Impact of 90-day tariff pause on the shipping industry: "Shippers are feeling the pinch"

CGTN Europe

CGTN Europe interviewed Peter Sand, Xeneta Chief analyst

Transcript

00:00Peter Sand is Chief Shipping Analyst from Freight Analytics firm Zanita.

00:04Welcome back to the program, Peter. Great to see you.

00:07So, shipping routes said to be bouncing back thanks to that pause in China-US tariffs.

00:12What are you seeing?

00:15We saw an instant increase for the medium-sized to small-sized shippers,

00:22those that are most uncertain and most threatened by a stop-and-go trade policy like this one.

00:28And rates for those guys jumped by some $500, from $2,500 up to $3,000,

00:35whereas the average-sized shipper saw an uptick too.

00:38But some of them are also, say, booking in advance,

00:42so not feeling the full brunt of all of a sudden moving goods that they didn't expect in the first case.

00:49There have, of course, been plenty of recent disruptions to supply chains, COVID, for example.

00:53But how do ports and shipping companies prepare for an increase in business?

00:58Generally, supply chains operate at their peak and at best when there is foreseeability,

01:05when there is reliability, and when there is a steady flow of goods, right?

01:10So, the one thing that we got now is the exact opposite.

01:14So, ports like carriers, like freight forwarders and those shippers trying to plan ahead are really under the pinch right now

01:25as they have very little foreseeability into their supply chains and goods they normally move out of China.

01:35Can they source those from another place in the medium to long term?

01:39That's what they are looking very much into right now.

01:43So, what does this uncertainty then mean for pricing and also for shipping times?

01:48Well, the carriers that have taken capacity away from the key trade lane across the Pacific

01:57is now redeploying some of that capacity into the market as demand, as you rightly put before,

02:04has jumped almost double from where it normally is this time of year.

02:09So, obviously, that gives the squeeze on capacity and it really leaves everybody in a rush.

02:16But mostly the shippers that have, let me call them, middle margin products,

02:21those products that were basically left unsqueezed out of the market due to the 145% tariffs,

02:27but now find it an opportunity to bring in goods with a tariff rate at 30% right now.

02:34But they need real intelligence, they need data to support that.

02:38And currently, transit times are not moving a lot.

02:41But, of course, if we see congestion around the American ports,

02:45that will, of course, add to the number of days it takes from bringing in cargo

02:48from the east to the west coast of the U.S.

02:52So, businesses are currently operating under the assumption that there is going to be a 90-day pause.

02:58If there's no deal reached by the end of this,

02:59what could be the consequences for importers and also customers?

03:05Well, we get back to square one, right?

03:07And square one is where we were last Monday before the announcement was made

03:12because that will bring everybody back to, well, I cannot call it necessarily a wait-to-see approach,

03:19but it's a full-stop approach, right?

03:22So, lessons learned over the past month or so will be redeployed.

03:25And, obviously, they will still find it extremely difficult to make sure that the selection of goods

03:34is readily available on the shelves for the American consumers.

03:38Most likely, we will also see fewer choice, less variety, that is.

03:43And also, the quality may vary because it very much depends also on the ability of Chinese manufacturing facilities

03:49to deliver as much possible goods in the shortest period of time before the window closes again.

03:55So, everybody is in a rush now and we're counting the days until this window closes.

04:01Fingers crossed the mechanism set up will bring us somewhere else in three months

04:06and then back to 145 and 115.

04:10Peter, great to talk to you.

04:12Thank you for coming on the programme.

04:14That's Peter Sand from Zunita.

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