As China grapples with the effects of the pandemic and has issued a lockdown in Shanghai, shipping is expected to be impacted as well. While tankers should take a hit from the slowdown in oil consumption, the dry bulk and container segments could stand to benefit, as congestion has already increased in various ports in China.

In its latest weekly report, shipbroker Intermodal noted that “China has announced Covid-19 related restrictions across 20 different provinces (including Shanghai the center of the country’s commercial activity) with an apparent effect on oil consumption. According to S&P global estimations, the loss in oil consumption is estimated at around 650,000 bbl/day in March and 400,000 bbl/day in April. However, restrictions could have a positive effect on the container and dry bulk freight markets, due to the upcoming port delays that could tighten the tonnage availability further. Inevitably, China’s economic performance will shape the 2022 dry bulk outlook”.

According to Intermodal’s Mr. Yiannis Parganas, “based on World Steel Association’s data, world steel production in February 2022 stood at 142.7 million tonnes, decreased by 5.7% compared to February 2021. Among the steel producing countries, China has produced a total of around 75.0 million tonnes, noting a decrease of 10% y-o-y. India, the second-largest producer, has a total of 10.1 million tonnes, noting the largest improvement among its counterparts of 7.6% y-o-y. India could play a leading role substituting a share of Russian steel exports amidst the imposed sanctions as of late eyeing the European market. According to Joint Plant Committee (JPC), the export of finished steel in February rose by 77% y-o-y and 42.1% m-o-m, reaching the 1.16 million tonnes mark. It remains to be seen how March’s exports will be formed”.

Meanwhile, “an agreement has been reached between the EU and the US under which Europe will abandon its dependence on Russian gas. According to the plan, the US will provide an additional 15bn m³ of natural gas for the European market this year, while stable European demand was agreed in the range of an extra 50bn m³/yr of demand for the US gas until at least 2030. Europe’s dependence on Russia is critical for its energy needs, accounting for around 50% of Russia’s crude exports and 75% of its Natural Gas. Despite the recent EU-US plan to limit this exposure, it is still uncertain if this could be materialized solely from the US supply”, Intermodal’s analyst said.

“Weather disruptions have caused a pause on the Caspian Pipeline Consortium (CPC) terminal on the Blacksea leading to depletion of CPC volume close to 320,000 barrels per day (20% of its oil production). According to the country’s energy ministry, it will take two to three weeks before repairs materialized across all the loading points and volume return to normal. On a separate note, Kazakhstan said that the lost barrels could offset its overproduction over the past five months. The impact of the freight market was downright; Suezmax and Aframax sectors witnessed discounts on the respective rates with TD6 and TD19 business routes declining by 19.16WS and 4.31WS points”, Mr. Parganas concluded.

Marex Media