A Titanic Struggle For Shipping | The Corona Correction | Refinitiv
Welcome to the Corona Correction Series in association with Refinitiv. I'm your host, Roger Hirst. Amrit Singh is a Refinitiv Senior Analyst covering the shipping sector, looking at both shipping routes and shipbuilding. All components of the transport sector, land, sea and air are clearly under extreme duress at the moment. If China is one of the major players in the supply and demand chains, then it's clear from the stunning declines in China's industrial production that the shipping sector has a very bleak short term outlook. The collapse in the oil price would normally produce some benefits, but because those declines really reflect the massive outage in global capacity, these benefits are too small to offset the drop in demand. I asked Amrit if these trends look likely to improve anytime soon. So in shipping, the key thing has been that there have been a number of blank sailings or cancellation of sailings. There has been ships which were diverted to different ports. There also has been ships in quarantine. Given that, you know, this has gone global, there will be some reduction in demand and trade growth. If one compares with what happened with SARS, I would think that we are still in the escalation phase of the Coronavirus. So I would think that the shipping sector would see volatility going into the second quarter and towards the end of the second quarter of this year when we would sort of see some stabilisation coming in, and then the seasonal trends are expected to follow. Amrit, like many other Refinitiv analysts, does not expect his sector to pick up meaningfully until the second half of the year. We've not yet reached peak fear in the US and Europe, and the long standing effects on the economy are not clear. The Baltic Freight Index looks like it will remain anchored to the bottom of the 30 year range. Danish shipping stock Maersk has already fallen nearly 50% from its highs, and as of Monday the 16th of March, it was still making new lows. With the current outlook for countrywide lockdowns now expected to last well beyond the two weeks that were initially expected, the supply and demand chains are unlikely to recover until the second quarter or well after that. Wuhan is still in lockdown two months after the outbreak began to spread uncontrollably. The collapse in the oil price will also lead to a hollowing out of demand across the manufacturing complex. Though eventually, the expected fiscal stimulus will arrive, and it will focus on infrastructure. But before that can occur, governments and central banks need to stabilize risk assets and businesses before it turns its attention to rebuilding. We'll see you tomorrow with another update.