" I am worried that about the viability of future solutions for the shipping industry that may be very costly. But not due the costs themselves, but due to the lack of passing on extra costs down the supply chain – to the end-consumer or industry. " Peter Sand
Question: Your official title is Chief Shipping Analyst with BIMCO based in Copenhagen, DENMARK. Our firm is a member of BIMCO for several years now and thankful for membership benefits associated with it. For the benefit of the readership, please tell us more about BIMCO, its objectives and services provided to its members and the industry, and where your role as shipping analyst fits in.
BIMCO /Peter Sand (PS): Thanks for being a member of BIMCO. It’s a pleasure to serve you, and to provide expert knowledge and practical advice to safeguard and add value to your business. Thanks also for being amongst our 1,900+ members in more than 120 countries that have chosen BIMCO as their trusted partner to provide leadership to the global shipping industry.
BIMCO has four core service areas in which we support our members:
BIMCO’s world leading standard contracts and clauses for the shipping industry and our contract editing tool SmartCon.
BIMCO takes an active role on behalf of shipowners during discussions and decisions with global and regional regulators.
We deal with 10,000 member queries every year on many issues and see over three million page views on our website each year.
Finally, BIMCO Training activities include face-to-face courses, webinars and tailor-made courses for companies.
All my great colleagues share their expert knowledge with members, incl. the Shipping Market Analysis which I lead. To the best of our ability we analyze how global economics affects seaborne trade for the main three shipping sectors where BIMCO members predominantly own and operate ships. Forecasting the near and far future of the dry bulk, oil tankers and container shipping industry is what we do. And we do it with no strings attached. I guess that what have brought us to where we are today – a global leader in shipping market analysis – known for being trustworthy and unbiased.
Q: Please give us your overall assessment of the shipping markets. Apparently rates in all market segments more-or-less are low. What’s really happening? Is it demand this time? Or is it supply?
BIMCO / PS: by mid-March we had to revise our 2020 forecast – even though it was done only 3 months earlier. The reasons are today obvious to anyone – the coronavirus pandemic. We have never changed a forecast like that. Surely, in normal years, we review our estimates regularly to make sure they are always up to date – small adjustments to make the more precise, never to the extent of what we have just done.
Having said that, the revision of our forecast was not one that put it all upside-down. For dry bulk and container shipping we expected a loss-making year – but the extent of it which we now most likely will see, was obviously beyond previous expectations.
As goes for the tankers – well, it’s incredible still, what geopolitics can do an otherwise doomed market – at least in our view. We expected crude oil tankers to see a tough year – it was all in the making until the OPEC+ alliance fell apart.
Nevertheless, when those tensions eventually ease, gravity will prevail and the massive fall in oil demand will also bring down tanker freight rates. The timing of that, being a ‘decision’ for the oil producers, much more than any well thought-of analysis from anyone.
Q: COVID-19 was the last thing the world, and particularly shipping, needed at this phase of the cycle. Still many variables outstanding, but how bad this can be both short term for shipping operations but also its impact on demand for commodities and end products for shipping?
BIMCO / PS: This morning, we have just seen Singapore go into a lockdown for the month of April. At a point in time when all look towards Asia for hopes and good news from countries who are about to recovery and bring back normality to personal lives and businesses – this is a backlash. Demand will drop for oil and oil products, most likely also for quite a few dry bulk commodities, but mostly containerized goods are about to take a large hit. When unemployment rage like a wildfire in the US, at a mind-blowing pace – consumer demand will fall sharply in the wake.
BIMCO is expected a slow a gradual recovery of shipping demand once the pandemic has finally been contained.
Moreover, I would like to highlight that “rolling back globalization is not the answer” to anything. But crisis brings about inward-looking focus everywhere, so will see the trade-to-GDP multiplier take another beating as protectionism takes its toll.
Q: Which market segment seems most promising at present based on fundamentals? Please sail us through your analysis, please!
BIMCO / PS: The oil product tanker sector is the strongest from a fundamental supply-demand perspective. Much of it owed to the relatively lower fleet growth of the past few years. Despite the uptick we saw in 2019, as the IMO2020 ‘optimism’ pushed up deliveries. BIMCO's Shipping Market Analysis report from March 2020 delves into greater detail, and be accessed by clicking here.
Being the most promising amongst a selection of challenged sectors may now say much, but trading of oil product has a higher seaborne-trade multiplier to oil consumption than crude oil. Looking at BIMCOs expected fleet growth for 2020-2021, the oil product sector is likely to keep this ‘most promising’ label for the coming year or two.
Q: Any market segment that fundamentals are so off-balance that it’s hard to see foreseeable recovery, and therefore stay away from such?
BIMCO / PS: Fortunately, shipping sectors can enjoy good times, even if the fundamentals are off. The VLCC sectors is doing just that right now. A sector header straight for the doldrums before the oil price war kicked in. Moreover, it has been ‘well supported’ by sanctions and other geopolitical factor over the past year.
Q: You are a well-regarded shipping analyst and economist. Drawing on such expertise and putting an investment advisor’s hat for a minute, what would you advise shipowners of 5-10 vessels (the backbone of the industry really) to do and optimally position their companies for the next phase of the cycle? Is business and market tougher on smaller owners than those owners that managed to have 50+ or even more 100+ vessels in any segment?
