as “shadow subsidies”, which are the result of constraints on competition. “Confronted with reduction in demand for containerised trade, the main container carriers jointly withdrew ship capacity by cancelling scheduled voyages,” it  said. “Between February and June 2020, approximately 20%-30% of the container ship capacity on the main trade lanes was idled. The artificially created scarcity pushed up the price to ship a container. Freight rates rose particularly strongly on the transpacific trade lane, but many other routes also saw increases despite the drop in containerised trade volumes.” The rise in rates drove carrier profitability to its highest levels since 2010, but could be seen as a subsidy paid for by consumers, the report said. “By managing to push up the price above its level under competitive conditions, carriers have in effect reduced consumer welfare. This shadow subsidy comes on top of state support in some cases: at least four of the main container carriers have also benefited from the Covid-19 aid.”

State aid for the maritime sector during the pandemic mitigated the economic impact of the crisis on the shipping sector but also raised questions regarding the stringency of government policies. The forum recommended increased monitoring of competition in the shipping industry. “The recent joint efforts of container lines to eliminate capacity through a coordinated strategy of blank sailings raises many questions of concern to competition authorities and merits investigation,” it said. It also called for a “greening” of competition policy. “Maritime competition policy has often been narrowly focused on the price for customers. It should also take account of market power vis-à-vis suppliers and a wider set of indicators related to service quality, connectivity and environmental performance,” it said.

The U.S. Department of Agriculture has projected a banner performance over the next year for domestic corn and soybean exports, and so far, sales have been living up to the hype. Those bookings have translated to a record shipment pace for soybeans, but corn has yet to turn out the drastically larger export volumes. The 2020-21 marketing year for U.S. corn and soybeans began on Sept. 1, but buyers had already booked a record number of cargoes prior to that date. Ever since, sales have continued at a very robust pace, especially for soybeans.

As of Oct. 15, the United States had sold 45.35 million tonnes of soybeans for export in 2020-21, some 76% of USDA’s full-year target. That is the second-largest share within the last decade behind 2013 (81%) when considering sales and expectations as of the same date. But final 2013-14 soy exports were 20% larger than what was expected at this point in the marketing year. Unless 2020-21 exports are gravely underestimated, then this year’s sales pace has indeed been unusually strong.

As of Oct. 15, some 55% of total U.S. soybean commitments were to China. For the date, that is more than in the years just prior to the trade war when the average was around 50%. But it is not as high as the 2011-2014 era when it was around 65%.

U.S. corn sales totaled 28.3 million tonnes as of Oct. 15, some 48% of USDA’s target. The recent five-year average for the date is 31%. Only 2011 and 2013 had a larger share by the same date given expectations at the time. Some 37% of those corn purchases are destined for China, a previously unheard-of portion. The roughly 20% share by this date in 2013 is the closest comparison.

USDA predicts U.S. corn exports in 2020-21 to reach 2.325 billion bushels (59.1 million tonnes), up 31% from last year’s slump. Soybean exports are forecast at 2.2 billion bushels (59.9 million tonnes), also up 31% on the year largely due to China’s return to the U.S. market. Realizing actual shipments is important if the export sales are to have complete legitimacy with traders. For soybeans, that transition has not yet been disappointing. According to weekly export inspection data, a proxy for shipments, volumes for soybeans have been larger than in any other year in every week so far in the 2020-21 marketing year. That streak may appear to have been broken in the latest week through Oct. 15, but USDA usually revises the previous week’s number in each report. Based on the recent upward revisions that have been observed, the streak probably lives on.

Corn export inspections have been consistent and a bit above average through mid-month, but domestic corn inventory in recent months has not been as plentiful as in prior years. Harvest is still ongoing and U.S. corn exports typically pick up in the second half of the marketing year, so the absence of eye-popping corn shipments is not yet worrisome.

USDA’s latest export sales report that covers the week ended Oct. 15 suggests that a third of the U.S. soybeans China has booked for 2020-21 has already been shipped. That is a similar rate as the same date in 2015 but behind those of 2016 and 2017, which were both around a record 38%. The rate of total shipped corn to sold corn is predictably low through Oct. 15 at 19%. That is close to 2013’s rate and the lowest in at least a decade. The recent five-year average for the date is 32%.

The opinions expressed here are those of the author, a market analyst for Reuters.

China’s government is discussing permits for millions of tonnes of additional corn imports over the next year, three industry sources told Reuters, amid a surge in animal feed demand and after storms and drought damage tightened domestic supplies.

