Tariff truce spurs Pacific trade rush, boosting global shippers
The surprise truce between the US and China, temporarily bringing down tariffs on each other's goods, will probably give way to a surge in transpacific shipping in the coming weeks, lifting earnings for Cosco Shipping Holdings, AP Moller-Maersk A/S, and Mitsui OSK Lines, said Bloomberg Intelligence (BI) analyst Kenneth Loh.
The US has reduced combined levies on most Chinese imports to 30 per cent from 145 per cent for a period of 90 days, while the 125 per cent Chinese duties on US goods will drop to 10 per cent.
Danish shipping giant Maersk saw an increase in bookings in the hours after the trade deal was announced, a welcome reprieve after cutting its forecast earlier this month.
While escalating trade tensions darkened the sector's outlook earlier this year and caused US-bound shipments from China to drop by a fifth in April, things are looking up again.
Hapag-Lloyd, the world's No 5 container carrier, said it's handling a 'huge surge' in volumes this week. Volumes are up more than 50 per cent compared with recent weeks, with bookings from China to the US particularly strong, chief executive officer Rolf Habben Jansen said.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Sign Up
Sign Up
The trade agreement was 'good news,' Rodolphe Saade, CEO of privately-owned CMA CGM, said in a hearing in the French Senate on Monday (May 12). He added that the world's third-largest container carrier had lost 50 per cent of its volumes towards the US since the start of the trade war.
'We are likely to see a renewed front-loading surge as exporters and importers alike in China and the US attempt to capitalise on the steep cut in tariffs during this 90-day pause,' according to BI's Loh.
This wave of pent-up demand is pushing up freight rates, which had been sliding since the beginning of the year, in turn boosting earnings for shipping companies.
Peak season demand could be pushed even higher as the end of the 90-day reduction in tariffs between both countries will overlap with the sector's busiest period in mid-August, with China accounting for around 40 per cent of US container imports, Citigroup analysts including Kaseedit Choonnawat said in a note.
The cost for a 40-foot container from Shanghai to Los Angeles rose 16 per cent from the prior week to US$3,136, the biggest gain in percentage terms since December, while the Shanghai-to-New York rate jumped 19 per cent from the previous week to US$4,350, according to the Drewry World Container Index posted on Thursday.
More ship calls amid the cargo rush from China threatens to cause port congestion and bottlenecks, similar to what happened during the Covid-19 pandemic, HSBC Holdings analysts including Parash Jain wrote in a note.
Chinese ports including China Merchants Port Holdings, Cosco Shipping Ports and Shanghai International Port Group could also win market share during the period, which could narrow the cost gap with rival export hubs and trade routes, said BI analyst Denise Wong. 'The truce will also give Chinese exporters more time for workarounds, which can potentially help sustain volumes at Chinese ports.'
Oversupply risk
The front-loading might lead to higher consensus estimates, though not necessarily a 'material increase' in second-quarter earnings for container liners, said Axel Styrman, an analyst at Kepler Cheuvreux.
'Our long-term view on container shipping remains cautious as we think that there will be a significant oversupply in the industry,' Deutsche Bank analyst Andy Chu wrote in a note, raising his recommendations on Maersk and Hapag-Lloyd to hold from sell. 'We do acknowledge that container shipping stocks are cyclical and momentum driven and that near-term demand on the China-US trade lane is set to rebound as inventory is replenished.'
Still, the current rebound might be short-lived.
