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Covid-19 to stifle investment in multipurpose and heavylift shipping

According to Drewry’s latest MPP forecast, charter rates for multipurpose ships, including both breakbulk and heavylift vessels, are not expected to recover back to pre-Covid-19 levels until the end of 2021, with the recovery anticipated to take even longer if the global pandemic is not contained.

Drewry also says that given a projected slump in project cargo demand, newbuild investment is also at particular risk.

They present a base case where Covid-19 is contained globally over the next few months and there is no second wave. This allows the global economy and dry cargo demand to rebound in 2021.

The base-case predicts a decrease in MPV demand of almost 7% over 2020, compared to 2021, with an associated rebound in 2021 of 7.4%.

They then present a set of scenarios with worsening outlooks dependent on a series of caveats, which include further recessions for the global economy and longer-term damage to demand, causing a longer downturn in the freight market.

Scenario A is the assumption that COVID-19 is contained over 3Q20 but then a second wave occurs over 2021. The new outbreak in 2021 will reduce any pent up demand as further lockdowns will come into force on a wider scale. This will mean the ongoing global recession will weaken longer-term demand and, for the short-term, the V-shaped recovery will be much shallower. This in turn will limit the return to growth of container port throughput and is likely to stall crude steel production and manufacturing activity.

As the uncertainty around this second wave grows, they believe that demand for MPV in 2020 will remain significantly below 2019 levels and 2021 could see growth of less than 3%.

Scenario B looks at the effect of a longer outbreak in 2020 plus a second wave in 2021. It looks at the effect on dry cargo demand of a deeper global recession in 2020, with a continued recession in global economic activity in 2021 and beyond.

General cargo levels are expected to sink to unprecedented lows as manufacturing production and business confidence fail on all sides. The effect on MPV demand is devastating as recovery is stalled and competition from other sectors will remain high.

Find the summary and info on how to purchase the full report here.

Read our interview with Susan Oatway, author of the forecast.

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