Shipowners’ revenue is largely dependent on developments in the world economy. This applies in particular to overseas, intercontinental transport. 2020 has been greatly affected by the handling of the worldwide corona pandemic.
One month after the WHO declared Covid-19 a global pandemic, almost half of the world’s population was in some form of lockdown, and 3.9 billion people were instructed by the authorities to stay at home. Many companies have asked their employees to work from home, schools and universities have had to close, public transport services have been restricted, and travel restrictions have been introduced both domestically and internationally.
In its report «Global Economic Prospects» published in January 2021, the World Bank estimates that the world’s gross national product was reduced by about 4.3 per cent in 2020. In the January issue of «World Economic Outlook, also published in January 2021, the International Monetary Fund IMF reports that the world economy shrank by 3.5 per cent in 2020.
Common to these reports is the conclusion that large economies in particular, such as the United States, Russia, India, and Saudi Arabia, as well as countries in the Eurozone, have been hit hard. China has seen a significant reduction in its economic growth but remains positive, including 2020.
The World Bank forecasts for the world economy indicate growth of about four per cent in 2021. The IMF is somewhat more positive and expects the world economy to grow by 5.5 per cent this year and 4.2 per cent in 2022. Emerging markets are expected to experience the fastest growth.
In April 2020, when the corona pandemic hit the world economy full force, the World Trade Organization (WTO) estimated that world trade would be reduced by up to a third of the level prior to the pandemic. However, since the economy recovered sharply in the third and fourth quarters of last year, the WTO has changed its assumptions to a reduction in world trade of 9.2 per cent in 2020.
Forecasts for 2021 point to an increase of 7.2 per cent, but estimates are highly uncertain, and depend on both the development of the corona pandemic and countries’ response during the crisis. In any case, it is very unlikely that world trade in 2021 will reach pre-pandemic levels.
Last year's decline in demand for tonnage is the first since 2009, when the aftereffects of the financial crisis took hold.
Analysis from Shipbrokers and consultants Lorentzen & Stemoco shows that shipping markets are growing after a year in which demand for maritime transport fell by around –1.8 per cent on an annual basis due to the corona pandemic. Last year’s decline in demand for tonnage is the first since 2009, when the aftereffects of the financial crisis took hold.
The downturn last year was greater than during the financial crisis, when the decline was –0.2 per cent, and was probably the largest decline in demand for shipping in modern times.
Oil prices strengthen offshore activity
Developments in oil prices greatly affect Norwegian shipping companies. The price of oil generally determines offshore activity, and thus constitutes the most important prerequisite for activity for about one-third of the Norwegian foreign fleet.
In addition, oil prices are an important factor for the transport segment, as fuel costs make up a significant part of vessel operating costs. Thus, a high oil price will be positive for turnover in the offshore segments, while a low oil price contributes to lower operating costs in the transport segments.
Demand for oil has fallen sharply during the corona pandemic. Since two thirds of oil is used for transport, consumption of refined products such as petrol and diesel has fallen as a result of transport restrictions enacted to control the spread of the virus.
The price of North Sea oil fell dramatically from January to May, also hitting lower levels than during the most demanding period of the oil crisis. On April 21, the price of oil fell below USD 20 a barrel.
This has led to a rapid downscaling of activity, and further deterioration of the situation for offshore companies. Last year, the industry reduced expenses by around 25 per cent by cutting oil and gas exploration and sharply reducing oilfield services.
This year, it appears that global oil companies are planning for increased expenditure in oil and gas exploration, and it is expected that expenditures on production and oil and gas exploration will increase by around seven per cent internationally.