ALLIED: US-China Trade War Leaving Bitter Aftertaste in Dry Bulk Market

BulkerIllustration. Image Courtesy: Pixabay under CC0 Creative Commons license

The trade war between the United States and China has left a bitter aftertaste in the dry bulk market as the market recovery is slowly being eroded by the recent geopolitical frictions, ALLIED Shipping Research said in its latest update.

Last week witnessed a direct hit on the bulk shipping markets, with China’s announcement to extend its tariffs on imports from the US to several more agricultural products including soybeans.

“With the US holding a fair share of China’s soybeans imports of just over 94 million tons, this is a direct hit on a trade primarily served by dry bulkers and a significant one at that given that most wait for the seasonal peaks this soft commodity brings on to freight rates during the US harvest seasons,” ALLIED explained.

Between October and March each year, the US becomes the main source of soybeans for China, with the largest portion of the 35.7 million tons in total that it ships there annually being imported during this period.

“We have the indirect effects that will be brought about by the proposed US tariffs on a large list of Chinese products, which could well lead to a deterioration in the global trade of dry bulk goods moving forward, taking into consideration that most of these goods rely on raw resources for their manufacturing in one way or another.”

“All this leads to indications of a downward correction on the demand forecasts for this sector, something that will surely shake up the balance and lead to a more modest performance in the freight market,” the consultancy added.

However, the shipping consultancy hopes that the geopolitical tensions will subside and that a deal will be made before any significant consequences are felt.

“In the case that this takes longer than what would be ideal, there is little to worry about given the fact that the expected fleet growth is hovering at relatively low levels, while the orderbook for the next two years is at historical lows.”

“The biggest fear is the combined effects that could be felt by the continued efforts being made in China to curb pollution by scaling back steel produc!on and other industrial activities in several major cities and regions. All this leaves for a cap on coal consumption, another vital commodity for the dry bulk trade, which in combination to the downward pressure on the rest of the commodities (…) could lead the total dry bulk into a perpetual limbo state,” ALLIED concluded.

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