2020 Year in Review
2020 spawned an unprecedented global public health crisis, during which the COVID-19 pandemic disrupted the economy, governments, and the society in which we live; reduced fossil fuel consumption and emissions, and accelerated calls for tangible climate actions; and launched a historic period of civil unrest as widespread protests against racial injustice unfurled around the world.
Revisit our special reports on the most important events of this tumultuous year.Published: December 7, 2020
Global Trade at the Start of the Pandemic
Trade in the Time of Coronavirus
At the onset of the coronavirus' geographical spread in late February and early March, markets began to feel the outbreak's initial implications for global trade—affecting oil and commodities to freight and logistics and more. China's manufacturing output and consumer activity dampened dramatically before countries around the world began implementing lockdowns to contain the spread of the virus, which ultimately constricted global activity.
Throughout the entirety of 2020, the global economic downturn depleted international trade as a result of the disruption to activity and supply chains and changes in the structure of demand.
Key Takeaways
- In February, the spread of coronavirus had already begun taking a toll on factory activity and consumers in China, cutting the potential for increased exports of manufactured products in the near term.
- It also raised the prospect of an interruption in supplies to American businesses—which was particularly sensitive for firms operating just-in-time supply chains.
- The spread of coronavirus outside China and the World Health Organization’s escalation of the outbreak to emergency status continued to stoke fears over weaker energy demand and disruption to key mineral resource supply chains.
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Oil Markets
OPEC+, Oil Price Crash, & Dampened Demand
The COVID-19 pandemic created a cascading series of cataclysms, beginning in March, for oil markets. Economic shutdowns led to the sharpest plunge in global oil demand on record as the coronavirus containment measures constricted mobility. Tensions between Saudi Arabia and Russia triggered an oil price war that, combined with the lockdowns’ depletion of demand, ultimately sent the West Texas Intermediate crude oil benchmark price into negative territory for the first time in history on April 20. Following the crash, the Organization of the Petroleum Exporting Countries and their partners curbed crude oil production by 9.7 million barrels per in May and June, then by 7.7 million barrels per day for the remainder of the year.
The largest coordinated supply contraction covered by an international deal was lifted in December when the OPEC+ alliance decided to gradually increase global oil production by 50,000 barrels per day in January. The group said it will revisit that amount monthly to determine what quota changes will be made. Now, while vaccine-induced optimism has recently fueled higher oil prices, rising infection rates and new restrictions in colder months have left oil markets in a vulnerable state at year-end.
Petrobras Sets Fresh Annual Oil and Gas Production Record in 2020
Brazilian state-led oil company Petrobras set a fresh record for annual output in 2020 on better-than-expected performance at the Buzios Field and improved corrosion-treatment efforts at its subsalt fields, the company said Jan. 7.
"The records demonstrate good operational performance despite the challenging scenario of 2020, with greater focus on world-class assets in deep and ultra-deep waters where Petrobras has displayed a large competitive advantage," the company said.
Supply Chain Risk
COVID-19 Took a Bite Out of Food Supply Chains
The COVID-19 pandemic revealed systemic weaknesses in the global supply chains that bring foot to markets. The crisis caused significant labor shortages, production facility closures, and changes in demand that threatened the successful functioning of such critical infrastructure.
Global farming was burdened by falling commodity prices, labor shortages, and difficulties related to planting, harvesting, and transporting crops as COVID-19 tightened its grip on the world. The global dairy industry struggled with lower demand and a steep decline in prices as the virus' spread wreaked havoc on its supply chains. Meat supply chains' food service demand plummeted in free fall and processing facilities were forced to shutter due to infected workforces.
2020 Review: Pandemic, Discipline and Failing to Fail – What We Got Wrong this Year
Panjiva’s 2020 year-ahead Outlook series provided views on the outlook for over 30 topics across a wide range of global trade, logistics and industrial supply chain subjects.
Read the Full Article2020 Review: COVID-19, Phase 1 and Brexit – 12 Events that Shaped Global Supply Chains
The report reviews the events that were emblematic of the changes in trade policy, logistics sector and industrial supply chain operations in 2020, based on our monthly most-read research review and the c1,200 reports published by Panjiva research in 2020.
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“S” in ESG
Social Justice as a Social Factor
Workplace safety and awareness of human capital have been thrust into the spotlight as key environmental, social, and governance (ESG) factors. Companies were forced to make direct decisions that impacted their employees and communities. Many institutions responded to the pandemic by offering more flexible working arrangements for their employees.
