Shipping companies have systemic issues to resolve is they are to survive beyond 2020
The Covid-19 pandemic has marked out 2020 as one of the worst economic periods in the last 20 years, which is saying a lot when that era includes the 2008 financial crisis. In the aftermath of the 2008 crisis the clear problems in the financial system were quickly addressed at a regulatory level.
There is no long-term regulatory solution to the financial impact of Covid-19. Governments are throwing money at the issue in the short term, but the impact will linger for years to come, even if there is a V-shaped recovery. That scenario is however looking more likely; as early as April 2020, Torm chief executive officer Jacob Meldgaard noted that the oil product trade in China was experiencing growth and this was confirmed by the subsequent data that showed a surge in single-occupancy car usage as Chinese commuters went back to work.
This is likely to be repeated across Europe when countries relax their Lockdowns and working life returns to whatever the new ‘normal’ is. In theory, there should be a demand pull of gasoline and diesel for car usage pushing on up the supply chain, coupled with an increase in demand for the seaborne transport of oil products. There will be a lag before this translates into an uptick in crude oil demand. The onshore storage of oil products is reportedly near capacity and around 12% (three times higher than average) is operating in storage.
The rapid increase in storage use among crude oil tankers, product tankers and in some cases, chemical and product tankers, is not without issues. Tank coatings are a long-term investment and the correct product is needed to prevent issues with degradation after storage. Another investment is fuel; long periods of inactivity can have a detrimental impact on fuel remaining on board, which needs to regularly inspected and treated.
Owners and operators need to carefully examine documentation and take advice if the tanker is diverted into long-term storage, to avoid claims from charterers and cargo owners.
“There should be a demand pull of gasoline and diesel pushing on up the supply chain”
As we enter the second half of 2020, shipping companies may feel some satisfaction of having survived this far into the year. But there is a large issue on the horizon that the industry cannot ignore or escape: the treatment of seafarers onboard during the Covid-19 pandemic. So far, the fact that seafarers have been prevented by travel restrictions from leaving ship months after the end of their contract has been shipping’s dirty secret. It will be one that has to be solved or the industry will simply find the supply of seafarers has dried up.