'The rate outlook for the second half of 2025 is weak with an expected significant downward adjustment in demand regardless of increased tariffs following expiration of the pause, and a potential reversal of the rerouting from the Red Sea via Cape of Good Hope which will amplify the downward correction,' Styrman said. BLOOMBERG
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Straits Times
3 minutes ago
- Straits Times
Philippines voices concern over 'dangerous' Chinese actions after Scarborough Shoal collision
Sign up now: Get ST's newsletters delivered to your inbox MANILA - The Philippines expressed serious concern on Tuesday over what it described as "dangerous manoeuvres and unlawful interference" by Chinese vessels during a coast guard supply mission for Filipino fishermen in the Scarborough Shoal on Monday. "Their actions not only posed a grave danger to Philippine personnel and vessels, but also resulted in the unfortunate collision between the two Chinese vessels," the Philippine foreign ministry said in a statement. A Chinese navy ship collided with a smaller coast guard vessel while the latter was chasing one of the Philippine Coast Guard ships involved in the mission, according to the PCG, which captured the incident on video. China's defence ministry and its embassy in Manila did not immediately respond to requests for comment on the ministry's statement. On Monday, China's coast guard said it took necessary measures to expel Philippine vessels from waters around the Scarborough Shoal. The Philippine said it had offered medical aid and other support to the Chinese side, including an offer to tow the damaged China Coast Guard vessel out of the area. "Yesterday's incident demonstrates the importance of adhering to international maritime rules," the Philippine foreign ministry said. It reaffirmed its commitment to diplomacy and dialogue in resolving differences. Top stories Swipe. Select. Stay informed. Singapore Full service on NEL MRT line resumes after 3-hour disruption due to power fault Singapore Live: NEL services resume fully; Sengkang-Punggol LRT services still unavailable Singapore Plan to base Singapore's F-15 fighter jets in Guam cancelled Business Singapore raises 2025 economic growth forecast but warns of uncertainty from US tariffs Singapore Off-duty SCDF officer dies after accident in Punggol; 15-year-old pillion rider taken to hospital Business Goh Cheng Liang, Nippon Paint billionaire and richest Singaporean, dies aged 98 Business StarHub buys rest of MyRepublic's broadband business in $105m deal; comes after Simba buys M1 Singapore Circle Line to close early most Fridays and Saturdays, start late most weekends from Sept 5-Dec 28 Monday's confrontation marks the latest in a series of incidents amid a period of heightened tensions between Manila and Beijing over territorial disputes in the South China Sea. A 2016 ruling of an international arbitral tribunal voided Beijing's sweeping claims in the region, saying they had no basis under international law, a decision China rejects. Rear Admiral Roy Trinidad, Philippine navy spokesperson for the South China Sea, warned at a press briefing on Tuesday that similar incidents could happen again as long as China continued to conduct what he called "illegal, coercive, aggressive and deceptive" activities in the strategic waterway. REUTERS
Business Times
3 minutes ago
- Business Times
The market will fall; here's why that shouldn't scare you
[SINGAPORE] Here's what few would tell you about market declines: They're not the exception; they're the rule. When we look at Singapore's Straits Times Index (STI), history gives us a sobering reality check. For the 32 years between 1993 and 2024, the market experienced a peak-to-trough decline of 10 per cent or more in all but six of those years. Put another way, about eight out of every 10 years had a market correction. Downturns of over 20 per cent are less frequent but still fairly common, happening in roughly one out of every three years. The accompanying chart provides a summary. The odds are similar when we look at the US market. According to wealth manager Ben Carlson, the S&P 500 also experiences a 10 per cent correction about once every year-and-a-half or so. A bear market, defined as a fall of 20 per cent or more, historically hits the S&P 500 once every four years. So, now you know the odds. But here's the point most people miss: knowing the odds of a storm does not tell you when it will start to rain. The flaw in averages It's tempting to take these historical odds and create a mental calendar for market crashes. Simply put, if a bear market happens at the STI once every three years, and we haven't had one in a while, one must be just around the corner, right? BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Unfortunately, the market doesn't operate on a tidy schedule. There's a difference between theory and practice. The odds are based on averages, and averages can be misleading. Think about it: averages are like having one hand in boiling water and the other in ice. The average temperature is supposed to be warm, but you're still getting burned. Furthermore, history shows that while the odds of a market decline hold true over long periods, the market can go for years without a significant decline. For instance, between 2003 and 2007, and again from 2016 to 2019, the STI did not experience a single 20 per cent decline. The same goes for the period between 2021 and 2024. Investors sitting on the sidelines waiting for a 