Page 46: of Maritime Logistics Professional Magazine (Mar/Apr 2018)

45 47

BULK CARRIER REPORT

Bulk Shipping:

The Trump Impact

Political risks: these are the bane of in- impact will be even heavier.

dustry forecasters because of their unpre- Then there are the effects of any retalia- dictability and, by defnition, uncertain tion. These are more diffcult to quantify, consequences, are omnipresent, with the as the measures exist only as threats so potential to quickly impact trade fows. far and the commodities involved would

Addressing perhaps the biggest political be varied. In some cases, ship operators variable in more than four decades, Mr. could beneft. For example, China is plan-

Rahul Sharan, lead drybulk analyst at ning to import soybean from Brazil and

Drewry, offered a carefully worded view Argentina instead of the US as a protest of the impact of newly announced U.S. against the steel tariff, which would mean steel tariffs on drybulk shipping, with a a substantial increase in tonne-miles.” focus on the Handymax and Supramax Speaking at the Morgan Stanley con- sizes predominating in the movements ference (two weeks prior to the “Trade of fnished steel products. War” talk), Robert Bugbee, the Presi-

In an OP/Ed published in March 2018, dent of Scorpio Bulk Carriers, said: “A

Sharan opined, “President Trump’s deci- trade war would have more immediate sion to slap a 25% tariff on steel imports and detrimental effects on the container- might not be all bad news, as alternative ship industry than on dry bulk.” trading patterns could lead to an increase Following the Trump/ China volleys, in tonne-mile demand.” This analysis was analysts added necessary qualifcations published just prior to the early April tariff to their views. Jon Chappell, the Equities bombshells being lobbed back and forth Analyst at Evercore ISI, cautioned inves- between Washington, D.C. and Peking. tors, saying “…the segment now faces

Mr. Sharan elaborates, in the Drewry some uncertainty regarding a potential analysis: “Overhauling trade routes to Trade War, and equity investors have and from US will have ripple effects on been quick to protect the downside before dry bulk shipping. If events go accord- any clear conclusions can be drawn. We ing to Trump’s plan, then dry bulk ship- do not pretend to know where the trade ping will lose 32 billion tonne-miles of tariff bluster will ultimately end up and steel demand. Half of all steel products what impact it may have on global dry move in dry bulk carriers, so a decrease bulk trade, but we do know that absent of 13 million tonnes of steel imports political meddling the capacity expan- would mean a loss of 6.5 million tonnes sion outlook for this sector sets the mar- of dry bulk cargo.” ket up very well for continued strength.”

However, Drewry offers the potential Analyst Randy Giveans, who follows for a silver lining, for Handy and Supra- shipping stocks at Jefferies & Company, max size vessels – the workhorses of the took a neutral view. Writing in the midst steel trades. Mr. Sharan suggests that: of the jousting, he said “Although this “Steel volumes from all trade partners news has been generally perceived as apart from Canada and Mexico would negative for shipping, we believe the im- suffer. Even without an increase in Can- pact on ton-mile demand could be mini- ada and Mexico’s share of US imports, mal as Chinese imports and US exports more than 100 Supramax shipments a will not cease, but rather switch to new year would be lost. If other countries trade routes/destinations, further dislo- lose business to the NAFTA pair, the cating the global shipping market.” 46 Maritime Logistics Professional March/April 2018 | |