A round of new import orders from China would make it the world’s top importer of corn for the first time and likely drive up global prices of corn and other grains. That would amplify food inflation caused by disruptions to global supply chains due to the coronavirus pandemic. Food security has emerged as a global theme during the pandemic, exacerbated in China by a disease that has devastated the hog herd over the past two years and left pork supply tight. China is the world’s largest pork consumer and second-largest corn consumer.

Beijing previously held massive reserves but has almost emptied them at auctions, leading to grain buyers buying alternatives such as rice and wheat, as well as boosting corn imports. Domestic corn prices hit record highs this month on shortages after a typhoon, a drought and a pest hit crops. Two China-based sources and a Singapore-based trader with knowledge of import discussions said Beijing was considering issuing more lower-tariff quotas for buyers to ease the domestic shortage. These quotas encourage imports by exempting shipments from most of the 65% tariffs that would otherwise be levied by Chinese customs.

“(The government) will review the market supply-demand situation, and might issue more quotas later that could go into the state reserves,” said one of the sources familiar with the government plan. The people with knowledge of the deals declined to be identified because they are not authorised to speak to media.

China’s state planner, the National Development and Reform Commission (NDRC), which sets import quotas, did not immediately respond to faxes seeking comment on future additional imports. COFCO, China’s top grain trader, and state stockpiler Sinograin did not respond to faxed requests for comment. China’s emergence as the top importer as it moves away from a long-standing policy to encourage domestic self-sufficiency in corn will change global grain trade and encourage corn growers worldwide to plant more to meet Chinese demand.

After China began importing soy – another crop used for animal feed – in the 1990s it rapidly became the top buyer. Farmers in Argentina, Brazil and the United States responded by switching to soy crops. “China over the next decade may change the landscape of the world corn balance sheet by becoming a major import player,” said Terry Reilly, senior analyst at Chicago brokerage Futures International.

Beijing routinely issues 7.2 million tonnes in annual low-tariff quotas for corn imports, and meets most of its 280 million tonnes of annual demand through domestic crops. China has never before used its full annual quota. Analysts have estimated it may need more than four times that quota, or 30 million tonnes, in the 2020-2021 October to September crop year.

The U.S. Department of Agriculture attache in Beijing said in a report issued earlier this month there was talk in China that state-owned companies were drafting a report to the NDRC recommending allocating an additional 20 million tonnes in lower-tariff quotas. Even before further additional quotas are awarded, Chinese importers have ordered more than double the annual allowance. They have booked around 12 million tonnes of corn imports from the United States and around 5 million tonnes from elsewhere including Ukraine for the crop year, according to a Singapore-based international trading source and two other people with knowledge of the deals. That would put China just behind Mexico, the world’s largest importer. Mexico is forecast to import 18.3 million tonnes, according to United States Department of Agriculture (USDA) estimates.

Of the corn sold to China, 3.7 million tonnes have been exported, according to USDA. China could still cancel corn orders that have not shipped. Beijing has already authorised a 5 million tonne special low-tariff quota to top grains trader COFCO, which was mainly used to book U.S. supplies, according to one of the sources familiar with the details of the trades. Under the terms of that extra allowance, COFCO would import the corn at the lower tariff rate, but its profits will be capped at 30 yuan ($4.49) per tonne and any additional windfall will go to the state, the person said. “I think this is done out of considerations from two perspectives,” the person said. “One is we do need corn. Secondly, we have this deal with the United States that we need to fulfil.”

China committed to buying billions of dollars of additional agricultural imports from the United States under the terms of a deal signed in January to end a trade war between the two countries. It is short of the $36.5 billion target for 2020, but has increased imports this year as it seeks to address shortages of corn, pork and soy. A report from the U.S. Trade representative’s office on Friday said China had purchased $23.6 billion in agricultural products so far this year.

CMA CGM has spent the past 24 hours trying to reassure clients that operations are carrying on and the worst effects from its ransomware attack over the past three days are over.

The French carrier became the latest big name in container shipping to reveal it had been hacked on Monday, following other leading liners including Maersk, MSC and Cosco in recent years.

From its Marseille headquarters the company issued a statement to Splash at 7pm yesterday evening stating that the malware was rapidly isolated and all necessary protection measures implemented.

All communications to and from the group are secure, including emails, transmitted files and electronic data interfaces (EDI), the company claimed, adding: “Maritime and port operations are functioning as per usual. The booking functionalities remain up and running. Alternative solutions to the e-business site are available in order to support business continuity for CMA CGM Group’s customers.”

