According to the World Shipping Council, the main shipping route across the world is Asia – North America. China and the United States are the main exporter and importer respectively, so they play main roles in terms of shipments movement in global maritime trade. But, with the current commercial tension between them, how is the maritime industry being affected?
Last year we saw the beginning of what was named a trade war between the United States and China. The first action was carried out by the United States when they increased the freight rates through duties on more than a thousand Chinese products. The decision was based on alleged unfair trade practices from China.
In response, the Asian country also decided to increase the freight duties on 120 American products. Since then, several actions and reactions of the same kind have taken place. The sanctions will probably continue to escalate on intensity since neither party wants to give in at negotiations.
Meanwhile, in the middle of this dispute, there is a network of ports, shipping companies, and other suppliers of the global trade supply chain, already living the consequences of this commercial tension, both positive and negative.
What has been this war’s effect on the maritime industry?
Without any doubt, when there is a trade war there is a reduction of import and export to and from the countries in conflict, so the shipping lines are the ones mainly affected. Whenever cargo volume decreases, rates go through variations. It becomes then another factor to justify why are freight rates constantly changing, especially when it comes to the routes involved with both countries.
Maersk, for example, had a container volume growth lower than expected in the second half of 2018. Plus, in the first quarter of this year, it faced a loss of 659 million dollars (589 million euros), with a volume reduction of 2.2%, although its revenues increased by 1.7%. However, Maersk continues to warn about the impact of trade tensions and freight rates increases on the maritime industry.
But not everyone loses. Mexico has taken advantage of the tension to expand within the North American market, increasing its trade by 3% during the first quarter of this year, according to the IMF.
Large players in the maritime industry, that are currently operating in China, are moving to Mexico or opening headquarters in this Central American country to avoid being affected by the US sanctions. Such is the case of Fuling Global (a Chinese plastic and paper utensils manufacturer) and GoPro (an action cameras manufacturer), who announced their operational arrival to Monterrey and Guadalajara, respectively.
Watching such business decisions, it is easy to anticipate an increase of the Mexican ports’ activity, which also now has the longest western breakwater in Latin America at Veracruz’s port. It is very fortunate to receive an increase in its operational logistic flow, taking full advantage of its strategic location at the Gulf, with maritime transport connections that reach to the north, the center and the south of America, Europe, and Africa.
Right now a cease of this tariff war seems unlikely in the short term, so we will have to wait to get to know which other consequences it brings to the maritime industry, and which opportunities it will offer to the sector companies.
