Revenues for ship management companies in Cyprus were hardest hit in the second half of last year due to the impact from the pandemic slowdown, declining by 17% compared to 2019, the Central Bank of Cyprus said in its semi-annual report.
Revenue from ship management declined by 26% year on year in the second half of 2020 with the sector, and particularly the cruise ship industry, negatively affected by the COVID-19 pandemic.
According to the central bank survey, revenue from ship management in the second half of 2020 declined to €430 mln, down 11% from €484 mln in H1 2020 and 26% less than in H2 2019.
Revenue from ship management for the full year 2020 amounted to €914 mln, compared with €1.104 bln in 2019, a 17% year on year drop; 2019 was a record year for the industry, according to Financial Mirror estimates.
According to the central bank survey, the drop in revenue came “as a result of the transport and travel restrictions triggered by the COVID-19 pandemic and the associated decline in economic activity.”
“These changes represent almost exclusively a decline in the passenger ships segment of the industry,” it added, noting that in the merchant ships segment, such as dry bulk carriers, tankers, containers, LNG carriers, the impact was “significantly smaller.”
Total demand or seaborne transportation was estimated to decline by 8% in 2020 due to COVID-19, according to the United Nations Environment Programme Emissions Gap Report.
By May 2020, some segments in global shipping had seen an increase in activity compared with the same period in 2019, though container shipping capacity reduced by 6%, the report said.
It said cargo shipping had been hit because of the downturn in manufacturing that the pandemic caused, which reduced the demand for seaborne trade of manufactured products and base materials.
“As the pandemic rippled across the globe last year, it interfered with typical seasonal patterns of global production and distribution. Factories closed, first in China and then elsewhere, as the world slipped into recession,” the Washington Post explained.
Shipping carriers initially idled vessels to match reduced demand, the newspaper said, adding that as consumers stuck at home began buying desks, computers, backyard fire pits and entertainment systems — and Chinese factories resumed normal operations — Asian exporters clamoured for space aboard cargo ships.
Gradual recovery
A similar optimism is shared in the Central Bank of Cyprus survey.
“The gradual recovery in economic activity that is currently taking place since the beginning of 2021, as well as the global rebound in international seaborne trade should be expected to also benefit the ship management sector in subsequent periods,” the central bank said.
Despite the downturn, Cyprus’ ship management industry remained mainly international in reach as 97% of the revenue came from the management of ships with a foreign flag and only 3% from Cypriot-flagged ships, the survey said.
Furthermore, 42% of the revenue came from Germany in the second half compared to 47% in H1, Greece’s share rose to 12% in H2 from 9% in H1, while Singapore followed with 9% of the revenue.
The share of full management services revenue dropped slightly to 50% of the total revenue in 2020 H2, while crew-management services rose to 47%.
“Nevertheless, these contributions are close to the levels observed in previous periods,” the central bank survey added.
The industry’s expenses in the second half of 2020 amounted to €416 mln compared with €423 mln in H1 2020, a mild reduction of 1.65% and a 2.6% decline compared to H2 2019.
Historically, the industry exhibits a relatively stable structure of expenses, the central bank said, with the majority of spending associated with crew expenses, which accounted for 58% of the total amount in H2 2020.
Most of these payments, or 41%, were directed to non-EU seafarers, while administration expenses accounted for 14% and ship management expenses such as spare parts, lubricants, dry-docking amounted to 28% of total spending.