But the most notable development for ESG came at the start of the summer, when several incidents of police violence against Black Americans sparked protests across the country and world and thrust the U.S. into a reckoning. The ongoing wave of civil unrest prompted corporate leaders to prioritize social justice as a social factor. Pressed to show how their policies are contributing to a more equitable, diverse, and inclusive workplace, many chose to publicly condemn discrimination and commit to changing their internal and external practices. Increased awareness and activism among corporate stakeholders pushed transparency and accountability to unprecedented levels.
Key Takeaways
- Of the close to 1,200 ESG-related rating actions made by S&P Global Ratings during April and May, 98% were triggered by the COVID-19 pandemic.
- The pandemic has highlighted the importance of social factors, which could drive more rating actions given the increased awareness and credit relevance of health issues, diversity, inequality, and social unrest.
- S&P Global Ratings expects social bonds to emerge as the fastest-growing segment of the sustainable debt market in 2020. This stands in sharp contrast to the rest of the global fixed income market, for which we expect issuance volumes to decline this year.
Gold
Save Haven Assets
Throughout the crisis, while the price of oil plunged and equities benchmarks skyrocketed and sunk, gold emerged as a safe haven for investors. Gold's rising market price, massive secondary supply, and quarter-over-quarter successes largely cemented its shining status as uncertainty prevailed. However, by the end of the year, gold’s status began to waver as positive news regarding COVID-19 vaccines and relative calm surrounding the outcome of the U.S. elections dampened some of the enthusiasm.
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Healthcare
The Heartbeat of Healthcare
The COVID-19 pandemic has disrupted health care systems operations across the globe without any precedent to respond to. While the deep wounds from the loss of revenues related to government shutdowns of non-essential and non-emergent care may be in the rearview mirror, hospitals and systems in the U.S. are likely to continue to experience an uneven financial recovery into 2021.
Notably, this crisis encouraged dramatic innovation to meet global needs. Established pharmaceutical manufacturers and new entrants raced to complete clinical trials of their experimental coronavirus vaccines in record time—and less than a year after the contagion was identified, safe and effective vaccines are already being distributed to the public.
Insurtechs Lift Global Insurance Sector's IPO Total to $3.83B in FY'20
Global insurance and insurtech companies raised about $3.83 billion from IPOs in 2020, the largest amount in at least five years, while the 2020 fourth-quarter total of $1.59 billion was the biggest for the final quarter of a year since 2015, according to an S&P Global Market Intelligence analysis.
The insurance industry also recorded 20 IPOs in 2020, the most since at least 2015, and nine flotations in the fourth quarter of that year, the most since the last three months of 2017.
Banking Sector Under Pressure
Loan Loss Provisions
With the economic downturn caused by the coronavirus pandemic, U.S. banks in 2020 had to prepare for the likelihood of elevated borrower defaults and more than doubled their allowances for loan losses.
This, on the back of about $115 billion of provisions in the first half of 2020, represented major progress toward absorbing the loan losses likely to result from the economic downturn.
For Nordic banks, oil-related exposures started to cause problems since the onset of the coronavirus crisis, but quarter-over-quarter financial results indicated that the region's lenders otherwise avoided the worst impact of the pandemic. Most of Europe's largest banks were able to strengthen their ability to mitigate the negative effects of the coronavirus pandemic after posting higher core capital ratios, while mid-sized and small Chinese banks set aside more cash as loan loss provisions than they earned as net profit in the first half of 2020.
U.S. Corporate Bankruptcies End 2020 at 10-Year High Amid COVID-19 Pandemic
U.S. corporate bankruptcies reached their worst levels in 10 years in 2020 as the coronavirus pandemic upended global industries and struggling companies faced their breaking points.
Read the Full Article2020 Anything but More of the Same; Track Where U.S. PE Activity Was Announced
Market participants predicted fundraising in 2020 to remain in line with previous years. Limited partners continued to commit to private equity funds in the aftermath of the outbreak, but the pandemic deepened a market bifurcation between firms able to raise large sums and those that were already facing difficulty in winning allocations.
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Energy Transition
COVID-19 Marked a Pivotal Moment for Climate Policies and Energy Companies
The COVID-19 pandemic is one of the most severe economic and energy shocks in modern history. On top of the massive disruptions to business, mobility, and everyday life, there clearly will be longer-lasting implications for the energy transition away from fossil fuels. While the shocks from the pandemic are leading to reductions in fossil fuel consumption and emissions, they will not be enough to put the world on a path to meet 2 degree global warming target, nor bring forward peak oil demand, nor drive coal consumption to near zero.
