china usa

China-US trade war won’t affect global container supply chains

The trade dispute between the US and China could have fewer ramifications across global container supply chains than initially thought.

According to new research from Drewry, although the transpacific trade, particularly headhaul eastbound, is expected to be hit hard by the introduction of billions of dollars’ worth of new tariffs, the way China has established itself as the world’s factory means other trades should be less affected.

“Potential losers in this trade war will be those countries that provide the raw materials and semi-finished goods to China that go into the re-export of the final products to the US,” said the analyst. “The US itself could suffer as China uses up some of its exports for re-exports.”

It added: “The thing is that China has developed its manufacturing capacity to such an extent that it barely needs inputs from the rest of the world to support its exports, which should limit the collateral damage.”

Drewry explained that the tariffs were likely to increase demand for manufacturing in countries other than China, which, due to the way many production processes typically involve several tiers of manufacturing with intermediate goods also being shipped around the world, container lines could actually see a volume fillip on other trades from the dispute.

“As final goods sourcing moves to countries currently without the same manufacturing eco-system as China, they will require more intermediate inputs, meaning more production fragmentation.

“Where those links establish themselves will determine how beneficial the process is for shipping lines. More intra-Asia trade will boost demand for shipping services and put a greater onus on smaller feeder ships, whereas greater regional trade in North America and Europe would be less advantageous due to overland opportunities,” it said.

“There will be some short-term disruption to the container market as new trading links are developed, but further fragmentation of production will boost the need for shipping, assuming demand levels are sustained. For the foreseeable future, China will remain the world’s container export hub, albeit a slightly smaller one,” it concluded.

And a senior freight forwarding executive told The Loadstar at the recent Transport Logistic show in Munich that the trade dispute could present a boon for forwarders willing to help shippers design their supply chains.

Essa Al-Saleh, chief executive of Agility, said: “Trade will follow the path of least resistance. People will find other opportunities. Some movements are opportunistic because of trade barriers, some are more long-term, based on labour, regulations or a combination of both.”

“Global supply chains are becoming more complex – there are lots of locations that can add more value, and there are some trends towards making supply chains shorter, some of it due to cost, or predictability.

“Costs are going up in China, but they have built a great ecosystem, that gives it a certain stickiness, so it’s hard to move out. Tariffs will have a negative impact on Mexico. Forwarders don’t just offer port-to-port; it’s end-to-end, and they can add value and service in between.

“You need agility and resilience in the supply chain – products may shift, or there may be quotas – the key thing is to understand the pain point: forwarders are always in demand, it’s never all doom and gloom; it’s about engagement with clients,” he explained.

Source: The Loadstar

container port

Bunker market not ready for IMO 2020

The bunker market is far from ready for the substantial switch in demand to low-sulphur fuel, when the IMO’s 0.5% cap comes into force on 1 January next year, according to the Marine Bunker Exchange (MABUX). 

In an article published by international shipping association BIMCO, the bunker exchange cautions that “shipowners are readybut the bunker market is not” –adding that reports from oil majors regarding the delivery of LSFO (low-sulphur fuel oil) “are concerning”. 

MABUX estimates that the global shipping fleet consumes some 5.3m barrels a day, with about 4m of these being non-compliant after the new IMO regulations kick in. 

Given that the majority of demand is expected to shift to LSFO to comply with IMO 2020, it calculates that the market for some 3m barrels will effectively “disappear overnight”. 

Moreover, the premium for LSFO remains unclear, meaning ship operators cannot properly budget for the increase in their fuel costs, or for that matter advise clients how much extra they expect them to pay. 

“The 0.5% fuel is not physically in the market right now… we have only futures with delivery time in December 2019,” said Sergey Ivanov, director at MABUX.

We do not have all the answers as to when, where and how much, making it difficult to forecast what the exact margin will be between high-sulphur fuel oil (HFO) and LSFO,” he said. 

“Right now, we see that marine gas oil trades at a premium of about $250 per ton more than HFO, but the forward curve forecast is that it may rise to about $380 per ton at the beginning of 2020,” said Mr Ivanov. 

MABUX understands, from its discussions with the main global bunker suppliers, that the first regular deliveries of the maximum 0.5% compliant fuel to bunker ports around the world is expected some time in the third quarter. 

Operators with ships that do not have scrubbers installed, which enable vessels fitted with the exhaust gas cleaning systems to continue to burn HFO, will need to start cleaning their tanks and replenishing with LSFO several weeks before the IMO 2020 regulations come into force. 

And in discussions with the oil bunker suppliers, a confusing outlook has emerged. 

One oil major surveyed by MABUX said it would be delivering LSFO to 18 ports in the world, including main hubs, and would continue to deliver HFO to 15 ports. Another said it would only be delivering LSFO to seven ports, for now. 

“This picture suggests the question of availability of very low-sulphur fuel is critical at this point. No one is sure that there will be enough LSFO in all the main ports in the world,” said Mr Ivanov. 

