From World Maritime News:
The end of the escalating trade war between the world’s two super-powers, China and the United States, seems to be on the horizon as the two sides near a deal on ending the tit-for-tat tariffs on export and import of goods.
Following a truce at the end of 2018 and the ensuing trade talks, the focus now is on the enforcement mechanism aimed at making sure the US and China meet their commitments allowing for the tensions to cool down.
According to US Treasury Secretary Steven Mnuchin, the bilateral trade talks have resulted in a mechanism to police the yet-to-be-unveiled trade agreement, which will entail establishment of new enforcement offices and repercussions for whomever fails to meet their end of the deal.
Even though the trade tariffs have had an adverse impact on the shipping market, especially for bulkers and tankers, there are industry leaders that believe the trade tensions were favorable for the container shipping market fundamentals overall.
Speaking at Capital Link’s 13 Annual International Shipping Forum, in a panel dedicated to container shipping, George Youroukos, Executive Chairman of Global Ship Lease, said that the “trade war is the best thing that happened to container shipping in the last few years.”
“Our industry is cyclical not because we have a cyclical demand – every year the demand is bigger than the last year. The reason we have a cyclical market is because of the supply, and the trade war has put the supply in check, putting a break on the ordering of new ships,” he added.
As explained, the lack of new ordering has paved the way for the lowest order book the industry has had in decades. This is very important having in mind that the container shipping sector has been battling choppy waters over the past few years especially due to overcapacity.On capacity:
Furthermore, Youroukos pointed out that he was not worried about the trade wars as he doesn’t believe the production of goods could be switched from the Far East to the Western hemisphere, hence there is no room to fear about trade wars having a major impact on the global container shipping patterns.
Commenting on the trade tariffs, Howard Finkel, Executive Vice President of COSCO Shipping Lines (North America), said that the company hasn’t seen a huge effect on trade as tariffs on certain imports that would have had a greater effect haven’t been put in place yet.
Specifically, in December 2018, Trump agreed to leave the tariffs on USD 200 billion worth of product at the 10% rate, and not raise it to 25% during the 90-day tariff ceasefire.
Nevertheless, Finkel said that there has been a great deal of overbooking over the last six months, as shippers try to beat the tariffs.
Due to overbooking, the West Coast ports of Long Beach and Los Angeles have been experiencing congestion due unprecedented import volumes as larger vessels are being deployed to accommodate increased cargo volumes as tariff deadline looms.
Every aspect of port operations, from labor and equipment supply to vessel and yard operations, to truck and rail availability is being stretched and contributing to congestion, gridlock and delays, as explained earlier by Taiwanese shipping company Yang Ming.
However, commenting on the potential outcome of the trade talks Finkel voiced his hope that “cooler heads would prevail”, allowing for the situation to normalize.
Outlook for the Container Shipping Market
Over the recent period the container shipping market has undergone numerous changes, with major consolidation wave shrinking the number of carriers present in the market and companies switching to different alliances....MORE
June 2016
Future Looks Bleak for Ultra Large Containerships -"A Billion Dollars In Concentrated Risk"
Back in January we mentioned, in passing, that Maersk had even laid-up one of their giant 18,000 TEU triple E's.
Now it appears there may be more to come.
September 2016
Shipping: "Mega-Ships May Be Too Big NOT to Fail"
December 2017
"Shipping Magnates Shock Industry With Huge Orders"
January 2018
Shipping: Today's Word Is 'Overcapacity'
January 2018
Global Fleet Capacity to Bulge as More Containerships are Delivered in 2018; Baltic Dry Index Down 21%, Hyundi Heavy Up
I'm going to have to learn how to say "Boom-and-bust cycle" in Korean.....
March 2018
Shipping: "Charter Market Capacity Crunch Will Put Dent in Carrier Profitability"
What could have been.
Of course you know how this plays out, the capacity will come on-line in 2019 and by 2022 half the names are trying to talk their creditors into renegotiating terms.
August 2018
Shipping: "The Global Container Shipping Industry since the Hanjin Collapse"
From Wolf Street, August 11:
Overcapacity reigns as companies splurge on the largest ships, consolidation rages, no one wants to back off....
January 2019
Drewry: Carriers to Mitigate ULCV Impact by Delaying Deliveries
Carriers would be able to mitigate the capacity inflation of the ultra large container vessels (ULCVs) scheduled to arrive over the next few years by delaying deliveries and slowing services, shipping consultancy Drewry said.
So yes, maybe halting the boom and allowing the shipbreakers to do their bit will end up saving the industry.
