Tariff truce boosts global shipping firms

Irish Examiner

18-05-2025

Importers rushing to ship Chinese goods to the US using a short reprieve from paralysing tariffs could provide a much-needed boost to global freighters.
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 analyst Kenneth Loh.
The US has reduced combined levies on most Chinese imports to 30% from 145% for a period of 90 days, while the 125% Chinese duties on US goods will drop to 10%.
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.
Hapag-Lloyd, the world's number five container carrier, said it's handling a 'huge surge' in volumes this week.
Volumes are up more than 50% compared with recent weeks, with bookings from China to the US particularly strong, chief executive Rolf Habben Jansen said in an interview with Bloomberg Television.
'Good news'
The trade agreement was 'good news,' Rodolphe Saadé, chief executive of privately-owned french shipping company CMA CGM SA, said in a hearing in the French Senate.
He added that the world's third-largest container carrier had lost 50% of its volumes toward the US since the start of the trade war.
'We're likely to see a renewed front-loading surge as exporters and importers alike in China and the US attempt to capitalize on the steep cut in tariffs during this 90-day pause,' according to Mr 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% of US container imports, Citigroup Inc. analysts including Kaseedit Choonnawat said in a note.
The cost for a 40-foot container from Shanghai to Los Angeles rose 16% from the prior week to $3,136 (€2,802) the biggest gain in percentage terms since December, while the Shanghai-to-New York rate jumped 19% from the previous week to $4,350, according to the Drewry World Container Index.
More ship calls amid the cargo rush from China threatens to cause port congestion and bottlenecks, similar to what happened during the covid pandemic, HSBC Holdings Plc 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 Bloomberg Intelligence analyst Denise Wong.
'The truce will also give Chinese exporters more time for workarounds, which can potentially help sustain volumes at Chinese ports.'
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 AG 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,' Mr Styrman said.
Bloomberg