Not even a third of the way through this strange year and surreal events continue to amaze and bewilder.
Just over 100 days ago, the big topic in shipping was how the IMO’s 2020 sulphur cap would pan out. Would those who bought into scrubbers be proved right and was there going to be shortages of compliant fuels?
At first it looked like the answer to both those questions would be yes as the price differential between ULSFO fuels and HFO rose sharply promising a payback for scrubbers measured in months not years and filing of FONARs began trickling in on the IMO’s website.
But then came news of a new SARS-like illness affecting parts of China just before the country went into its traditional long New Year holidays. Fast forward a month or two and that illness was spreading around the globe at an alarming rate. First Iran and Italy were the worst affected and then within days it seemed it was everywhere.
The response of most governments has been to introduce lockdowns with citizens almost, but not quite, put under virtual house arrest to prevent the medical services being overwhelmed with cases. Only time and the wisdom of hindsight will tell if these were sensible decisions, but they have been taken and we are mostly in favour of the intention if not the impact.
The impact on the world’s economies cannot be under-estimated. Some analysts are predicting drops of well into double figures on nations’ GDP figures and there is even talk of a new great depression to equal or exceed that of a century or so ago.
Whatever the statistics finally reveal it is clear that once COVID-19 is controlled and we don’t yet know when that will be (History may be repeated and like the Spanish flu pandemic of 1918/20, COVID-19 may come in waves), attempts to revitalise the world economy must get underway. The cost of government support for populations prevented from working and earning will need to be recouped.
There will also be an inevitable restructuring of world manufacturing and trade. Too many countries were caught with their pants down and unable to respond from their own resources to demand for such simple things as disposable gloves, masks and medical equipment. In Europe and elsewhere in the west, the folly of exporting manufacturing and expecting to thrive on service industries alone has been exposed.
In future shipping may need to adapt to fewer imports of manufactured goods from Asia and more raw materials imported in their place. It will take time – factories are not built in weeks or months, but they will be needed. There will be plenty of people to work in them as the effect of the lockdowns will see many failures in existing businesses.
Industrial output will require a higher and reliable energy production and that will inevitably undermine the green dream as demand for cheap energy will be high. All the money planned for future green subsidies may well have been spent by now in measures aimed at preventing poverty and destitution that could have resulted from the lockdowns.
Fortunately – or not as your opinion may be – the world currently has a glut of cheap fossil fuel that could be used to kickstart an economic revival. It may have looked odd that yesterday (20 April) at one point the price for West Texas Intermediate crude dropped to a negative £48 dollars a barrel. Today it is up again at $20 or above but then that is a consequence of the way crude prices are quoted.
The figures that are used in news bulletins and more generally are not the prices actually paid by traders for physical oil, but futures prices. Yesterday saw the final day of the May 2020 futures round and with oil still coming out of the ground and nowhere left for it to be stored, some who had speculated on the physical price being $15 or $20 or whatever could find no one to buy and was thus trying to offload the problem by virtually giving it away and paying someone else to take on the problem of finding and paying for storage. The sudden rise back to amore normal figure for the June futures round reflects the view that some of the existing oil will be used freeing up storage space.
It has to be expected that there will be resistance from environmental groups to any government’s move to revert to using fossil fuels but that will almost certainly be trumped by the desire of the wider populace to get back to work and earning money to provide for their families. Since politicians rely on votes for their own jobs, they will not be wanting to be seen as not being mindful of what the electorate wants.
Over the last weeks, commercial activity probably continued quite well over the phone and by email just as it always has. It was interesting to see that when liner operator MSC was hit by a computer outage in mid-April its advice to customers was to contact local agents who could continue to take bookings and advise on cargo movements and the like. It was only a few weeks previously that some experts were warning the days of local agents could be numbered as digitalisation would all but make them obsolete. That it was local agents who provided MSC with the resilience to deal with its problems should not go unremarked.
Another result of the lockdowns and travel restrictions has been the number of meetings and events that have been cancelled or postponed. Even the IMO is now exploring the idea of teleconferencing for the future. Maybe that is an idea that should have been explored before and for other events that do not really demand a physical presence, but which do provide opportunities for attracting protests and demonstrations. So long as the event is visible for transparency purposes no one should object to the idea.
It has definitely been a very strange period, but kudos must go to the unsung heroes that have helped to get us through it so far. As well as the key workers on shore that have been well recognised for their roles at the front line, we should not forget those on the ships and in the ports who have kept goods and commodities moving. Let us hope they will not be instantly forgotten when normality is resumed.