BIMCO hopeful ‘world trade will not implode’

Impact to shipping hinges on eastbound transpacific volumes, says analyst Peter Sand.    BIMCO is expressing concern that a trade war between China and the United States could drag down freight rates and hurt the shipping industry.
   “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. I am still hopeful that world trade will not implode and encourage the involved parties to avoid a brutal and harmful escalation that will affect the shipping industry badly”, says Anastasios Papagiannopoulos, the president of BIMCO and principal of dry bulk shipping company Common Progress.
    BIMCO says in a note that while there has been a lot of concern about how Chinese plans for tariffs on U.S. pork, fruit and wine may hurt the U.S. exporters, “the potentially lost TEUs containing these goods doesn’t really matter to the transpacific shipments on containers.”
   BIMCO Chief Shipping Analyst Peter Sand notes that “in many aspects, backhaul shipments (in this case on the westbound transpacific trade lane) only serve to cover a part of the repositioning costs of a ship to the next fronthaul voyage — they don’t generate profits.
   If eastbound transpacific or fronthaul volumes go down, he said oversupply of ships will develop, “causing utilization to drop alongside freight rates and earnings on the transpacific networks.”
   “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 U.S. than the other way around, that part of the trade is the constraining element in the optimizing matrix,” says Sand.
   He said Drewry’s senior manager for container research Simon Heaney projects that 1.8 million TEUs of Chinese imports from the U.S. and up to 3 million TEUs of exports from China into the United States could be subject to these higher tariffs. Sand said nearly 2.5 percent of total global container trade could be affected.
   “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, aluminum and soya beans,” Sand said.
   BIMCO says it has around 2,000 members, including shipowners, operators, managers, brokers and agents, making it the largest international shipping association.