Get A Quote
Get A Quote

News & Events

Analysts from Drewry and BIMCO are warning about the effect a trade war may have on the shipping business.
The London-based shipping consultancy Drewry says, “The risk to container shipping from U.S.-led trade wars is currently low, but potentially very damaging.”
In March, the company’s quarterly update to its Container Forecaster report was hopeful of a resolution of trade tensions.
“But at this point in time,” says Simon Heaney, senior manager of container research at Drewry, “we must accept that tariffs are going to become a reality. The only question now is: How severe will they be?
“Additional tariffs of 25 percent on the first list of 818 Chinese products, worth approximately $34 billion, are scheduled to be collected by U.S. Customs from Friday. July 6. A second list of 284 newly recommended products covering $16 billion is currently being reviewed, while there are threats of further tariffs on as much as $400 billion of goods to follow, in response to Chinese retaliation,” he said.
Drewry analyzed “three potential scenarios for eastbound transpacific container trade, based on the intensity of a trade war, ranging from tariffs of $50 billion to $450 billion being applied to Chinese imports.”
“In the worst-case scenario, Drewry calculates that as much as 1.8 million TEU, or nearly 1 percent of world loaded traffic, could be lost to the market over a period of time. As things stand, the impact from the initial two lists of Chinese products alone would be relatively insignificant at around 200,000 TEU.”
Drewry said its research shows that revised lists announced on June 15 “were heavily weighted towards industrial goods, while also being readily available from other trading partners. China only exported about 13 percent of the first list of products to the U.S. last year and around 8 percent of products on the second list.”
Heaney said, “With other sourcing options available, tariff increases on Chinese goods on these initial products lists will most likely create a small amount of trade diversions and raise the prospects of other exporting partners of the U.S.”
Drewry added, “The current risk threat to container demand is relatively low, even when factoring in tit-for-tat measures and disputes with other trading partners, but there is clearly the potential for matters to get much darker if additional tariffs are forthcoming. Perhaps the biggest risk is the unpredictability of it all and the potential confidence knock it will give to the world economy, just when it seems to be finding its feet.”
Peter Sand, the chief shipping analyst for the shipping BIMCO says Peter Sand comments “The trade war adds painful uncertainty for the shipping industry, as it distorts the free flow of goods, changes trade lanes and makes it difficult for ship operators and owners to position ships efficiently in the market.”
BIMCO warns “The trade war is a speeding train, accelerating with every trade-restrictive retaliatory measure imposed and becoming ever more difficult to stop. The long-term effect provides uncertainty and could possibly derail current global growth if the measures are kept or further escalated.”
It notes that even though the world’s three largest economies are involved–the United States, China and European Union, “the effect on shipping, in terms of volumes, is somewhat limited.”
Drewry said the trade disputes take the gloss off the strong demand growth seen in the early months of 2018, driven by a speeding of the world economy.
“There will be some gain for carriers this year in the form of increased demand and slowly improving supply-demand, but a lot more pain,” said Heaney. “Escalating fuel prices have caused us to slash the industry’s profitability forecast to breakeven and while freight rates are expected to rise modestly in the second half of 2018, it won’t be sufficient to turn things around. In some ways, buoyant demand is a problem for carriers right now as every extra box shipped at a loss only amplifies the deficit.”
Sand says “The dry bulk shipping industry has already been affected by the steel and aluminum tariffs and will be hit again when further tariffs come into force in July. However, the impact on the dry bulk shipping industry in terms of volumes remains limited.”
“The same can be said for container shipping, which although containerized goods have been and will be targeted again in July, the number of containers impacted is in the big picture relatively small”.

Source: American Shipper