With just six days to go the US election is into the home straight. The fractious campaign will culminate on November 3 with either the incumbent, Donald Trump, given another four years in the White House or challenger Joe Biden will become the 46th president of the world’s largest economy.
Occupants of the White House historically have had little effect on the fortunes of shipowners. However, the first term of the Trump administration has been so extraordinary and divisive that the shipping industry is watching this election cycle more closely than normal. Has Trump been good or bad for shipping, and who should shipowners want to win next Tuesday?
On a Trump win, we expect to see a material uplift in the energy sector and the US economy
“Overall, we should not overestimate the direct impact of the president,” argues Peter Sand, chief shipping analyst at BIMCO.
“The Trump presidency has been a mixed bag for shipping but overall, his energy policy has been beneficial for tankers,” says Rebeccca Galanopoulos Jones, head of research at Alibra Shipping.
BIMCO’s Sand says sanctions and the trade war have been the two biggest actions taken by Trump to have had an effect on shipping since he took power in January 2017.
“The Trump administration has created large scale uncertainties for the business environment – good for some, bad for most,” Sand says, going on to highlight US retail inventories to sales ratio as an example of what he describes as the descent from stability to volatility in recent years.
“Shipping thrives on unimpeded global free trade,” observes Dr Roar Adland, shipping chair professor at the Norwegian School of Economics.
“Trump’s fascination with import duties and raising trade barriers has probably been bad for shipping, though it has to be said that the so-called trade wars have had limited effect on the ground, as trade flows are simply redirected elsewhere such as helping exports of soybeans from South America.”
Nonetheless, Adland believes shipping is better off with normalised international relations and a pro-globalisation candidate and shipping ought to vote Biden.
A Biden victory may end up being better for the tonne-mile equation that so many owners obsess over
Randy Giveans, senior vice president at Jefferies, is more favourable to Trump’s actions, pointing out how he has ramped up US exports of energy and agriculture. Moreover, the trade wars have led to further dislocation of trade flows and actually increased tonne-mile demand.
Shipowners ought to hope for a Trump win next week, Giveans reckons.
“On a Trump win and Republican hold of the Senate, we expect to see a material uplift in the energy sector and the US economy. Plus China would really have to step up their purchases of US energy and agriculture to satisfy the trade deal,” Giveans says.
On a Biden win, energy could see the most incremental risk, the Jefferies analyst reckons. And specifically for shipping, Biden already has his sights on reducing shipping emissions, which could come earlier than the IMO 2030 regulations.
Like Giveans, Charlie Du Cane, commercial director at new UK shipowner Seastar Maritime, reckons the trade war and subsequent inefficiencies in the movement of goods have been good for shipping. However, he believes a Trump victory would lead to less – not more – trade friction.
“Non-market inefficiencies are usually seen as good for shipping, and certainly there has been some increase in the distance some commodities are being shipped,” Du Cane says, going on to argue that a Trump victory would get rid of these inefficiencies more rapidly, as he will have the political capital and incentive to reach a deal with China, whereas Biden, who is seen as softer on the Chinese, will have to move more slowly.
“Looked at in that way a Biden victory may end up being better for the tonne-mile equation that so many owners obsess over,” Du Cane predicts.
In plain numbers, the Trump era can be seen to have been favourable for shipping. Dr Martin Stopford, president of Clarkson Research Services, tells Splash Extra that during the eight years of the Barack Obama presidency, sea trade grew by 293m tonnes a year. Since Trump took office, it’s grown 356m tonnes a year – a 20% increase.
Moreover, the Clarksea Index – a barometer of the main shipping sectors – has averaged higher under Trump.
From a dry freight perspective, the US has been a “bystander”, suggests Ed Hutton, an analyst at Freight Investor Services (FIS).
“The phase one trade deal created excitement but once the reality kicked in it was pretty clear it has no effect. Agricultural cargoes – mostly soybeans – move from the US to China if the two are being nice to each other or from South America if they are not,” Hutton says.
The US used to account for almost 40% of China’s soybean imports in 2015 and 2016. Their share of China’s imports has now shrunk to about 20% in 2019 and 2020.
“The effect on tonne-miles from this was arguably mildly positive, so shipowners cannot really complain,” observes Lukasz Ogryczak, COO at Omegra Shipping.
The Baltic Dry Index has been higher since 2016, averaging 1,749 points versus 1,369 points during the Obama years.
Chris Hudson, another FIS analyst, believes dry freight traders might welcome a Biden victory as someone who would push a multilateral approach, which would help drive higher economic activity and therefore shipping of products. Biden would also look to paper over the cracks with China, and increase American spending, Hudson believes.
“Tankers would be looking askance at Biden’s green plans and pressure from the left wing Democrats which may kill off much of the future of US shale oil and also US demand for oil imports,” Hudson warns, adding: “Fewer cargoes would depress freight rates even further than the lows they are currently at.”