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Container shipping sector to remain on same course in 2020: Drewry

DREWRY expects container shipping to continue much the same in 2020 as it did last year with ocean liners again remaining price-takers, though staying profitable if they keep costs in check

31 January 2020 - 19:00
DREWRY expects container shipping to continue much the same in 2020 as it did last year with ocean liners again remaining price-takers, though staying profitable if they keep costs in check.

The port sector celebrated the reduction in the global trade tension. Index gained four per cent in the last quarter of 2019. Now with the US and China finalising the phase one of trade deal and phase two moving towards the end of 2020 (post the US presidential election), 'we believe other policy decisions and geopolitical agendas to take the centre stage, shaping the direction of the global trade,' said Drewry.



Initial chaos over scrubbers and unavailability of low sulphur bunker at many ports across the globe will 'push up earnings for dry carriers in the initial months of 2020,' it said.



Two per cent of the dry bulk fleet is now at yards to install scrubbers, and we expect this trend to continue in 2020 as well, squeezing effective supply. 'Meanwhile, vessels without scrubbers will sail on low sulphur fuel oil (LSFO) which, we expect, will be sold at a premium of US$200-300 per tonne. These vessels will slow-steam to save on high bunker costs, a phenomenon which will further reduce vessel supply.



'Spot LNG shipping rates have continued to drop on account of softening Asian liquefied natural gas (LNG) demand and higher inventory levels in Asia. China's coal to gas switch momentum has come down due to the slowing economy,' Drewry continued.



'The outlook for global seaborne LPG volumes is positive, with LPG charter rates expected to remain firm in early 2020 as heavy fixing activity out of the US Gulf - in light of a strong US-Asia propane price arbitrage in December 2019 - has kept vessel availability low.



'In December 2019, VLGC earnings were US$1.8 million per month - three times from US$606,000 per month in December 2018. High LPG demand on US-Asia trade and limited vessel availability might further drive earnings in 2020.



'Burgeoning growth in crude production in the US, Brazil and Norway is likely to result in deeper production cuts by OPEC+ in 2020, which in turn will force Asian buyers to import crude from farther afield.



'We expect refined product trade to benefit from the demand for IMO-compliant fuel as only 10 per cent of the global active merchant fleet are fitted with scrubbers. We expect the results of product companies in 4Q19 to positively benefit from improving product tanker prospects,' added Drewry.


WORLD SHIPPING
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