'predictable' crash would have been left behind. This is the flaw in timing the market: you are trading one kind of risk for another. By trying to avoid a decline, you're taking on the risk of missing out when the market goes on a bull run. Legendary investor Peter Lynch said it best: 'Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves.' The paradox of bull and bear markets As at Aug 8, both the STI and S&P 500 sit at less than 1 per cent away from their all-time highs. By most measures, we're deep into bull market territory. The numbers tell the story: the S&P 500 has surged by nearly 80 per cent since its 2022 low. Some stocks have done even better. Nvidia shares are up almost 16 times over the same period. If you're a Nvidia shareholder, you're probably kicking yourself for not buying more three years ago. Looking back, those 2022 lows now seem like screaming buy opportunities. But here's the twist: success has bred a new kind of fear. If you own shares today, you dread losing what you've gained. If you don't own shares, buying at these highs feels like financial suicide. Either way, the next market crash now looks like pure risk – nobody wants to watch their portfolio turn from green to red. In effect, crashes have become the enemy in investors' minds. But wait a minute. Didn't we just say that 2022's low was a golden buying opportunity? So, how can future market declines also be the biggest risk today? Said another way, how can crashes be both opportunity and risk? Morgan Housel, best-selling author and partner at Collaborative Fund, said it best: 'Every past market decline looks like an opportunity, every future decline looks like a risk.' That's the paradox investors face today. You can't have it both ways. If you want bargain prices, you have to embrace the declines. Get smart: Prepare, don't predict So what should you do when you know that market crashes are inevitable? For starters, accept the odds. But use them to prepare, not predict. Peter Lynch said it best – that it's not our brains, but our stomachs, that determine success in the stock market. Knowing that 10 per cent drops happen almost annually should spur us to prepare for when they arrive. Instead of trying to guess when the next downturn will happen, spend your time building a plan for what you will do when it does. Here are some suggestions: Write it down: Keep an investing journal documenting why you own each stock. When fear strikes, your past rational self becomes your best guide. Have a watchlist: Curate great businesses you'd love to own at a cheaper stock price. A market crash is terrible to waste; preparation enables you to act with conviction, not fear. Think in years, not months: When doubts creep in about the current market, Lynch suggests focusing on the Even Bigger Picture. In his book Beating the Street, he notes that stocks have delivered 11 per cent annual returns to patient owners – more than double what treasury bills, bonds, and certificates of deposits have provided. Remember: market crashes are a feature, not a bug. Embrace the odds, have a plan, and let time work its magic. The writer does not own any of the shares mentioned. He is co-founder of The Smart Investor, a website that aims to help people invest smartly by providing investor education, stock commentary and market coverage
Straits Times
2 hours ago
- Straits Times
China urges firms not to use Nvidia H20 chips in new guidance
Hong Kong – China has urged local companies to avoid using Nvidia's H20 processors, particularly for government-related purposes, complicating the chipmaker's attempts to recoup billions in lost China revenue as well as the Trump administration's unprecedented push to turn those sales into a US government windfall. Over the past few weeks, Chinese authorities have sent notices to a range of firms discouraging use of the less-advanced semiconductors, people familiar with the matter said. The guidance was particularly strong against the use of H20s for any government or national security-related work by state enterprises or private companies, the people said. In addition to Nvidia, Beijing's overall push affects AI accelerators from Advanced Micro Devices (AMD, one of the people said, though it's unclear whether any letters specifically mentioned AMD's MI308 chip. Both companies recently secured Washington's approval to resume lower-end AI chip sales to China, on the controversial and legally questionable condition that they give the US government a 15 per cent cut of the related revenue. Now, Nvidia and AMD face the challenge that their Chinese customers are under Beijing's pressure not to make those purchases. Some of Beijing's letters to companies included a series of questions, according to one of the people, such as why they buy Nvidia H20 chips over local alternatives, whether that's a necessary choice given domestic options, and whether they've found any security issues in the Nvidia hardware. The notices coincide with state media reports that cast doubt on the security and reliability of H20 processors. Chinese regulators have raised those concerns directly with Nvidia, which has repeatedly denied that its chips contain such vulnerabilities. Right now, China's most stringent chip guidance is limited to sensitive applications, a situation that bears similarities to the way Beijing restricted Tesla vehicles and Apple iPhones in certain institutions and locations over security concerns. China's government also at one point barred the use of Micron Technology chips