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Ongoing US/China trade war could impact soya bean trade lanes

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The Baltic and International Maritime Council (BIMCO) have reported that the shipping of soya beans from the US to China could become affected by the ongoing trade war between the two nations. According to the Council, soya bean trade lanes are expected to be affected if the Chinese buyers shy away their traditional suppliers because of the extra cost from the proposed tariff on US soya beans. A move that may favour Brazilian ones further, which also hold a higher protein content. As US soya bean exports are currently out of season, the first indication of the effect will be an indirect one, as the Brazilian soya bean exports’ season is just about to lift off, peaking in May-July.

BIMCO’s Chief Shipping Analyst, Peter Sand, commented: “The uncertainty in the shipping market has already been felt. Anecdotal evidence of fewer US gulf cargoes heading for China is an indicator of this. Changes in pricing of soya beans is another effect already seen. In terms of volume, the coming months will show us exactly how much Brazil can further ramp up its exports to China. Brazil is already the leading provider of soya beans to China, but unable to become a full substitute for US exports this year.”

 “Clash of the Titans”

China is the world’s largest consumer and importer of uncrushed soya beans; the US is the largest producer and Brazil is the largest exporter.In 2017, the dry bulk shipping industry transported 51 million t of soya beans at an approximate distance of 11 000 nautical miles from Brazil to China. During the same year, the US exported 33 million t, as it lost a bit of its share in the Chinese market. China established stricter import standards from 1 January 2018 which started to bite the US during 4Q17. That also meant that shipping of in soya beans between the two countries was down by 18% (2 million t) in first two months of 2018. Over the past two decades, one nation only, China, has increased its appetite for soya beans to any meaningful extent. 

 

Is it desirable for Brazil to close the Chinese ‘import gap’?

Should China decide to enact the import tariff on US soya beans, the relevant question becomes: To what extent can, and will, Brazil step in to make it up for US exports? The answer to that is: anywhere between 0% and 82%, probably depending on the price.

Seasonality gives guidance to impact on shipping

Brazilian exports take place throughout the year, but 80% of it is shipped in Panamax and Supramax ships during the months of April through to September. This is an exact opposite to the US exporters who ship 80% of their soya beans from November through March. 

“For the shipping industry, traders, exporters and importers this delayed impact gives leeway for them to adjust their business to a ‘new reality’ in due time before the real effects of a trade war involving global shipping of soya beans is felt. Let’s hope that it will not be carried out, as a trade war is harmful to everyone”, Sand concluded.

Read the article online at: https://www.drybulkmagazine.com/shipping/19042018/ongoing-uschina-trade-war-could-impact-soya-bean-trade-lanes/

 

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