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US-China tariffs add bearish sentiment to trans-Pacific shipping markets

London — The recent developments between the US and China regarding tariffs have added some considerable bearish sentiment to the trans-Pacific shipping routes, with imports into the US likely to slow significantly in response to the news.

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In the container market, the implementation of tariffs will have a huge impact on trans-Pacific head hauls, with capacity utilization likely to take a tumble as some US importers try to mitigate their exposure to these new regulations.

This, in theory, could spell an end to the relatively firm trans-Pacific all inclusive rates that the market has seen in recent weeks.

"The big question is when will we see BCOs starting to hold back? They front loaded heavily ahead of the potential tariffs at the start of the year, but there hasn't been a deadline this time for everyone to try and import," a container market source said.

This news comes following a delay in tariffs that were due to come into force at the start of the year, which saw significant front-loading of imports from US-based importers. However, the market has yet to recover fully from the post Lunar New Year lull, and so this could be a tough period for the container freight market going forward.

In dry freight, the US Gulf Supramax market has seen little grains fixture activity, as the Trade War has hindered US-sourced soybean exports. Fixture lists have improved after the recent holidays but are down against previous years. With scant activity, fronthaul grains time charter rates via the Panama Canal to China/Japan have been broadly flat against last done level since early March.

Operators were heard in the market this week asking mid-$38s/mt for 50,000 mt grains cargoes to the Far East but failing to achieve that level. In a typical market fixture, JX Ocean was heard to have taken the Ocean Tianchen, 63,554 dwt, 2018 built, on subjects for a fronthaul cargo, open Altamira, for $18,000/day APS Southwest Pass basis.

With Ultramaxes currently commanding around $1,500/day more than Supramaxes in the US Gulf, the S&P Global Platts New Orleans to Kashima, 50,000 mt grains route was assessed up 25 cents Thursday to $37.75/mt. However, the assessment has fluctuated by barely $2/mt since March 1.

Market participants pointed to imbalanced tonnage lists as evidence of a longer-term market depression. "I mean, there's been a bit of a clearout of business in the US Gulf," one shipowner source said. "But with so few cargoes around right now and plenty of spot vessels, I wouldn't be surprised if the rates come off even more."

--George Griffiths, george.griffiths@spglobal.com

--Sam Eckett, samuel.eckett@spglobal.com

--Edited by Pankti Mehta, pankti.mehta1@spglobal.com