With carriers being the victims of tailored IT attacks of late, Itai Sela, CEO and president of Israeli maritime cyber security firm Naval Dome, told Splash today: “It is imperative that they ensure their IT systems are not on the same networks as their ships OT systems. If there is no segregation or protection and OT systems are hacked then world trade could be further disrupted.”

Chester Wisniewski, principal research scientist at British IT firm Sophos, commented: “Controlling, updating, and securing computers is a challenge for any global company, but especially so for shipping and logistics. Security costs increase dramatically when attempting to create uniformity across such diverse environments.”

Wisniewski added: “Many companies look at the dollars being spent on security and think it is a solved problem. To effectively defend against big game ransomware gangs you must have humans actively threat hunting and manning your side of the chess board.”

CMA CGM is not the only high profile name in intentional shipping to suffer an IT outage this week. The website of the International Maritime Organization (IMO) is down today, there UN body citing “technical issues” in an update on social media.

Shipowners will soon have a far better idea of their newbuild’s carbon footprint at the design stage thanks to a pioneering project from class society ABS and Korean shipbuilding major, Hyundai Heavy Industries (HHI). The pair have completed a joint development project (JDP) to build multi-physics simulations capable of analysing the carbon-footprint of vessels in the design stage.

The simulations allow in-depth evaluation of the impact of a range of energy saving options, offering a detailed preview of a vessel’s performance before key investment decisions are made.

“The modelling and simulation techniques that ABS and HHI are pioneering allow owners, designers and shipyards unprecedented insight into the impact of multiple decarbonisation strategies on a vessel’s performance at the earliest possible stage. This approach unlocks benefits in operational efficiency, safety and investment decision making,” said Patrick Ryan, a senior vice president at ABS.

Jaeeul Kim, HHI’s chief technology officer, commented: “This joint project will give us more options to review alternative technologies at an early design stage.”

The simulations connect to a broad range of inputs from many model types such as computational fluid dynamics models, wave resistance models, and data-validated engine performance models. A multi-physics model unlocks the ability to evaluate the performance impact from the design options and the operational measures.

Examples of technologies that can be evaluated in the modelling process include air lubrication systems, energy-saving devices, voyage speed profiles, and engine fuel options. The simulations can also reflect the impact of inputs from a range of data sources and optimisation tools allowing comprehensive analysis of the trade-off between different vessel configurations.

“Developing a detailed understanding of the impact of your chosen decarbonisation pathway on a vessel during the concept design phase is a major step forward in helping owners navigate the complexity of building a fleet capable of meeting IMO sustainability objectives,” said Georgios Plevrakis, ABS’s director of global sustainability.

Shipowners must prepare for compliance with IMO 2021 and look beyond it to the demands of an increasingly digitalised, smarter shipping industry, writes Tore Morten Olsen from Marlink.

The shipping industry is on a voyage to a new horizon, this time it is digital. We are already in the era of the connected ship, where we are witnessing the digitalisation of the asset, with increased levels of remote monitoring, more data collection and analysis points, with the digitalisation of operational technology (OT). The next phase will be digitalised ships, where crew-operated vessels remain the norm but with increased remote assistance using industrial IoT and real time analytics.

The ultimate phase is smart ships, where the digital transformation of the business actually occurs with vessels potentially operated remotely with crew assistance, with ships integrated into a wider digital transformation of the company and its activities within the chains of logistics. But just as the journey of a thousand miles starts with a first step, this voyage needs to understand the main stumbling block to progress. It’s not traditional resistance to change, it’s the need to secure the current and next generation of assets. Put simply, without adequate cyber security this voyage cannot make progress.

What shipowners need to understand more than anything that the digital journey means that a vessel is a single ecosystem, encompassing information technology (IT) and OT and that they need a partner who can help them address both. Traditional cyber security focuses on the IT system and its normally visible components with well-established protective tools. In order to meet the baseline requirements of IMO 2021 amendments to the ISM Code as well as the much more demanding voluntary systems such as SIRE and TMSA, owners need to document protection of OT assets which means proactive threat detection is necessary too.

An analysis of the data gathered by Marlink from a sample of shipowners illustrates the problem. On average the vessel IT network (the ship’s collection of admin PCs and back of bridge support systems) accounts for 22% of cyber threats. The OT network of connected machinery and devices accounts for 10%. The crew LAN remains the biggest area of threat at 68%. This suggests that crew do not in the main have enough awareness around cyber hygiene and procedures for safe use of their handhelds and mobile devices. The situation many crew find themselves in since the start of the pandemic may explain this to some extent but the responsibility lies with owners to provide them with the necessary training.

