BIMCO: Trade War Would Hurt the Fronthaul Transpacific Leg

Containership MSC PamelaImage Courtesy: MSC

A potential trade war between the world’s top trading partners could lead to a drop in container shipping industry’s volumes on the essential leg of a transpacific voyage from China into the US, according to BIMCO.

“The shipping industry is concerned with a lower level of US containerised imports which may become a result of a trade war between the US and China. If fronthaul volumes go down, oversupply of ships develops causing utilisation to drop alongside freight rates and earnings on the transpacific networks,” Peter Sand, BIMCO’s Chief Shipping Analyst, said.

When container alliances and individual carriers optimize their global networks, which they constantly do, they try to match shipping capacity with that of shipping demand. As more containers move from China to the US, than the other way around, that part of the trade is the constraining element in the optimising matrix.

“The global shipping industry naturally gets concerned when two nations of huge importance to most shipping sectors get in the ring to fight a trade war – gloves off,” Anastasios Papagiannopoulos, BIMCO President and Principal of dry bulk shipping company Common Progress, said.

The US is China’s largest trading partner measured by value – and China is the largest one-country trading partner that the US has.

1.8 million TEU of Chinese imports from the US and up to 3 million TEU exported from China into the US will be subject to these higher tariffs, according to Drewry’s senior manager for container research, Simon Heaney. Nearly 2.5% of total global containerised trade can be affected.

“For the shipping industry, importers and exporters in either country involved in transpacific shipments of containers this uncertainty is a huge burden to handle. As the countdown continues we get ever closer to disruptions – not just of container shipping but also dry bulk shipping in the case of steel, aluminium and soya beans,” Sand concluded.

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