"Rapid Recovery of the Global Shipping Market... Positive Outlook for This Year"

BNK Economic Research Institute, Report on Global Shipping Market Outlook and Implications
Escaping Last Year's Slump... Time to Enhance Future Responsiveness

[Asia Economy Reporter Kim Hyo-jin] A forecast has emerged that the global shipping market will perform well this year. However, due to restrictions on human mobility caused by COVID-19, oil tankers are expected to underperform.

According to the report "Global Shipping Market Outlook and Implications" released on the 6th by BNK Economic Research Institute, affiliated with BNK Financial Group, the global shipping market has rapidly recovered from the slump since the second half of last year. This is mainly attributed to capacity adjustments such as shipping companies reducing operations and a rebound in demand due to economic recovery in major countries.

The report predicted that this year, the favorable market conditions centered on bulk carriers and container ships will continue. For bulk carriers, positive effects are expected from the resumption of global industrial activities, increased manufacturing operating rates, and increased grain imports by China.

Additionally, as the growth rate of dry bulk carrier capacity is expected to slow from 3.7% last year to 2.6% this year, supply-side pressures are also anticipated to ease.

Container ships are forecasted to show strong performance due to the recovery of global consumer sentiment and the effects of U.S. economic stimulus policies. In particular, the report mentioned that the increase in scrapping of aging vessels due to strengthened environmental regulations such as sulfur oxide emission restrictions and mandatory EU greenhouse gas emissions trading is a factor reducing ship supply.

However, oil tankers are expected to remain sluggish. Despite the economic rebound, demand for aviation fuel and other products is not expected to increase significantly due to restrictions on human mobility.

On the supply side, oil storage vessels are expected to be reintroduced into the market during this year, which will act as a factor causing freight rate declines.

The recovery of the shipping market is expected to positively impact the Southeast region's economy through expanded shipbuilding orders.

As the importance of technological competitiveness in ship orders is increasingly emphasized, it is expected that Korea, which possesses higher technological capabilities compared to China and Japan, will see a significant increase in ship orders.

However, the shipping market in the Southeast region is forecasted to show only a slight improvement. This is explained by the fact that most regional shipping companies are small to medium-sized, and the proportion of tanker ships, whose market outlook is not bright, is high.

Until now, the operating profit margin of the top 20 shipping companies in the Southeast region has declined from 13.8% in 2015 to 2.7% in 2019, indicating weakened vitality. Considering company size and ship type composition, this trend is expected to continue this year as well.

The report emphasized that it is a time for the shipping industry to focus more on enhancing future responsiveness.

While issues surrounding the shipping industry in the past focused on low growth and oversupply of ships, they are now shifting to the Fourth Industrial Revolution and environmental regulations, so active efforts are needed to establish a sustainable growth structure for the future.

Along with this, resolving polarization among shipping companies is also emphasized as important for building a shipping industry ecosystem.

Large shipping companies are increasing their market dominance through structural improvements such as forming new alliances, mergers and acquisitions (M&A), and ship enlargement, but the vitality of small and medium-sized shipping companies has yet to improve, the report pointed out.

Jung Young-doo, head of BNK Economic Research Institute, stated, "The environment surrounding the shipping industry is rapidly changing due to advances in the Fourth Industrial Revolution and strengthened environmental regulations," adding, "Considering the size of Southeast region shipping companies, investments for digital and eco-friendly transitions are not easy, so active support to secure future competitiveness is important."

This content was produced with the assistance of AI translation services.