There Is Not Much Change In Rates Vs Q3 & Bulk Carrier Rates Are Marginally Lower QoQ: GE Shipping

Summary

In this insightful discussion, Mr. G. Shivakumar, Executive Director and CFO at GE Shipping, provides an in-depth analysis of the current challenges and trends in the global shipping industry. He addresses the impact of tariff talks, fluctuating crude oil prices, and geopolitical tensions, particularly surrounding Russia and China. Shivakumar discusses the shipping market's fluctuations, with tanker rates seeing a slight decline and bulk carrier rates also dipping due to seasonality. He also highlights the potential impact of U.S. proposals to impose fees on Chinese-built vessels, emphasizing the complexities and uncertainties in the sector's future.

Takeaways

• 😀 The shipping sector is facing multiple challenges due to geopolitical tensions, tariff proposals, and fluctuating oil prices.
• 😀 Crude oil tanker rates have remained relatively stable at about $30,000 per day, with some minor decline in Q4 compared to Q3.
• 😀 Bulk carrier rates have seen a slight decrease, with smaller ships seeing a $3,000-$4,000 lower daily rate compared to the previous quarter.
• 😀 Year-on-year, shipping rates have dropped significantly, with tankers experiencing a $10,000-$15,000 decline and bulk carriers $5,000 on average.
• 😀 President Trump’s proposed tariffs on Chinese-built vessels entering US ports could raise shipping costs, especially as China dominates global shipbuilding.
• 😀 The US tariff proposal suggests fees of up to $1.5 million per ship per port call, which could increase overall shipping costs significantly.
• 😀 The shipping company in question only has a small number of Chinese-built vessels (5), so the impact of potential tariffs would be limited for them.
• 😀 If tariffs are implemented, rerouting ships to avoid affected markets might reduce efficiency but increase the demand and cost for other shipping routes.
• 😀 Geopolitical instability, such as US tariffs and trade disputes, is making it difficult to predict the optimal time for the shipping company to invest in new ships.
• 😀 The US-China trade war had some past effects, like rerouting of oil and grain shipments, and could lead to similar inefficiencies and cost increases if tariffs on other products rise.

Q & A

What is the current situation in the shipping sector with regards to tariff talk and crude oil prices?

The shipping sector is facing a complex environment due to fluctuating crude oil prices, ongoing tariff discussions, and geopolitical tensions. There is some concern about how these factors could influence shipping rates, including tanker and bulker rates.

How have tanker rates changed recently, and what is the outlook?

Tanker rates, specifically for crude carriers, have remained fairly stable around $30,000/day, with slight decreases compared to the previous quarter. However, there has not been a significant upward momentum, and the market remains somewhat stable but weak.

What impact have geopolitical events, such as sanctions on Russia, had on the shipping market?

Geopolitical events, particularly sanctions on Russia and issues surrounding Ukraine, contribute to market uncertainty. These tensions can affect global trade flows and shipping routes, leading to unpredictable shifts in demand for shipping services.

How do seasonal trends affect bulker rates, and what has been the trend in the current quarter?

Bulker rates tend to fluctuate seasonally, with the first quarter of the calendar year being the weakest. In the current quarter, bulker rates are lower than the previous quarter, aligning with the typical seasonality pattern.

What potential impact could US tariffs on Chinese-built ships have on the shipping industry?

If implemented, the proposed US tariffs on Chinese-built ships could lead to higher shipping costs, particularly for vessels entering US ports. Since China dominates global shipbuilding, the potential tariffs could disrupt the efficiency of the shipping supply chain.

What percentage of the global shipbuilding order book does China currently dominate?

China holds a dominant share of the global shipbuilding order book, accounting for approximately 60% of the current ships under construction, which is a significant portion compared to Japan and Korea.

How would the implementation of US tariffs on Chinese-built vessels affect shipping companies like GE Shipping?

For GE Shipping, the impact may be limited as they own only five Chinese-built ships. However, if the tariffs are enforced, they may need to avoid putting these vessels into US-bound trade routes, which would make operations less efficient and increase overall shipping costs.

What is GE Shipping's strategy regarding the purchase of new ships in the current market?

GE Shipping is taking a cautious approach toward purchasing new ships, as ship prices have not yet dropped to attractive levels. The company is waiting for a more stable and favorable market before making any new investments in fleet expansion.

How have trade rerouting and tariffs impacted shipping efficiency in the past?

In the past, tariffs on certain goods between the US and China led to rerouting of trade. For example, China imported from Brazil and Argentina instead of the US, which made trade less efficient but did not have a significant negative impact on shipping. However, widespread tariffs could affect overall economic growth and demand for commodities, which would be detrimental to shipping.

What are the potential positive and negative impacts of tariffs on the shipping market?

The positive impact of tariffs could be seen in terms of a more efficient shipping market as trade routes adjust. However, the negative impact would arise if tariffs reduce demand for commodities, leading to less trade and a downturn in the overall shipping market.