Drewry: charter rates won’t recover until end of 2021
Charter rates for multipurpose ships are not expected to recover back to pre-Covid-19 levels until the end of 2021, with the recovery anticipated to take even longer if the global pandemic is not contained, says Drewry.
In its base-case scenario, the shipping analyst expects the virus to be contained globally over the next few months, with a second wave being avoided. This would allow both the global economy and dry cargo demand to rebound in 2021.
This year the global economy will record a sharp recession over the year with the latest assumptions for global GDP at -5% when compared to 2019. The decline is followed by a V-shaped economic in 2021 puts global GDP up 6.5%, with weakening but positive growth for the longer term.
Drewry expects the V-shaped economic recovery to produce a similar pattern for cargo demand. “Dry cargo demand as a whole is expected to decrease by some 4.5% compared to 2019 as container port handling and steel production, and therefore associated imports and exports, collapse over 2020 due to the twin effects of Covid-19 and lower crude oil prices. Thereafter the return to positive growth is swift as countries come out of lockdown, manufacturing activity resumes and business sentiment improves”, the analyst firm states.
There are caveats to this outlook which could lead to worsening of the situation, like further recessions for the global economy and longer-term damage to demand, causing a longer downturn in the freight market.
“Our base case is still the most likely but there is growing concern that a second Covid-19 wave could arise, giving our other scenarios increasing probability”, Drewry concludes.
According to Toepfer’s Multipurpose Shipping Index for July, the charter rates for multipurpose vessels seem to have bottomed out following a sharp decline since February. The index shows an average day rate of USD 6,391 per day for a 12,500 dwt geared vessel.
Charter rates for multipurpose vessels have dropped significantly since the coronavirus broke out. In February, the average charter rates amounted to 7,415 dollars, meaning rates have dropped by 14% since then.