“In our view, shipowners are ready. Many are in a position now where they can say ‘give me compliant fuel and I will adjust my power system, I will train my crew and start using it’.

“But they need the compliant fuel and they cannot get that now. They do not currently have much choice. Many of them are ready, but the bunker market is not,” he warned.

Source: The Loadstar

china usa

U.S. begins collecting higher tariffs on Chinese goods arriving by sea

The United States began collecting higher, 25% tariffs on many Chinese goods arriving in U.S. seaports on Saturday morning in an intensification of the trade war between the world’s two largest economies and drawing retaliation from Beijing.

U.S. President Donald Trump imposed the tariff increase on a$200 billion list of Chinese goods on May 10, but had allowed a grace period for sea-borne cargoes that departed China before that date, keeping them at the prior, 10% duty rate.

The U.S. Trade Representative’s office in a May 15 Federal Register notice set a June 1 deadline for those goods to arrive in the United States, after which U.S. Customs and Border protection would begin collecting the 25% duty rate at U.S. ports. The deadline expired at 12:01 a.m. EDT on Saturday

The tariff increase affects a broad range of consumer goods, and intermediate components from China including internet modems and routers, printed circuit boards, furniture, vacuum cleaners and lighting products.

Earlier on Saturday, China began collecting higher retaliatory tariffs on much of a $60 billion target list of U.S. goods. The tariffs, announced on May 13 and taking effect as of midnight in Beijing (1600 GMT), apply additional 20% or 25% tariffs on more than half of the 5,140 U.S. products targeted. Beijing had previously imposed additional rates of 5% or 10% on the targeted goods.

No further trade talks between top Chinese and U.S. negotiators have been scheduled since the last round ended in a stalemate on May 10, the same day when Trump announced higher tariffs on $200 billion of Chinese goods and then took steps to levy duties on all remaining Chinese imports.

China ordered the latest tariff increases in response to Trump’s move.

Trump has accused China of breaking a deal to settle their trade dispute by reneging on earlier commitments made during months of negotiations. China has denied the allegations.

Beijing has grown more strident in recent weeks, accusing Washington of lacking sincerity and vowing that it will not cave to the Trump administration’s demands.

Its rhetoric has hardened particularly since Washington put Chinese company Huawei Technologies Co Ltd on a blacklist that effectively bans the firm from doing business with U.S. companies.

Source: Reuters.com

lng gas

Carriers turning to scrubbers to comply with IMO 2020

Around 16% of the ocean carrier global fleet – equating to 36% in terms of teu capacity – will be equipped with exhaust gas cleaning scrubber systems to comply with the IMO 2020 0.5% sulphur cap.

Ships with approved scrubber systems installed will be allowed to continue to burn heavy fuel oil (HFO) after 1 January next year, but other vessels will need to bunker with low-sulphur fuel oil (LSFO), which is expected to carry a premium of around $200 per tonne.

And with ultra-large container vessels (ULCVs) consuming upwards of 100 tonnes a day at sea, the cost savings for a voyage with scrubber-fitted ship are likely to be substantial.

The consultant estimates that, according to a survey, more than 840 containerships are set to be equipped with scrubbers, for a total capacity of 8.09m teu, which includes 590 planned retrofits.

It said: “With the cost of scrubbers falling rapidly, to just $3-$5m a unit compared with $5-$8m a year ago, the scrubber option has become more attractive for owners.”

It noted that several carriers, including Maersk Line and Hapag-Lloyd, which had initially expressed doubts over the use of scrubbers, had “changed their minds”.

However, carriers that expressed scepticism or simply sat on the fence seem to have lost the cost-saving initiative to rivals that were in the scrubber camp from the moment the IMO approved the low-sulphur regulations in late 2016.

Famously, MSC’s chief executive called its strategy to install scrubbers on many of the ships in its fleet as a “no brainer”, whereas Maersk and Hapag-Lloyd’s executives argued that the use of exhaust gas cleaning systems was “not the long-term answer”.

Of the 12 top-ranked carriers, Alphaliner said, MSC had the “most extensive scrubber programme”, with more than 200 ships expected to have systems installed. Second is Taiwanese carrier Evergreen, with a retrofit and newbuild scrubber programme for around 140 vessels.

CMA CGM has “already committed” to 80 scrubber units, said the consultant, a number that is expected to climb to over 100 units by 2021.

Elsewhere, ambitious South Korean carrier HMM plans to have over half of its fleet of more than 50 ships equipped with scrubbers, and has made its strategy for IMO 2020 compliance a key part of its planned recovery from heavy loss-making.

Meanwhile, Maersk has said that it would install scrubbers on around 10% of its ships, and has allocated $263m for its owned fleet. It will supplement this with an unspecified number of chartered vessels fitted with scrubbers.

Carriers will need to begin bunkering ships not fitted with scrubber systems with LSFO in the final quarter of the year, in order to be compliant with the new IMO regulations.

Source: Alphaliner / The Loadstar