While recovery of rates in the shipping segments was indicative of improvement in global trade environment, driven by some agreement on US-China trade issues, and the impact of IMO 2020 on tanker segments, the coronavirus outbreak has negatively affected many shipping sectors.
Commenting on these impacts, K. Ravichandran, Senior VP and Group Head, ICRA Ratings, mentioned that the tanker segment had experienced moderation from the highs witnessed in Q4 2019. However, the Baltic Dry Index and Baltic Capesize Index saw a decline with the capesize index as it turned negative for the first time due to the coronavirus outbreak.
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The decline was also driven by ships getting stranded at Chinese ports, as they were being diverted to other locations or were waiting in the sea. These ships are unable to deliver cargo to China. Overall, Covid-19 has significantly affected the shipping sector, while any recovery will be dependent on the demand recovery in the Chinese industrial segment.
In addition, the shutdown of industries in China has also impacted the Indian cargo movement, as India has significant trade links with China, as it imports and exports raw materials and finished goods. Moreover, as the movement of containers is affected by the cancellation of calls, container cargo movement at Indian ports could be disrupted.
Mr. Ravichandran added that other industries such as chemicals, dyes and pigments, pharmaceuticals, textiles, electronics, and auto, could also face short-term supply disruptions because of the Chinese production shutdown.
What is more, the reduction in economic activity could lead to a slowdown in bulk consumption, while it can also affect bulk imports like coal, crude and other commodities. As a result, ports that have significant exposure to the affected cargo categories, could see their cargo volumes being affected in the near term.
