{"id":84912,"date":"2021-12-06T10:07:37","date_gmt":"2021-12-06T03:07:37","guid":{"rendered":"https:\/\/advantage.vn\/vi\/?p=84912"},"modified":"2022-08-20T15:15:13","modified_gmt":"2022-08-20T08:15:13","slug":"omicron-threatens-tankers-but-could-extend-container-shipping-boom","status":"publish","type":"post","link":"https:\/\/advantage.vn\/en\/omicron-threatens-tankers-but-could-extend-container-shipping-boom\/","title":{"rendered":"Omicron threatens tankers but could extend container shipping boom"},"content":{"rendered":"

[Advantage Logistics<\/a><\/span>] The new global threat from the omicron variant is being layered on top of existing fallout from delta-variant outbreaks in Europe and Asia. <\/strong>Assuming omicron is not a false alarm, it\u2019s more bad news for crude and product tanker rates, another positive for container shipping rates (with some downside risk also in the mix) and relatively neutral for dry bulk shipping, at least for now.<\/strong><\/p>\n

No matter what the shipping segment, omicron further obscures the timeline for a return to some semblance of normalcy.<\/p>\n

\u201cHere we go again,\u201d commented Stifel analyst Ben Nolan. \u201cHopefully, this will be no more than another small bump in the normalization process.\u201d<\/p>\n

The immediate effect of omicron is a slowdown in international travel as countries halt flights. The loss of jet-fuel demand amid the pandemic has been a major negative for tanker shipping demand, as have refineries\u2019 use of inventories as opposed to new supply, and production cuts by OPEC+. Anything that slows a full recovery of jet-fuel demand is bad for tankers.<\/p>\n

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The spread of the delta variant was already impacting fuel consumption in Europe and Asia before the omicron scare. Austria went into a full lockdown last week, Germany is poised for restrictions, and a delta outbreak continues to curb movements in China. According to Evercore ISI China analyst Donald Straszheim, \u201cNew cases have been found in Shanghai, Zhejiang and Jiangsu \u2014 economically important provinces. Defensive steps are already underway.\u201d<\/p>\n

According to Nolan, \u201cA rise in travel restrictions and quarantining is not good for oil consumption and tanker demand. There is no silver lining or sugar coating.\u201d<\/p>\n

The timing of the omicron news was particularly unfortunate for tanker shipping: OPEC+ is meeting this week on planned easing of production cuts. The Joint Technical Committee meeting was pushed back from Monday to Wednesday to allow more time to weigh the omicron effect. OPEC+ will make its decision on Thursday.<\/p>\n

If OPEC+ slows resumption of production in response to omicron, that\u2019s another negative for crude-tanker rates.<\/p>\n

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Lars Barstad, CEO of crude and product tanker owner Frontline, said on Monday\u2019s conference call with analysts, \u201cDemand and supply of oil continue to rise, but the latest virus variant is obviously now clouding the outlook.\u201d He added, \u201cWith regards to the production increase, I think that\u2019s riskier now, whether OPEC actually will increase volumes into Q1.\u201d<\/p>\n

As tanker shipping has been suffering a historic depression during most of the COVID era, container shipping has boomed.<\/p>\n

Despite a moderate drop-off from the all-time highs reached in September, container freight spot rates have held steady throughout November and even nudged back up again over the past week. The Drewry global composite index is currently 6.7 times where it stood in late November 2019, pre-COVID.<\/p>\n

The guessing game on when rates will truly plunge just got even harder. Stefan Verberckmoes, shipping analyst and Europe editor at Alphaliner, told American Shipper, \u201cThe pandemic has made it extremely difficult for carriers and analysts to look into the future. Omicron is likely to extend the period of little-to-zero visibility in the liner shipping sector.\u201d<\/p>\n

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COVID had a negative effect on container shipping demand when production areas such as China or consumption areas such as the U.S. and Europe were locked down. Beyond that, the COVID effect on container shipping rates has been highly positive, due to the shift in consumption from services to goods, compounded by port congestion.<\/p>\n

Asked by American Shipper about possible omicron effects, Vespucci Maritime CEO Lars Jensen replied: \u201cWe don\u2019t really know the full impact of omicron, but there are two elements in play: One is the risk of more shutdowns of port and infrastructure facilities. This is a large risk in China, and was even before omicron \u2014 I have flagged this as the largest disruptive risk element for quite a while, simply due to the Chinese government\u2019s typical response to the outbreak of just a few cases.<\/p>\n

\u201cThe second aspect is on demand, especially in the U.S. where the pandemic has pushed a shift from service spending to spending on goods. This is a key reason for the demand boom in container volumes to the U.S. If the omicron variant extends the pandemic period, this will keep the boom running.\u201d<\/p>\n

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Clarksons Platou Securities said Monday: \u201cWith omicron now causing more restrictive travel measures, consumer spending habits may remain engaged in the favor of the container shipping sector. Several liners had already taken a view that strong market conditions will persist into 2022, and this could be extended further \u2026 with a potentially longer run.\u201d<\/p>\n

The caveat is that U.S. consumers may not have as much to spend on goods in 2022 as they did in 2021.<\/p>\n

On Monday, Deutsche Bank transportation analyst Amit Mehrotra downgraded UPS (NYSE: UPS), railway Canadian Pacific (NYSE: CP) and trucking company Saia (NYSE: SAIA) to \u201chold\u201d in conjunction with his team\u2019s 2022 outlook. That outlook warned, \u201cThe easy monetary and generous fiscal policies that have propelled consumer wealth and spending to all-time highs are now largely in the rear-view mirror.\u201d<\/p>\n

\u201cGenerally, the areas with the least direct impact have been dry bulk and gas shipping,\u201d said Stifel\u2019s Nolan, referring to broader consequences to shipping from COVID, and by extension, from omicron.<\/p>\n

Dry bulk has had its best year in over a decade in 2021, while spot shipping rates for liquefied natural gas carriers are now at all-time highs.<\/p>\n

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The biggest pandemic effect on dry bulk has been congestion in Chinese unloading ports driven by COVID precautions and restrictions at terminals. That congestion has tied up bulkers at anchor, a plus for rates.<\/p>\n

Asked about potential fallout from omicron, Nick Ristic, lead dry cargo analyst at Braemar ACM Shipbroking, told American Shipper, \u201cFor now everybody seems to be taking a wait-and-see approach. The one place where significant pandemic-related measures can significantly tighten the [dry bulk] market \u2014 China \u2014 is already pursuing a zero-COVID strategy, so it\u2019s hard to imagine more disruption from congestion and quarantines.\u201d<\/p>\n

Source: freightwaves.com<\/strong><\/p>\n

>> Other news:\u00a0<\/strong><\/span><\/p>\n