Even as quarantines, closed borders, travel bans, and other measures to delay the spread of the coronavirus disease 2019 (COVID-19) send the global economy into recession and financial markets into head-spinning volatility, the breakbulk and project shipping sector may be facing an even greater existential threat: plunging oil prices.
Already under severe pressure as global demand dries up, oil prices have been undercut by what may be the single most ill-timed game of production chicken in history. Saudi Arabia and Russia, following the breakup of the OPEC+ alliance, abandoned production controls in March and opened the spigots. As a result, global benchmark Brent crude hit a 20-year low of $24.74 per barrel on April 1.
With OPEC and Russia scheduled to meet Thursday to discuss a potential cap on production, prices rose to $32.84 per barrel on Wednesday, but analysts warn it may already be too late.
“The last time that there was a global surplus of this magnitude was never,” said Jim Burkhard, vice president and head of oil markets with IHS Markit, parent company of JOC.com and The Journal of Commerce. “Prior to this, the largest six-month global surplus this century was 360 million barrels. What is coming will be twice that or more.”
On top of IMO 2020 and an already-tremulous market, this is frightening news for the project and breakbulk cargo sector, as oil prices tend to act as a leading indicator for project transport demand. If oil prices remain depressed, there will likely be a major project cargo slowdown in 18 to 24 months stemming from cuts made over the next few months to capital expenditure plans. That could be offset to an extent by renewables and other investments, but much will depend on how quickly the global economy recovers from the effects of the coronavirus pandemic.
Burkhard was scheduled to speak at The Journal of Commerce’s breakbulk and project cargo conference, which would have been held April 27-29 in New Orleans. Hearing from him, and the rest of our stellar slate of speakers, would have been immensely valuable in these fraught times.
However, as with so many other events, the conference has been canceled. JOC.com, along with IHS Markit, had been closely monitoring the situation, and we made our decision the week that the World Health Organization declared COVID-19 a global pandemic. It was made sadly and reluctantly, but our foremost concern was the health and safety of our attendees, speakers, partners, colleagues, and vendors.
No one with whom I’ve spoken since the decision was made has been surprised. Disappointed, yes, but not surprised. “We’ve been expecting this call,” I was told many times, along with, “It’s the responsible thing to do.”
In lieu of an in-person gathering, JOC.com is presenting much of the content that would have been covered at the conference in an online webcast. The webcast, Breakbulk & Project Cargo: Recalibrating for a New Normal, will be held April 28 at 1 p.m. EDT and will include panel sessions on resetting global and regional economic expectations for 2020 in the face of the COVID-19 recession; the state of the global oil market and outlook for capital projects; risk management, safety, and preparedness; and navigating tariffs and sanctions
Once it is safe to travel and hold meetings again, JOC.com will also be organizing some smaller events and presentations. And we are already planning for 2021.
To misquote the greatest movie ever made, “I’m no good at being noble, but it doesn’t take much to see that the cancellation of one breakbulk and project cargo conference doesn’t amount to a hill of beans in this crazy world.”
Of course it matters, but in the grand scheme of things, cancelling a conference is a small price to pay to potentially help stem the spread of the coronavirus. We at JOC.com and our industry colleagues will work our way through this together, and we will come back bigger and better in 2021. And boy, will we have a lot to talk about.
In the meantime, let’s stay safe, stay strong, and take care of each other.