The IT/OT numbers are equally troubling because they suggest that threats are being increasingly recorded against both PCs and unattended systems and components by actors seeking wider network access. Experts have long warned that the Internet of Things poses a serious threat to security without proper protection measures and the impact of a successful attack could be fatal.

On the bridge – and in officers’ cabins – it suggests that hackers and attackers could be exploiting unpatched software, out of date operating systems and poor hygiene, from default passwords to simple breaches of procedure. Until now these threats had been a fact of life but not a show stopper, assuming that cyber protection software did its job. From January 2021 all that changes when amendments to the International Safety Management Code come into force, requiring owners demonstrate that they have a process of cyber risk management in place. Compliance with voluntary cyber security guidelines until now has tended to succeed or fail on the basis of the human element, relying on an intention to do the right thing. In the future, the vessel will have to demonstrate that it has a policy and procedures in place for crew awareness, a means of ensuring that all systems are up to date and means of proving both.

Given the increasing complexity of onboard systems and their contribution to efficiency, fuel saving and voyage management it also suggests that cyber protection is in itself not enough; owners will need to demonstrate that they have a plan in place for proactive detection of cyber risks. This also has commercial implications. Updates and guidance from industry associations and statutory bodies like class will influence the behaviour of the ship operators moving forward. Owners that cannot demonstrate that the data they are handling on behalf of their customers has the required level of security may find it harder to compete for cargoes from blue chip charterers. These same customers may even assume that an operator should go well beyond the IMO 2021 baseline and have policy and procedures in place more akin to the TMSA or SIRE vetting standards used in the tanker industry.

Owners undergoing inspections during the first months of 2021 will find out whether they have done enough to meet the standards expected of the port state. They will find themselves required to provide compelling and immediate evidence that the ship is in compliance. And it seems likely that as the digital voyage continues, the requirements will continue to tighten, both from a regulatory or a commercial perspective – though customer demand is likely to be the first mover. Seen from that perspective, the stakes have rarely been higher.

Maritime shipping needs an additional $6trn in investment over the next 50 years to meet decarbonisation goals, the International Energy Agency says in its report Energy Technology Perspectives 2020. The study assessed available technologies to meet zero-emission goals across the energy sectors, with a $21trn call on additional investment for global transport infrastructure encompassing shipping, aviation and freight.

Biofuels and operational energy efficiencies were expected to emerge within five years as the main, shorter-term contributors to emissions reductions for the global shipping sector. Hydrocarbon and ammonia-based technologies were nearly a decade away from commercial viability. From 2025 biofuel oils would be blended with very low sulphur fuel oil in increasing amounts to displace conventional residual fuel, according to the report.

“Biofuels are the most promising fuel option for shipping in the short to medium term because they can be blended at gradually higher shares as a drop-in fuel into heavy fuel oil or diesel, which avoids the need for new vessels and fuel systems,” the report says. “Biofuels could play a smaller role depending on the pace of progress of hydrogen and ammonia technologies, and on the speed of the scale up of second and third-generation biofuels production capacity. “However, the majority of vessels sold today run almost exclusively run on fossil fuels, and they will still be operating in 2050 unless regulations encouraging or mandating early retirements are put in place.”

In the medium term, blending with biofuels is forecast to increase from today’s “negligible” levels to reach 25m tonnes of oil equivalent by 2040, rising to 50m tonnes in 2060, accounting for one fifth of total energy use in shipping. Biofuels production is estimated to scale up to 5m barrels per day over the next decade, from levels of 2m bpd in 2019, and used as an alternative to fossil fuels first for road vehicles and then for the maritime and aviation sectors.

“In the longer term, biomass-to-liquids (BTL) — an alternative technological pathway to making diesel substitutes — makes an increasing contribution in shipping energy use as BTL moves to large-scale production from about 2050, while ammonia and hydrogen come increasingly to the fore,” the IEA says. “As ships using fossil fuels blended with some biofuel reach the end of their life from 2050 onwards, they are replaced by new vessels equipped with propulsion technologies compatible with ammonia and hydrogen, two technologies that become steadily more competitive after their first use on short and medium-distance trips from 2025, gradually replacing vessels using oil and, later, LNG, as they retire. Together they are used on over 60% of new vessels sold after 2060.”