BIMCO / PS: you are right, the smaller shipowners are the backbone of shipping and many of them are members of BIMCO. They seek our advises on ports accessibility, local Sulphur rules, new shipbuilding standards and of course on market analysis. I always talk about how to handle the risks of our industry, and now is a good time for anyone to walk that talk.
Counterpart risk is number one, make sure your deal with partners that you trust will pay its due. Do you due diligence twice and don’t fix if you are in doubt. Treat your seafarers well – after all they take care of your assets every second of the day. Call you banker, in bad times as often as in good times – liquidity and access to capital will be key to many trying to weather the current headwinds. The challenges for the champions of the industry are same-same but different. They simply play a different game, when they make sacrifices – they do so on behalf of the entire industry. It’s amongst the larger players we see demolitions sales done to improve the fundamental balance, not amongst the smaller owners.
Q: At the age of drone shipping and big data, what do you see as the greatest challenges for shipowners, investors in the industry, shippers and charterers? The saying “this time is different” has been banalized, but do you think we live at an age when “this time is different” is really meaningful for shipping?
BIMCO / PS: it’s not different this time around either. The real values are still only found in reliable data and trustworthy analysis. One can only fail by relying blindly on the output of computer and big-scale models. Those who will benefit in this environment where new data is offered into the shipping world will be those that apply the human mind to the data points. Only the you will be able to judge is this good or bad ‘advise’ to take.
Q: After several years of headlines and heartaches, Phase I of trade agreement between the USA and PRC have been signed. Hopefully both parties can live up to expectations, and eventually Phase II can be agreed upon. Still several more agreements to follow up, most prominently between UK and EU, US and UK, etc What’s your assessment of these bilateral agreements, their impact on shipping, especially as these affect trading volumes to and from the US?
BIMCO / PS: In all fairness, I believe BIMCO has been on top of the Trade War implications for global shipping like very few others. Just recently, we have shared the following two analysis into the impact of the US-China trade war and the “Phase One” agreement.
I see the bilateral agreements as moves in the wrong direction. It’s politics arresting the benefits of globalization benefitting no one, not even those they claim to ‘protect’. Setting up trade between any two nations, as it was done 200 years ago – is not a move forward – it’s protectionism that hurts, shipping as it hurts the people. Lower quality of goods, higher prices for them and fewer to choose between, that’s what you get.
Q: There has been a lot of publicity around the launching of ferry FV “Ellen” in September 2019 to the island of Ærø. The ferry is fully operational and works completely on battery power. (The ferry is 60m LOA, holds 200 passengers and 30 cars and has 22 nautical mile range). We appreciate that the route is limited and pre-determined, but, as far as we know, this is the first case of a commercial vessel operating fully on battery power and being of zero emissions and pollution. Not a small achievement. First of all, tremendous congratulations to your country, Denmark, and the local municipalities involved with the project and their forward thinking. From this very successful “experiment”, what conclusions can be drawn, if any, and how “concerned” you are that commodity shipping will be under severe pressure to think well beyond IMO2020 and just Low Sulphur Fuel Oil as low pollutant fuels? Solutions that would cost money that many shipowners do not have and also would accelerate technological obsolesce of the current fleet?
BIMCO / PS: Scandinavia seem to be the testbed for al lot of innovation in the shipping world. Fascination indeed. For deep-sea shipping, electrified ships are not an option. Surely, all innovation that will bring around cleaner shipping should be applauded, but we must also have a clear sight on what’s truly “green” and what only “greenwashing” or simply missing the target as politicians don’t get the finer technicalities of global shipping. i.e. IMO2020 is not about CO2 emission, is only about Sulphur. Be sure you know the difference between local and global irritants.
I am worried that about the viability of future solutions for the shipping industry that may be very costly. But not due the costs themselves, but due to the lack of passing on extra costs down the supply chain – to the end-consumer or industry.
Q: On a more personal level, in your line of work, what aspects of the industry do you enjoy most? Any memorable experiences you wish to share, that may inspire young people to consider the maritime and shipping industries for a career, whether as seafarers or ashore?
BIMCO / PS: Everyday is different. Still you meet the same wonderful people all over the world and repeatedly. Because the shipping industry is like Hotel California. I have been fortunate to travel the world exchange views with many insightful people with many different backgrounds. It will be great to be able to do that again. For a land lobber like me, a great memory goes back five years, when great former colleagues of mine, made it possible for me to sail on a Panamax bulker from Hamburg to Svalbard. We headed straight for the North Pole most of the time. The crew onboard Nord Navigator were very kind to me and made the journey into a lifetime memory.
Thank you very much for the opportunity, consideration and insights, and wishing you and BIMCO all the best!
Peter Sand has been almost twelve years with BIMCO, nine of them as the Chief Shipping Analyst of the Organization. Peter's prior professional experience encompasses the academia, the ship-owning industry, and government bodies. His recognized industry expertise and easiness at analyzing market drivers and presenting eloquently market trends have made Peter a popular presence in the press, on TV and on the conference circuit. Peter's professional profile can be found here, and his must-follow maritime presence on Twitter can be found here!
Twitter Handle: @BIMCO_PS