March 27, 2020 | By Semi Assimakopoulou and Kostis Chatzimichalis
China is now restricting vessels arriving from nine countries including the U.S. and Singapore in efforts to limit the spread of coronavirus by visiting ships and their crew, according to Bloomberg.
What if the whole world — or a large part of the world — started imposing such quarantines? What would longer voyages mean for overall vessel availability?
MR1s, with shorter average voyage lengths, would be most impacted
“Partial Quarantine”= a 14 day quarantine imposed only on vessels which originated in Japan, Korea, Iran, France, Germany, Spain, the U.S.A, Singapore, and Italy. “Global Quarantine” = all vessels subject to quarantine, regardless of origin.
VLCCs, which typically have ballast or laden legs exceeding 14 days, would be minimally affected by the imposition of both a partial and a global quarantine.
Assuming that demand stays the same, we could see a significant impact on vessel supply of a similar order of magnitude.
Which countries, if made part of the quarantine, would account for the greatest increase in total voyage duration?
Countries where volumes are high and short laden legs originate would contribute a larger percentage of increase in total voyage duration, if global ports were to add them to their list of quarantine countries.
Here are the countries that would account for the greatest percentage increase in total voyage duration across all vessel classes, should they be included in a 14-day quarantine scenario. For example, a quarantine applied to voyages originating in Russia would alone account for a 4.72% increase in total voyage duration.
Additional commercial impacts of quarantines
The global or partial imposition of 14-day quarantines will certainly shape the tanker shipping market.
Of course, we may also see a decrease in vessel demand that could blunt the impact of reduced vessel supply in the market.
One of the most significant impacts may be that the dollar-per-ton rate of short voyages could become much more expensive compared to long-haul voyages.
Longstanding trade routes may experience a disturbance as charter parties seek to avoid calling ports where additional quarantine-related wait times are required.
We will continue to monitor the situation and update our analysis as new developments come to light.
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To produce this analysis, we leveraged Signal Ocean Technology, and used Signal Maritime’s data. We looked at the length of the ballast and laden legs for all voyages that occurred since January 1, 2019, across MR1, MR2, Panamax, Aframax, Suezmax, and VLCC (dirty and clean segments) and adjusted the corresponding duration to reflect the imposition of a) a partial global quarantine and b) a global quarantine. We ignored delays due to canals crossing, bunkering operations, repairs, etc.
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