Tuesday, November 3, 2020

How Will the US Election Result Affect the Oil Tanker, Dry Bulk and Container Trades?

Blog Aims to Foretell the Future
Shipping News Feature

US – When analysts pronounce how the future will evolve as they see it, having a large spoonful of scepticism on hand is always advisable. There are however those amongst them who can back up the speculation with facts and this week we see a blog published ahead of the US election which takes a look at what each candidate may offer three major shipping sectors if elected.

VesselsValue (VV) is one site which regularly updates the considered cost of buying and selling merchant ships and is not afraid to predict where it sees these going. Interesting then that, as we await the count in the current US presidential election, the site has published a blog on how the different shipping divisions may fare under each if the potential leaders.

The blog, which can be read in full here, postulates that Biden’s favouring the new energy modes compared to Trump would not suit the US oil tanker market. US fuel production has risen under the current administration and the long haul to Asia has forced up tanker market rates. To impede US shale production and fracking, as many expect Biden to do, would slow US production with a return to more traditional Middle Eastern producers to fill the gap.

VV says crude tanker cargo miles from the US increased by an impressive 159% in the first year of Trump’s presidency. Since 2017 cargo miles have very nearly doubled again. Sanctions imposed by Trump on Venezuela and Iran, amongst others, have somewhat benefitted US crude exports, and indications are he would continue to follow such policies.

These moves have both positive and negative effects as can be seen on the blog illustrations whereas overall the effect of the Trump presidency on bulk tankers is seen as almost entirely negative. VV says the Dry Bulk trades from the US to China have been much less consistent of late and it is suspected that Trump’s trade war attitude is not favourable to the US in this sector, whereas the outcome if Biden wins toward Chinese trade is uncertain to say the least.

The trade war attitude of course bleeds into the container market. Any restriction of tade between the two is likely to hit US box shippers hardest. If Biden wins his party line is for a bigger stimulus package in light of the coronavirus which theoretically means more consumer spending and thus more work for the container ships, with a warning that this would be flushed away if shipping lines proceed to over order more new ships as a result.

The blog concludes that the result is basically a two to one win for Biden. Oil tanker trade buoyed by Trump’s blacklisting of some fleets and his production policy make him the favourite for those vessels whereas Biden would damage production in the search for new energy sources.

Biden breaks the tape however in both Bulker and Container markets which have laboured under Trump protectionism and the continuing trade war with China. There are however no certainties, and with the election result still in question (and we suspect likely to be argued over for a while whatever the outcome) you would need a reliable crystal ball to foretell what will happen, particularly as the Covid-19 situation is not any more so much an outbreak, as a new way of life.

Photo: One of the VesselsValue illustrative graphs.