World Grain - July 2018 - 48
Shipping markets in
over trade war
Disputes about trade policy causing supply chain uncertainty
here is much talk in the grain and shipping sectors about how new technology is creating upstart "disruptors" eager to secure their own piece
of the trading or transaction pie from incumbents. But
as World Grain went to press, it was traditional disruptions in the shape of industrial action and trade wars
that were causing supply chain mayhem.
The rumbling "Trade War" between China and the
United States was an open question as summer approached with new U.S. trade policy pronouncements
- often contradictory - creating fresh challenges on
an almost daily basis for those charged with supply
chain and freight procurement and planning.
The "Will They, Won't They" negotiation narrative
was certainly still alive and kicking in early June.
This left U.S. farmers in a strange kind of limbo.
On balance, it seemed most likely that a range of tariffs would be imposed on China by the United States
and this would result in threatened retaliation against
U.S. farmers being realized. But as World Grain went
to press, both sides still had opportunities to pull back
from the brink.
A SECOND FRONT
The standoff meant the situation for shippers and shipowners was consistent only in its random volatility. Bulk
shipping markets faced further uncertainty as the United
States decided one trade war was not enough and raised
the stakes in negotiations with its European Union,
Canada and Mexican allies over steel and aluminum tarLIIVXVLQJQDWLRQDOVHFXULW\DVMXVWL¿FDWLRQIRULWVDFWLRQV
If a compromise is not reached, on June 20 the E.U. will
reveal new tariffs on U.S. goods in response.
This second front in Trump's War could have major
implications for bulk markets and grain traders. The
United States imported a total of 32 million tonnes of
aluminum and steel products due to be tariffed via the
sea in 2017, while the E.U., Canada and Mexico were
responsible for exporting 8 million tonnes, equivalent
to 160 Handymax loads, according to shipping assoFLDWLRQ %LPFR$Q\ FKDQJH LQ WKHVH FDUJR ÀRZV ZLOO
affect vessel availability - positively, negatively and
perhaps both - later in the year.
³7KH86LVQRZ¿ULQJVKRWVDJDLQVWORQJWHUPDOlies in something that could soon become a full-blown
trade war," commented Peter Sand, chief shipping
analyst at Bimco. "Not only is this affecting the seaborne shipment of steel and aluminum, but the retaliation from the E.U. will also affect the Transatlantic
When the prospective U.S.-China trade war is added to the mix, which, as previously reported in World
Grain, could put U.S. exports of soybeans at risk, Sand
said protectionism now threatened to ruin the best year
for shipping since 2011.
"From a wider perspective, the effect of an escalating
trade war may derail the current global upswing, which
is at its highest point since 2011 and expected to continue," he said. "This will have cascading effects on shipping demand as a whole. Free trade provides prosperity
and is a fundamental principle to cherish and safeguard."
INDUSTRIAL ACTION IN BRAZIL
Which brings us back to the other great disruptor to
grain trades in late spring. It was widely assumed that
China would import as much of Brazil's soybean crop
July 2018 / World Grain / www.World-Grain.com
Igor Strukov - stock.adobe.com
by Michael King