The multipurpose vessel (MPVs) and heavylift vessel segments are expected to experience a weak demand in the second half of this year on the back of reduced Chinese exports and the impact of the spread of the coronavirus, according to analyst Drewry.
Drewry will be downgrading its full year cargo demand forecast for MPV from its previous projection of 1.8% growth, when it publishes its next forecast at the end of March.
“It is our opinion that for the short term the knock-on effect from container and dry bulk segments will be detrimental to the breakbulk sector, as the supply of vessels able to carry general cargo will increase. At the same time multipurpose cargo demand will be weaker due to the loss of Chinese exports and investor confidence is likely to soften as well, due to concerns for the global economy,” wrote Susan Oatway, senior analyst of multipurpose and breakbulk shipping at Drewry.
“In the medium term the increasing spread of the (coronavirus) outbreak, the loss of investor confidence coupled with the tightening of financing costs for Chinese companies and weaker global demand are all negative drivers for this sector. Weaker than expected demand over second quarter 2020 will delay the recovery we were expecting this year,” she explained.
Oatway added that while both the container and bulk sectors have a small upside due to vessels being out of service due to scrubber refits, there is no such respite for the MPVs and heavylifts sector as so few vessels were taking this option.
Furthermore, if containment of the coronavirus is delayed into the second half of 2020 and the virus continues to spread, the hit to multipurpose shipping and the wider global economy will be much greater over both this year and next.
For the MPV sector, steel and renewables are some of the largest cargoes for the Asia region. Chinese domestic demand for steel is not expected to pick up before April, but this has led to historically high inventory levels at many mills and an increased interest in exports.
For the renewables sector, construction of both wind and solar projects in China has slowed down over the last two months due to the coronavirus outbreak.
“However, recent reports suggest that turbine production is on the increase again in China. Our assumptions for breakbulk and project cargo are that although we expect some Chinese (overseas) projects to be delayed, there is clear momentum for most and there is some return to export demand,” Oatway said.
“However, this will be hampered by the latest news of outbreaks in the Middle East, a significant region for project cargo,” she noted.
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