The United States is contemplating the introduction of a tariff that could reach as high as $1.5 million per port call for ships built in China. Given that China comprises approximately 60% of the global shipbuilding market, this tariff could significantly increase shipping expenses and disrupt established trade dynamics. G Shivakumar, Executive Director and CFO of GE Shipping, highlighted that, although the proposal is currently under review and faces challenges in its implementation, it could lead to greater inefficiencies in the global shipping landscape, resulting in tighter supplies and higher freight rates. Shivakumar pointed out that tariff-induced shifts in trade could lead to less efficient shipping routes.
While this might temporarily heighten demand for available vessels, the long-term effects could hinder economic growth and diminish commodity demand, negatively impacting the shipping sector. Although the immediate effects of the tariff discussions are neutral, potential new restrictions on oil trade with Canada and Mexico may alter this perspective. Amid ongoing geopolitical and economic uncertainties, shipping rates have remained relatively stable. However, Shivakumar indicated that tanker and bulk carrier rates experienced slight declines over the last quarter.
Product tanker rates are marginally lower, while bulk carrier rates have dropped by approximately $3,000 to $4,000 per day on average. More notably, there has been a year-on-year decline, with tanker rates down by $10,000-$15,000 per day and bulk carriers by around $5,000 per day. GE Shipping has minimal exposure to Chinese-built ships, with just five vessels in their fleet. If the proposed tariffs are implemented, the company intends to reroute these vessels to bypass US trade and its associated costs.
Despite a 15% drop in ship prices, GE Shipping is not currently considering fleet expansion, as the existing prices remain stable compared to the previous month, and trade uncertainties prompt caution in any new acquisitions. The company’s market capitalization is reported at ₹13,042.54 crore.