Hydrogen use is forecast to account for 16% of global maritime bunker demand by 2070 and oil and gas for about one sixth of total shipping fuels. Biofuels are the cheapest option for current decarbonisation measures according to the IEA, even though few companies are pursuing the technology. So-called ‘scaling up’ capacity is limited only by availability, with the technology favoured by the aviation sector. The IEA’s roadmap for meeting international climate and energy goals, which it calls its “Sustainable Development Scenario”, assumes policies are implemented that will result in net zero emissions by 2070. The IEA assumptions for its Sustainable Development Scenario are based on shipping emissions that are 70% lower than today’s levels by 2070 but yet to reach net zero emissions. Shipping emission are forecast to peak “in the early 2020s” to the same level as in 2019, at 710m tonnes, the report said.

If decarbonisation policies remain unchanged, shipping emissions will rise by 50% from 2019 levels, to 1.1bn tonnes by 2050, stabilising through to 2070, according to the IEA. “In maritime shipping, biofuels, ammonia and hydrogen meet more than 80% of fuel needs in 2070, using around 13% of the world’s hydrogen production,” the report says. “Energy efficiency also makes a significant contribution. These changes require further tightening of efficiency targets and low-carbon fuel standards to close the price gap with fossil fuels and de-risk investment.”

The IEA highlights the dilemma facing global shipping as regulations to achieve lower greenhouse gas emissions with costly fuel alternatives clashed with the longer lifespan of vessels, which it said inhibited the uptake of new technologies. Curbing fuel consumption by using operational energy efficiency technologies, including slow steaming, were obvious potentials the report said. Emissions-free ammonia and hydrogen fuels “look likely to be particularly important for long-range transoceanic travel”, according to the report. It was technically feasible for short-distance ships to use less energy-dense fuels and switch to battery electric power. Technology to switch to fuels such as ammonia and hydrogen was not yet commercially available, the IEA says. Two engine manufacturers expect to have ammonia-fuelled internal combustion engines ready by 2023.

BP and the International Energy Agency have envisaged biofuel, hydrogen and ammonia will play important roles in the shipping industry’s decarbonisation efforts in the decades to come. In their long-term energy studies unveiled over the past week, the two prominent organisations both suggested oil-based fuels would need to have a small share in the bunker market to combat climate change.

In BP’s Net Zero scenario, where global carbon emissions are assumed to fall by over 95% by 2050, the major expects global bunker demand to amount to seven exajoules by mid-century. Of them, hydrogen and ammonia would account for three exajoules, biofuels for two exajoules, natural gas and oil each for one exajoule. In comparison, the world’s bunker demand reached 11 exajoules in 2018 — all of which were oil-based. “Fuel mix in the shipping sector is able to diversify into hydrogen (either as ammonia or in liquid form) and LNG, as well as biofuels,” according to BP’s annual energy outlook. Non-fossil fuels would account for 85% of marine transport bunker consumption by 2050, with more than half of fuel mix from hydrogen and ammonia, the energy major said.

In its Energy Technology Perspectives 2020 report, the IEA also believes low-carbon fuels need to replace oil-based ones for a global net-zero CO2 emissions target to be met by around 2070. The Paris-based energy watchdog predicts biofuels, ammonia and hydrogen would meet more than 80% of global marine fuel demand 50 years from now in this Sustainable Development Scenario. “Biofuels and energy efficiency are the main contributors to international shipping emission reductions…in the short term, while hydrogen and ammonia contribute more in the long term,” the IEA said.

Biofuel consumption as marine fuel would jump from negligible levels today to more than 25m tonnes of oil equivalent in 2040 before a further hike to almost 50m tonnes in 2060, equivalent to more than one-fifth of total bunker demand, according to the IEA. “Biofuels are the most promising fuel option for shipping in the short to medium term because they can be blended at gradually higher shares as a drop-in fuel into heavy fuel oil or diesel, which avoids the need for new vessels and fuel systems,” the report said. Also, the IEA expects ammonia use for shipping to reach 130m tonnes and hydrogen to 12m tonnes in 2070. “The role of hydrogen as a fuel for large vessels is more limited, due to the high costs of hydrogen storage and its lower energy density,” the IEA said.

It estimates the shipping industry needs additionally $6trn investments through to 2070 for a shift to low-carbon fuels and energy efficiency measures. This will help reduce shipping emissions by 70% by 2070 from today’s levels.

Despite a drop during the coronavirus pandemic, CO2 emissions from shipping will rise again and peak at 710m tonnes in early 2020s, the IEA predicts. This would be about the same level as 2019. The IEA envisages that CO2 emissions would fall to 120m tonnes in 2070, a trajectory broadly in line with the International Maritime Organization’s target to half emissions by mid-century. “Maritime shipping does not reach zero emissions until after 2070 reflecting the difficulty and high cost of abating emissions,” the IEA said.

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.