in critical infrastructure. Still, it's possible that Beijing may extend its heavier-handed Nvidia and AMD guidance to a wider range of settings, according to one person with direct knowledge of the deliberations, who said that those conversations are in early stages. Top stories Swipe. Select. Stay informed. Singapore Power fault downs MRT service on stretch of North East Line; recovery may take 2-3 hours Singapore Live: NEL MRT service between Farrer Park and Buangkok stations restored Singapore Plan to base Singapore's F-15 fighter jets in Guam cancelled Business Singapore raises 2025 economic growth forecast but warns of uncertainty from US tariffs Singapore Circle Line to close early most Fridays and Saturdays, start late most weekends from Sept 5-Dec 28 Business Goh Cheng Liang, Nippon Paint billionaire and richest Singaporean, dies aged 98 Business StarHub buys rest of MyRepublic's broadband business in $105m deal; comes after Simba buys M1 World After tariff truce extended, a Trump-Xi summit in China? AMD declined to comment, while Nvidia said in a statement that 'the H20 is not a military product or for government infrastructure.' China has ample supplies of domestic chips, Nvidia said, and 'won't and never has relied on American chips for government operations.' China's Ministry of Industry and Information Technology and the Cyberspace Administration of China did not respond to faxed requests for comment on this story, which is based on interviews with more than a half-dozen people familiar with Beijing's policy discussions. The White House did not respond to a request for comment outside normal business hours. The Chinese government's posture could make it more difficult for Nvidia and AMD to sell their hardware into the world's largest market for semiconductors. It also raises questions about the Trump administration's explanation for why the US is allowing those exports mere months after effectively banning such sales. Multiple senior US officials have said their policy reversal was part of a trade accord with China, but Beijing has publicly indicated that the resumed H20 shipments were not part of any bilateral deal. China's recent notices to companies suggest that the Asian country may not have desired such a concession from Washington in the first place. Beijing's concerns are twofold. For starters, Chinese officials are worried that Nvidia chips could have location-tracking and remote shutdown capabilities – a suggestion that Nvidia has vehemently denied. Still, Trump officials are actively exploring whether location-tracking could be used to help curtail suspected smuggling of restricted components into China, and lawmakers have introduced a bill that would require location verification for advanced AI chips. Second, Beijing is intensely focused on developing its domestic chip capabilities, and wants Chinese companies to shift away from Western chips in favour of local offerings. Officials have previously urged Chinese firms to choose domestic semiconductors over Nvidia H20 processors, Bloomberg reported last September, and have introduced energy efficiency standards that the H20 chip does not meet. But Beijing has stopped short of outright banning the hardware, which Nvidia designed specifically for Chinese customers to abide by years of US curbs on sales of advanced chips to the Asian country. The H20 chip has less computational power than Nvidia's top offerings, but its strong memory bandwidth is quite well suited to the inference stage of AI development, when models recognize patterns and draw conclusions. That's made it a desirable product to companies like Alibaba Group Holding and Tencent Holdings in China, where domestic chip champion Huawei Technologies is struggling to produce enough advanced components to meet market demand. By one estimate from Biden officials – who considered but did not implement controls on H20 sales – losing access to that Nvidia chip would make it three to six times more expensive for Chinese companies to run inference on advanced AI models. 'Beijing appears to be using regulatory uncertainty to create a captive market sufficiently sized to absorb Huawei's supply, while still allowing purchases of H20s to meet actual demands,' said Lennart Heim, an AI-focused researcher at Rand, of China's push for companies to avoid American AI chips. 'This signals that domestic alternatives remain inadequate even as China pressures foreign suppliers.' US President Donald Trump on Aug 11 called the H20 chip 'obsolete,' saying that China 'already has it in a different form.' That echoed previous statements by officials in his administration, who defended the decision to resume H20 exports on the grounds that Huawei already offers comparable chips to the H20. The US should keep the Chinese AI ecosystem reliant on less-advanced American technology for as long as possible, these officials argue, in order to deprive Huawei of the revenue and know-how that would come from a broader customer base. US Commerce Secretary Howard Lutnick and other Trump officials have also claimed that the H20 move was part of a deal to improve American access to Chinese rare-earth minerals – despite the Trump team's previous assertions that such an arrangement was not on the table. The first Nvidia H20 and AMD MI308 licences arrived a bit over a week after Mr Bessent's declaration – after Nvidia chief executive officer Jensen Huang met with Mr Trump and both companies agreed to share their China revenue with the US government. BLOOMBERG
