Tanker prospects may stay weak after coronavirus: Bimco

Shipping association Bimco said tanker freight rates are unlikely to rebound sharply even if the coronavirus is contained by the end of this month, because what has already been lost will not be made up for in the second quarter of the year.

Bimco modelled two scenarios — one where the outbreak is contained by the end of February and Chinese activity returns to normal in early March, and one where economic activity reaches "normalisation" by April or May.

In the first scenario, Chinese crude imports will stay low through February and normalise in March and April. But tanker earnings are unlikely to rebound because lunar new year flight travel and the lost energy consumption will not be made up in the following months.

In the second scenario, crude imports will remain low throughout the first quarter and resume at a normal pace in the second quarter.

Even when Chinese demand recovers, higher fleet growth and higher fuel costs compared with last year will still weigh on the tanker market, the association said.

In the dry bulk market, the effect of the first scenario will likely remain "short lived" if industrial production picks up throughout March. The dry bulk market is seasonally weak during the lunar new year period. In the second scenario, the dry bulk market will remain depressed for the remainder of the first quarter because Chinese construction projects will remain slow until mid-March.

With slower shipping demand, and therefore lower bunker demand, bunker prices may come down and this could help to contain the decline in dry bulk earnings, Bimco said.

The coronavirus outbreak has shown how dependent shipping has come on the Chinese economy, Bimco said.

By Nicolas Kyriakoglou