Shipping is reeling from what could be the most
seismic decision to effect the industry yet in the opening weeks of Donald
Trump’s second term in office. The
American president will make a decision, likely in around a month’s time, on
whether to carry out suggestions made by the office of the US Trade
Representative following an investigation carried out over the past year into
China’s growing dominance in maritime, especially in the realm of shipbuilding.
The USTR report cites artificially suppressed
labour costs, forced technology transfer and intellectual property theft among
a raft of accusations levelled at Beijing.
The trade office has recommended potential fees of up to $1.5m per port
call for Chinese-built vessels, $1m per port call for operators of
Chinese-built ships, and mandatory US-flag shipping requirements with March 24
set as the deadline for public comments to be made after which the president
will make his decision.
The majority of ocean-going ships would pay the
maximum port fee given their net tonnages, according to analysis by Jefferies,
an investment bank.
“These fees would
likely require re-organizing fleet patterns and make US calls more lucrative on
a freight rate basis, which operators would aim to pass on,” a note from
Jefferies stated.
The most affected sector is likely containerships
given their multiple port calls. ...Were
Trump to approve of the USTR measures, Dutch bank ING said the ripple effects
will impact global supply chains, investor confidence, and international
relations, creating even more uncertainty further on, as businesses grapple
with enduring low arrival reliability with potential new disruptions and
increased costs.
As with many industries, China has come to dominate
shipbuilding this century, moving from a global market share of less than 10%
of the global orderbook to a commanding two-thirds stranglehold by the end of last
year. The US, by contrast, has a market share of just 1%...A spokesperson for China’s Ministry of Commerce in Beijing commented on
the USTR’s recommendations: “The US measures will not only fail to revitalise
its shipbuilding industry but will also raise shipping costs on related routes,
exacerbate its domestic inflation, reduce the global competitiveness of US
goods, and hurt the interests of its port operators and dockworkers... “As
the Trump 2.0 reality show unfolds, as it does daily, often with singular
market-moving tweets, we might as well suspend trying to make credible
forecasts of future supply-demand balance across shipping sectors. Underwhelming spot earnings render
shipping sentiment downbeat while we seek greater clarity on today’s geopolitical,
trade and social threats,” noted a recent report from broker Hartland Shipping.