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Global shipping industry faces changes | orders plunge to 20-year low as no one’s buying new ships

The global shipping industry faces changes: The global shipping industry is in the midst of its biggest changes as everyone around the globe is uncertain about the environmental conditions in the post-COVID world accompanied by the economic fallout due to the pandemic. There is hardly anyone buying new ships. Thus, the new orders plunged to a 20-year low.

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But Why?

According to Stephen Gordon, the managing director of Clarksons Research, ships are long-term investments and buyers are uncertain about the exact policies, regulations, and technology that might be adopted after the pandemic.

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Earlier this year stricter environmental rules were imposed which further discontented the potential buyers and owners. Now the ship owners have to pay more for cleaner fuel, retrofitting ships with pollution-reducing scrubbers or even ordering new vessels.

The coronavirus outbreak is yet another hit in the buying & selling of the new ships as the pandemic has hit all the economic activities and supply chains. Most of the ships are standing still worldwide. The pandemic has also delayed the completion of shipbuilding projects as the demand for containers is expected to decrease this year.

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Shipowners and potential buyers are also lacking the finances to make new purchases is yet another reason for the downfall in the new orders.

Ralph Leszczynski, head of research at shipbroker Banchero Costa & Co. said: “Most shipping markets are coming from a relatively poor decade, 2009 to 2019, in terms of earnings so most shipowners do not have that much cash in their pockets,” he said. “External finance is also in short supply as banks are now largely steering clear off shipping after the defaults they suffered after 2008.”

A ray of Hope

The coronavirus pandemic has created short-term uncertainty in the market, however, the medium-to-long-term outlook looks better as Qatar has signed a deal with South Korean shipbuilders worth $19 billion for more than 100 liquefied natural gas vessels. Thus, giving a better outlook.

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