Key Takeaways
- COVID-19 has reduced long-term world oil demand by 2.5 million barrels per day. Not all adjustments to the demand outlook were downward. That decline is, however, not enough to substantively bring forward the year of peak oil demand that S&P Gobal Platts Analytics projects for the late 2030s.
- COVID-19 has altered three fundamentals drivers of emissions: macroeconomics, behaviors, and policy, that combined will lower energy sector CO2 emissions by 27.5 gigatons over 2020-2050.
- However, this is only a minor step in the direction needed to meet the 2 degree target, which would require more than 10 times that reduction over the period.
- While changes in travel behavior typically do not meaningfully affect natural gas or coal demand because those fuels are not commonly used in the transportation sector, there will likely be second-order effects.
Cyber
Cyber Risk: The Other Virus Threat
The COVID-19 pandemic has forced almost all organizations to speed up their digital transformation priorities, which has increased systemic vulnerabilities to cyberattacks. Some corporates and financial institutions have doubled-down on information technology spending and infrastructure to ensure business continuity. New security technologies came to the forefront as the latest defenses for corporate cybersecurity.
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Climate Risk
What Comes After the Wildfires in the West?
Beginning with devastating bushfires that blazed across Australia and ending with millions of acres of the Western U.S. scorched after months of inferno, this year the global community confronted a new era of climate-driven disasters. Disastrous wildfires and rolling blackouts in August 2020 forced the Western U.S. to confront a new era of climate-driven disasters. In particular, the crisis in California and surrounding states forced communities, businesses, energy companies, and policymakers to face the immediate physical risks of climate change by
As the warming climate continues to disrupt conventional power systems, leaders are facing a critical moment to take a unified approach in order to mitigate the detrimental consequences of climate change.
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2020 Elections
Climate Action Under Biden
President-elect Biden has announced sweeping plans for a clean energy revolution, but without a Democrat-controlled Senate, his climate agenda will likely be limited. The stakes are high for the U.S. energy and commodities sectors as the new administration is expected to bring a different approach to shaping energy, climate, and trade policy. Biden’s announcement that he will reenter the U.S. into the Paris Climate Agreement raised hopes that the move will create momentum to fight climate change and advance technological innovation. The president-elect also unveiled key nominations and appointments to his climate change team, confirming reports on his choices for major cabinet positions that will be instrumental to his plans for slashing carbon dioxide emissions nationwide.
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Caregiving Crisis
COVID-19 Could Rapidly Expand Family-Leave Policies While Also Dealing a Serious Blow to Women in the Workforce
For employees worldwide, the coronavirus crisis has caused a clash of professional and personal responsibilities, and presents an urgent question for companies that want to retain their talent: How do you create policies that allow employees to balance career and family—both during a pandemic and beyond?
As such, many institutions have responded to the pandemic by increasingly offering more flexible working arrangements for their employees. Companies also recognize that meeting employees’ needs supports their bottom lines, and offering more family-friendly benefits tends to produce higher returns. However, some companies aren’t as familiar with the issue of family caregiving for adults, and instead favor supporting parents. Fears that current conditions will become permanent and significantly set back women’s participation and advancement in the workforce have crystalized. Flexibility and support, coupled with better leave policies, can help employers find and keep female talent.
Key Takeaways
- S&P Global, in partnership with AARP, examined Corporate America’s family-leave policies by analyzing the relationship between family-friendly benefits, turnover, and company performance—since the U.S. private sector has largely taken the lead in such policies.
- While some federal paid leave mandates have been introduced in the U.S. since the pandemic began, these mandates may not be long-term and don’t apply to the largest companies in America.
- The first piece of research, published in October 2020, was from the perspective of employees and showed that offering more flexible policies may be one way to prevent the COVID-19 crisis from dramatically hurting women in the workforce.
- The latest research, published in December 2020, confirmed that U.S. corporations are increasingly offering more flexible working arrangements for their employees, but shows that some companies see greater benefits into supporting parents rather than family caregivers of adults.
Vaccine
Will the COVID-19 Vaccine Cure All?
The COVID-19 pandemic has placed much of the hope of returning back to normal on the pharmaceutical industry to develop treatments and vaccines. Following the completion of several stages of clinical trials, safe and effective vaccines developed in record time by Moderna Inc. and Pfizer Inc. have left warehouses and are already being distributed to the public worldwide. The next crucial steps toward a new normal and economic recovery will be widespread availability, distribution, and administration. Healthcare executives, however, say building trust with the public is the next hurdle in combating the pandemic. Following decades of consolidation, the global vaccine market offers stable and healthy revenue growth, significant barriers to entry, and good profitability, broadly comparable with the broader pharmaceutical industry.
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