The mounting trade tensions between China and the USA, combined with the latter’s protectionist policies towards its other trading partners, have plunged global shipping markets into a continuing state of uncertainty.
Due to the US tariffs imposed on China and China’s countermeasures, bulk shipping markets were already facing uncertainty, and the USA’s negotiations with Canada, the EU and Mexico on steel and aluminium tariffs could throw another spanner in the works, wrote World Grain on 7 August.
A change in these trade flows could have far-reaching implications for bulk markets and grain traders due to impacted vessel availability later in 2018, whether that availability was higher or lower.
Peter Sand, chief shipping analyst at international shipping association Bimco, said the trade war could “derail the current global” upswing in shipping, the highest since 2011.
In addition to the tariff threats across three continents, it was expected that China – the largest importer of US soyabeans – would turn to Brazil to make up for imports it was set to miss from the USA.
In Brazil, however, a truckers’ strike in May over fuel costs had led to nearly every leading export port closing to trucks during the busiest soya export season.
The backlog caused by the strike was projected to take weeks to clear with, for example, queues at the Port of Santos reaching over 50 vessels by early June, World Grain said.
Additionally, vessel delays at ports in southern Brazil could increase quickly if soyabean exports delays began to overlap with the start of the corn export season, said David Ross, national manager of cargo port and agency specialist Alphamar Agencia Maritima.
According to Ross, the timing of the truck strike was especially troublesome for soyabean exporters because of the value crash of the Brazilian real compared to the US dollar from March to May, a time when Brazilian soyabean was even more popular than usual due to poor output from Argentina.
“Even though the USA might come back at full force, buyers, particularly from China, are going to need pretty much all of the Brazilian cargo to make up for the loss of Argentina,” Ross said.
Finally, shipping prices continued to increase in 2018, with rates for various vessel sizes being up by 25-27% in the first month of the year compared to the same period in 2017.
Word Grain wrote that unless ship owners drastically sped up their ships – which was unlikely – higher freight rates could last until 2018 and beyond.
As a silver lining, Rahul Kapoor, Asia Pacific transport analyst at Bloomberg Intelligence, said shipping would be the big winner if the China-USA-EU trade tensions thawed and demand risk fell.
“Soyabean imports, which have bolstered demand for small- and medium-sized dry-bulk vessels in recent years, will likely increase as the USA send more of its agricultural exports to China,” said Kapoor.