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Shipping’s Recovery is Tied to the Pandemic

A potential rebound in trade and freight rates is hinging on a successful dealing with the pandemic, which, as of today, is rather elusive. In its latest weekly report, shipbroker Allied Shipbroking said that “reaching the end of the summer period and entering the final stretch of 2020, it is clear that the year has undoubtedly been “interesting” so far, with very distinctive black swan events taking place and shaking the global economy as a whole and in turn shipping markets. However, what can we expect in the final months? Will global trade rebound after its pandemic pause? Should we expect more geopolitical tensions? Will a recession take full hold of the global economy?”

Source: Allied Shipbrokers

According to Allied’s Mr. Yiannis Vamvakas, “these are but a few of the questions which are intensifying uncertainty and clout any investment decisions right now. A second “tidal wave” of the pandemic spread has not been ruled out by any means and according to the latest figures, is now looking like the most likely scenario. The daily new cases as of late have increased to numbers well above 200,000 per day (closing in on 300,000), sounding alarm bells as to the upcoming autumn season. This will definitely have important consequences to the global economy, with the OECD having predicted that under such a case the global economy’s contraction could reach the 7.5% for the year (compared to the 6% of the initial estimate). However, as this number illustrates, the impact will not be the same as it was in the beginning of the pandemic. The reason is that countries are now much better prepared, companies have already taken required measures and lockdowns are not expected to be so widely adopted or severe as they were during the February-May period”, he noted.

Vamvakas added that “on the trade front, the slight recovery that has been noted during the last couple of months could be turned on its head if we see any escalation in the pandemic. Given that trade is highly linked to GDP growth, it is hard to be optimistic for the year, but it is important that any recovery starts from this year in order to see a faster return back to preCOVID19 levels, even if a V-shaped trade rebound scenario for 2021 now looking ever more like a far away dream. As to the scenario of deep and far reaching global recession, this is now looking to a dead certainty for 2020, with almost all key economies expecting their GDP to fall by record levels. However, the pace of recovery and the total period that will be required for economies to stand back on their feet is the real question. There are positive signs here and there, with the latest US data showing that a recovery of sorts has started to take shape as business activity returned to its early 2019 figures, while home sales rose for a 2nd month in a row”.

Source: Allied Shipbrokers

“In contrast though, numbers in the EU are not so optimistic just yet. The PMI figures for key European economies such as France and Germany fell short of expectations, depicting a slowing momentum in the recovery. In China, mixed signals are being seen, as positive industrial production and fixed asset investment figures are countered by a poor consumer spending rate. Chinese spending on goods and services during the April-June period was approximately $530 billion, compared to $606 billion in the second quarter of 2019. It seems that uncertainty will continue to be the key theme for the rest of the year, despite the gradual improvement noted in the global economy and trade. The current recovery is so fragile that a second wave of lockdowns can tear it apart in but a few weeks. However, the situation now is more optimistic compared to a few months ago, leaving hope for a better end to the year. Shipping markets, especially that of the dry bulkers, have been relatively resilient so far and are expected to remain so in the upcoming months, even if we end up encountering some deep temporary slides”, Allied’s analyst concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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