Shipping should shrug off Coronavirus but escalation risks supply chain contagion

The impact of the Coronavirus on shipping is being experienced differently across the sectors, says Dr Adam Kent, Managing Director, MSI

The impact of the Coronavirus on the Chinese economy has already been severe and the scenarios for shipping range from a quick resolution to a long drawn out impact. To model the likely effects, Maritime Strategies International has published an analysis* assessing how the virus is affecting shipping sectors now and what the future implications of a further escalation might be.

Each sector has been affected to a different degree by the crisis so far, and each has a different set of vulnerabilities to escalation or prolonged disruption says MSI Managing Director Adam Kent.

“Vessel earnings in the tanker segment have already seen a negative impact and are exposed to continued disruption to oil demand while for dry bulk the Coronavirus has worsened an already-challenging environment. The impact on the container trades have been different until now, with relatively small movements in markets but major disruption to trade. In each case the downside risks from escalation and further disruption are extensive.”

The MSI risk matrix depicts how different segments will be affected by the status quo in which it expects that the disruption peaks over mid or late February and then restrictions to output and mobility are unwound thereafter.

MSI has modelled a moderate escalation scenario in which disruption continues into March with some restriction on port activity over that period of time, which again implies further downside risk to vessel earnings.

Lastly MSI has modelled a severe escalation scenario in which the impacts last well into Q2 forcing a continued shutdown or increased shutdown of Chinese factory output or significant disruption to Chinese port operations. In that case the market should expect double-digit downside risk to vessel earnings in the different segments.

* The full article can be downloaded from www.msiltd.com

About Maritime Strategies International (MSI)