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Trump Trade War - Shipping rates plunge as owners fret

Logistic News - Published on Fri, 14 Sep 2018

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Bloomberg reported that when US President Mr Donald Trump fired the first salvos in his trade war with China, the market for hauling bulk commodities that power the Asian country’s economy responded with a surprising surge. Now shipowners are losing their swagger. Rates to haul iron ore and coal on 1,000-foot Capesize ships plunged by 39 percent since reaching their 2018 peak in early August. Fourth-quarter hedging contracts dropped 11 percent from their high last month. Mr Peter Sand, chief shipping analyst at BIMCO, a trade group representing 2,100 ship owners and operators, said that “Some of the weakness we have seen in dry bulk freight rates can to some extent be attributed to growing uncertainty around the trade war. It is an increasing worry that we hear amongst our members.”

Some observers say freight costs offer investors clues about economic and trade growth. Increased purchases of iron ore feed China’s steel mills and ultimately power the country’s construction industry. Coal is predominantly used in power generation.

Capesize day rates slumped 3.9 percent to USD 16,559 a day on Wednesday, according to data from the Baltic Exchange. They stood at USD 27,283 on Aug. 6. Fourth-quarter forward freight agreements fell to USD 23,750, having been at USD 26,600 on Aug. 21, data from Clarkson Securities Ltd. show. The Baltic Dry Index, a wider measure of commodity transportation costs, slumped to 1,411 points, its lowest since late June.

Mr Trump said that he’s lined up an additional USD 267 billion of Made-in-China products to tax “on short notice if I want.” That’s on top of already proposed levies of USD 200 billion that could lift the price of household goods in the U.S.

Shipping Rates Plunge as Owners Fret About Trade War Impact
Those paid to follow the dry-bulk market and its companies are staying overwhelmingly bullish for now. Of 10 dry-bulk ship operators tracked by Bloomberg with market valuations exceeding $500 million, equity analysts have a total of 87 buy ratings, 8 holds, and six sells.

Mr Herman Hildan, co-head of research at Clarksons Platou Securities AS, said that “There’s good reasons to believe this bullish sentiment will turn out as expected, even though in the short-term there’s been some negative pulls. While there’s “no doubt that the market is worried about the possible consequences of the trade war,” vessel supply remains “low.”

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Posted By : Nanda Koijam on Fri, 14 Sep 2018
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