The Covid-19 coronavirus is beginning to impact shipbuilding and one newbuilding VLCC that left the yard this year has re-started the trend to load oil products on the maiden voyage
Covid-19 coronavirus is beginning to impact the Chinese economy. China is the world’s single largest shipping market, responsible for 22% of imports, according to Clarkson Research Services (CRS). Any slowdown in China’s output will be immediately felt in the shipping market and according to the available data, that slowdown is beginning to take place. The Purchasing Managers Indices, which covers mostly state-owned enterprises, fell to 37.5 points in February from 50 points in January. Many economists now think China will fall into recession in H1 2020.
China is responsible for approximately one third of global shipbuilding and 77% of retrofits, according to CRS. In the newbuilding sector, construction is slowing down. According to reports from marine suppliers whose factories in China supply shipyards, their production has slowed due to a shortage of workers.
In turn, marine equipment is arriving late to shipyards in China and South Korea, which are having their own worker crises due to employees having to self-quarantine or living in cities that are in Covid-19 coronavirus lockdown. The slowdown in production is affecting all trades across China. Inventories of raw materials such as iron ore and crude oil are reaching recent peaks. Therefore, owners may be grateful that vessels are delayed as there may be little work available.
In total, 49 VLCCs were due for delivery in 2020, somewhat below the 69 VLCCs delivered in 2019. As at the end of February, there are 37 VLCCs left to be delivered in 2020, according to VesselsValue. That 2020-built VLCCs will become a vintage year is too early to say, but at least one recently delivered VLCC has re-started the trend of carrying diesel on the maiden voyage.
During H1 2019, large tanker newbuildings swinging carrying products dampened the product tanker trade. According to real-time tanker analytics provider Vortexa, the Latvian Shipping Company-managed 300,000 dwt VLCC Elandra Kilimanjaro received around 90,000 tonnes of diesel via ship-to-ship (STS) from the LR2 tanker Torm Herdis, offshore Tanjung Pelepas in Malaysia. Vortexa has traced the origin of the diesel on board Elandra Kilimanjaro back to Malaysia’s Tanjung Langsat and Singapore’s Universal Terminal. According to Vortexa, newbuilding VLCCs that loaded diesel via STS in Singapore/Malaysia last year, headed west to discharge into northwest Europe and West Africa. But it notes that diesel margins in northwest Europe have fallen to multi-year lows in February amid weak regional demand.