Shipping is showing resilience in the face of President Trump's latest tariff hike as stocks across various sectors hardly moved at all today.
The Trump administration raised taxes on almost half of Chinese imports to 25% from 10%, effective today.
This latest tariff move puts $250bn worth of Chinese products — from TVs to soybeans — within the latest tax hike.
New York-listed shipping companies, which move 90% of goods by water, seem to have taken it in stride, as their stocks have kept an even keel throughout the day.
"The tariffs on imported Chinese goods will not likely directly impact dry bulk demand since the flow of dry bulk is typically more eastward," Noble Capital Markets analyst Poe Fratt said.
"If China retaliates and continues to import grain, including soybeans, from places other than the US, dry bulk demand will be impacted."
Dry bulk player Seanergy Maritime's shares were among the most affected, falling less than 4% to $1.78 by late afternoon. Competitor Globus Maritime slipped 2% to $2.88.
Meanwhile, tanker owner International Seaways' stock gained almost 4% to $20.18, while Scorpio Tankers went up more than 3% to $27.58.
Boxship player Danaos ticked up 2.4% to $10.65.
When Trump raised the threat last weekend some analysts were fearful the new charges would be negative across the board for shipping.
Others suggested Trump would not go ahead with the new tariffs suggesting his social media posting was simply a negotiation tactic to speed trade deal negotiations with China.
'Clear as mud'
Fratt said the biggest factor at play in the dry bulk market is the contracted flow of iron ore out of Brazil due to the Vale mine accident.
The drop in coal imports into China due to restrictions have also had an impact, he said.
He said February's very weak freight rates have staged a moderate recovery but will depend on trade-issue resolution and pace of iron-ore and coal shipments into China.
"Against the uncertain demand backdrop, supply growth is muted and new regulations, mainly IMO2020, could cause slow steaming and/or retirements, both factors that could help offset any shortfall in demand," he said.
"Clear as mud, but we are optimistic over the rest of the year."
The tariff news is having the expected unfavourable effect on dry bulk stocks, with some down as much as 12.5% during the week, Evercore ISI analyst Jon Chappell said.
"The actual immediate trade flow impact from tariffs, really the retaliation on China’s part, is somewhat limited to soybeans and some building products," he told TradeWinds.
"But the much bigger issue is the potential unfavorable impact on the China economy and how that will filter through to import demand for all commodities."
Impact on boxships
Steel imports from China should not take a major hit, given most US steel comes from the US, Canada and Mexico, Jefferies analyst Randy Giveans said.
Dry bulk and boxship trade overall should not be heavily impacted, given the US does not import a lot of crude oil, LNG or LPG from China, he said.
"For containerships, much more impactful as the vast majority of US imports from China are finished goods," he told TradeWinds.
"All that being said, we expect a deal will get done in the coming months, and China will agree to purchase a very substantial amount of agricultural, energy, industrial, and other products from the US to reduce the trade imbalance between the two countries, which will be very good for shipping earnings and for shipping equities."
