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hipping is bound to witness a difficult market in the coming months, with most market delegates adopting a “wait-and-see” stance in every aspect of their business, which in itself could delay the market’s comeback. With things in the supply side of the equation not leaving much room for adjustments, it seems as though ship owners need to brace themselves for a “rocky” road ahead.

In its latest weekly report, shipbroker Allied Shipbroking said that “it has now been established that the Covid-19 pandemic has already left its mark, whether you see it from a socioeconomic aspect and everyday reality, or within the shipping industry and the way different business and operational activities are to be conducted from now on. Given also that we are already in the midst of a transition mode, from a short-term shock over to a longer-term macroeconomic “problem”, it is debatable as to what should be of higher concern (at this point at least)”.

According to Mr. Thomas Chasapis, Research Analyst with Allied, “both the continuous bearish signs and the general uncertainty have attracted most of the attention in global markets. However, I must point out that the lack of direction noticed in the market for a while now, as well as the concept of continuous postponements in the whole spectrum of decision-making within the industry, are the most worrying indicators from a short to medium-term perspective. The belief is that the current levels of disarray, alongside with the “wait and see” attitude, can further drive the recession pattern that has gained pace since the outbreak”.

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“Narrowing down the discussion to the dry bulk sector, one wonders as to how well the market can rebalance itself in the near term? In previous market views, we mentioned that the step back in global trade can reach a level of as high as 15% for this year, while 2021 will play a role of just covering these losses in hope of managing to reach on par with 2019 volumes for several of the main dry bulk commodities. Can the fleet growth adapt to this reality quickly? A favorite topic of late has been the comparison with what we witnessed during 2016. Even with the freight market being reminiscent of the difficulties faced 4 years ago, alongside the hefty similar correction in asset price levels that is currently taking shape, the two time frames are completely different on a fundamentals level. In 2016, the problem was rather “known”, the exaggeration in newbuilding activity of previous years, led inevitably to a freight rate collapse, given the excessive tonnage capacity that was becoming available compared to what was needed at the time. In other words, it was “an accident waiting to happen” on the supply side. As a result, the solution was derived solely from the supply side (with a strong recycling market and hefty cancellations and slippages on the newbuilding front) helping shift supply-demand dynamics back into balance. However, this was materialized in a market environment that was still looking fairly positive on the side of trade. In previous years, we had the “luxury” to “complain” that the growth rate was relatively poor”, Chasapis said.

He adds that “current estimates for trade have collapsed to the negative side. So, how do we adapt to this? Despite the modest Orderbook-to-overaged fleet ratio, the flexibility in terms of fleet development is very limited, in order to see an actual impact on the supply-demand dynamics. Moreover, given the uninspiring conditions the ship recycling market is currently under, as well as the firm attitude that a strong upward potential may be upon us at some point in the near term, it would be rather surprising to see a significant tonnage capacity pushed aggressively for early retirement. The market seems stuck for the time being, with many problems possibly yet to be fully unraveled. Notwithstanding this, even with the general macroeconomic indicators portraying a rather gloomy state, no matter what the given market conditions you will always have opportunities and positive shocks present themselves. To fully capture these opportunities, it will be but a matter of well-positioning, quick adaptation and correct calculations of the risks involved”, Allied’s analyst concluded.