The newly released 2020 map shows a major shift in sentiment. The economic-crisis marker shifted far to the right on the likelihood axis and up even further on the impact axis. Pandemics were added to the risk landscape, and the big fear in 2018 — cyberattacks — dropped further in the rankings. In addition, respondents saw a higher likelihood of insufficient access to ship finance.
To put concerns into numerical terms, survey respondents’ view of the likelihood of a global economic crisis in the next 10 years increased from 2.88 on a scale of 1-4 in 2018 to 3.59 this year.
The survey was conducted between late April and June, and respondent commentaries were collected between June and August. That timing — in the middle of a pandemic — heavily swayed the answers.
“An overwhelming majority, 93%, said the pandemic made a global economic crisis much more likely,” noted Marcus Baker, global specialty head of marine and cargo at Marsh, during a web presentation on the results Tuesday.
Comments from respondents pointed to the likelihood of “more bankruptcies, consolidations, scrapping of older tonnage and a lower rate of newbuildings,” he said.
Even if owners wanted to order ships, they would have more difficulty finding the money to do so. “When we talked about [lack of] access to finance, almost half of our respondents said that was more likely compared to last year,” said Baker.
COVID effect on decarbonization drive
Economic fears might be curbing new orders more than regulatory fears, but regulatory uncertainty is alive and well.
In this year’s impact rankings, decarbonization ranked second and new environmental rules fourth. In the likelihood ranking, new environmental rules ranked first (above global economic crisis, which came in second) and decarbonization sixth.
But what if economic crises and pandemics leave shipowners unable to pay for the design upgrades and new fuels they need to decarbonize? What if the governments and major cargo interests that will have to bear the higher transport costs of “clean” ocean shipping don’t agree to the rules — because they’re in the midst of economic or geopolitical crises?
According to GMF Head of Research Kasper Søgaard, “The answers were quite split. On the negative side, concerns were raised about whether there will be a lack of resources in an economic crisis to invest in cleaner ships and new fuels.
“But there were others who noted the potential to align the need to invest, especially on the government side to create economic activity, with the need to build a more sustainable shipping industry and support the decarbonization of shipping.
“It’s a mixed picture. On one hand, if our industry is making less money and needs to deal with the urgent issues of the day, will we have the capital and long-term investment horizon to make these investments?
“On the positive side, pressure seems to be growing in terms of decarbonization in the financial sector, from customers and from governments. So, there may be an opportunity to actually accelerate this.
“Time will tell,” said Søgaard. “Both views are out there. But there is definitely not a sense that this [decarbonization] is becoming any less important. On the contrary.