Global Trade Flows: The Coronavirus Impact



J Mintzmyer | Seeking Alpha

COVID-19: Direct Impact to Global Trade

The outbreak of a novel Coronavirus (“COVID-19”) in Wuhan in late-2019 eventually led to a drastic quarantine effort in mid-January to lock-down Wuhan, followed shortly thereafter by the surrounding Hubei province and other major cities. China’s efforts were drastic, essentially completely turning off their economy for over a month, but they were required to halt the dramatic spread of this virus. Virtually overnight, roads were emptied, energy consumption plummeted, and shipping routes froze in place.

These efforts wreaked havoc on global shipping markets, especially the dry bulk segment, which heavily relies on China’s gargantuan imports of iron ore and coal, among other products. The strength of the dry bulk market can be easily gauged by the benchmark Baltic Dry Index (“BDI”).

Although the BDI is seasonal and typically always bottoms near the Lunar (“Chinese”) New Year, this year’s drop was far more violent and long-lasting than usual, plunging over 80% from peaks in September to depths in mid-February. Thus far, even with China starting back up, the BDI has failed to meaningfully improve.

This dry bulk data is clear and obvious for all to see, and has slammed relevant stocks such as Diana Shipping (DSX), Eagle Bulk (EGLE), Genco Shipping (GNK), Golden Ocean (GOGL), Navios Maritime Partners (NMM), Safe Bulkers (SB), Scorpio Bulkers (SALT), and Star Bulk Carriers (SBLK). However, many other sectors of shipping are far more complex and nuanced. For instance, crude oil tankers are massive beneficiaries of the recent ‘Oil Price War,’ as I covered in detail in a recent public update nearly two weeks ago.

Anything connected to shipping has sold off in a completely indiscriminate fashion, with no regard to valuations or specific prospects. I shared a list of potentially oversold firms in early March, but it became clear that we needed to create an event to improve awareness for shareholders, potential investors, researchers, and reporters regarding the actual fundamental impacts and risks of COVID-19.

Virtual Investor Forum: COVID & Oil Price War

Following the developing teleworking trend, Value Investor’s Edge launched the Virtual Investor Forum: COVID-19 & Oil Price War Impacts in mid-March. From 16-20 March, we hosted 15 live interview and Q&A session with nine top firms from each segment of shipping, several major bank analysts, industry experts, and shipping journalists. All sessions were available for members of our platform, with free trials available, and media passes open for all journalists, student researchers, and press members.

We did our part to gather the best information in the world, and over the coming days and weeks, I will be sharing our top lessons learned as we position ourselves appropriately for these markets. Last Thursday, we shared our full interview with International Seaways (INSW) in podcast format as well as the full associated transcript.

After hearing from major bank analysts, industry experts, and nine companies across the containership, crude tanker, product tanker, LNG, LPG, dry bulk, and ship financing sectors, we capped off our forum with a big picture interview with Lori Ann LaRocco, an established industry journalist and author, who is also a frequent trade pundit and contributor for CNBC.

Her interview offers some broad insights which are important for the markets, so I’m glad to share those publicly as we lead off a series of lessons learned.

Lori Ann LaRocco: Journalist & Author Perspective

I’ve been familiar with Lori Ann’s writing for several years, dating back to her excellent book on founding shipowners: “Dynasties of the Sea,” which she published in late-2012, just a couple years after I started covering the sector in extensive detail. In summer 2018, she published the sequel “Dynasties of the Sea: The Untold Stories of Postwar Shipping Pioneers,” which covered several of the more modern titans we are familiar with.

Most recently, when we were dealing with the US-China Trade War, and the continual political bickering and misleading stats involved, Lori Ann researched direct trade data and published, “Trade War: Containers Don’t Lie, Navigating the Bluster,” which was an incredibly timely addition last November.

Although the majority of the ‘Trade War,’ has since softened to a Phase 1 trade deal, which everyone has forgotten about during the COVID-19 outbreak , the lessons learned from that research process are absolutely relevant for someone who wants to monitor the impact of today’s pandemic.

To see the full article, click here.