Changing Tack

From floating storage to experimental fuels, the global shipping markets look for new opportunities under drastically changed economic conditions. S&P Global Platts Shipping looks at what’s in store for Q4 2020 and beyond.

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Shipping Markets Respond to an Altered World

Expected seasonal upturns in freight markets should always be treated with caution. The fourth quarter of the year is often cited as a traditionally strong period for spot freight markets, with good reason. Tanker and LNG markets can benefit from increased demand for oil, gas and refined products due to the onset of winter in the northern hemisphere. Similarly, dry bulk markets can expect more thermal coal demand alongside increases in US grain export volumes following the onset of corn and soybean harvesting from September. And container freight typically sees an upturn in volumes of westbound finished goods in advance of the winter holiday season.

However, as market participants know, there are other factors that influence freight levels, which make predictions far from straightforward. As this report indicates, dirty and clean tanker owners are looking to floating storage as their potential savior given the ongoing oversupply of crude, products and tonnage. Chemical tanker owners, by contrast, appear to be cautiously optimistic around the resilience of demand for petrochemicals. Similarly, after a torrid time so far in 2020, LNG vessel owners are hopeful of a gradual recovery in the coming months.

By contrast, container freight rates have surged recently and our infographic tells the story of industry consolidation of the last few years that has been the key to the market’s strength. Despite ongoing overcapacity, carrier discipline has succeeded in supporting freight rates in the face of the challenges posed by a global pandemic.

Meanwhile, the future of marine fuels continues to be debated. In the short term, the use of scrubbers by a sizeable portion of the global fleet which continues to grow, means that the use of HSFO endures alongside VLSFO for now. In the years to come LNG, methanol, hydrogen and ammonia are all in the mix as potential alternatives marine fuels. As ever, S&P Global Platts will continue to monitor and inform around these volatile markets as events unfold.

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Read more on the impacts of COVID-19 on the shipping market in our special report, Winds of Change