BRI and trade war will definitely also affect shipping

Forthcoming developments, in such a conundrum, can be hardly envisaged, SMI conference says

Federagenti's President Gian Enzo Duci, attended Shipping Meets Industry SMI 2019 arranged in Milan by ClickUtility Team and International Propeller Club Port, as one of the pannellist introducing 'Geography and geopolitics in freight logistics and transports'.

The first topic regarded the Belt and Road Intiative (BRI), “also listed in the statute of the Chinese Communist Party” recalled Giorgio Cuscito of Limes trade magazine – showing how Beijing considers the project a strategic issue”.

“The Popular Republic of China needs to stand out globally not only as a leading economy but also as politics and military power. The Belt Road is needed to sell out the Chinese surplus and grant Beijing available freight lines as an alternative to traditional shipping routes, which are exclusively controlled by the US”.

According to Limes' analyst after the Chinese economic power will be consolidated in Europe, the military power will follow, the Republic inaugurated their first military army installation in Gibuti in 2017.

As illustrated by Marco Conforti, Vicepresident of Confetra (who recently published a position paper on the BRI in partnership with Intesa Sanpaolo SRM, study group), the problem doesn't pivot on the fact whether a country (like China) could or couldn't manage our ports, the real problem is to verify how their control is regulated in order to prevent unfair discriminations.

“Can Italy work independently and determine if and how joining the BRI?” continues Conforti.

For example the Suez Canal will become a key junction for the BRI: “Ten% of the global shipping trade currently cross the Suez Canal, no size restrictions exist”, recals Massimo Deandreis, Manager at SRM.

“In 2018 the Canal attained 18,000 ships record breaking figures (+3.6%), 983 million tons freight  (+8.2%). Overall +9.8& southbound and 458.8 million tons (6.6%) northbound, out of 524 million tons.

Such traffic might continue soaring due to forthcoming Chinese expansion “Suez is a key line in the BRI. Europe and MENA (Middle East and North Africa) consolidated GDP stands at 20,000 billion dollars, it's higher than the American one and doubles the Chinese. This area has a huge strategic importance for Beijing”.

Dry bulk and general commodities have no interest in the Belt  & Road Initiative.

Furthermore US and China's political decisions definitely influence shipping transport markets for example with latest protectionist sanctions on China introduced in the so called trade war between Washington and Beijing.

“China reduced soja import from the US, which were the first global exporter, simultaneously increasing purchase from South America. Subsequently fostering transport demand and freight rates”.

The same situation exis in the steel market, core business for Romeo group: China is the top global producer, after sanctions were introduced, China export to the US has drastically dropped. Worried to be invaded by Chinese steel Europe enforced import restrictions which reduced the available steel offer fostering countries like Turkey, Ukrain and Russia which consequently increased steel prices.

This situation, illustrates Nova Marine Carriers' CEO, directly affects shipping allowing shipowners to increase freight rates and favour smaller ships”.

The market is particularly sensitive and can be often molded, sometimes China disrupted buying commodities they had large stocks of, plunging transport demand and freight rates.

Subsequently, purchase soared again and freight rates remained lower at least for some time”.

According to Fabrizio Vettosi, Managing Director of Venice Shipping and Logistics, only 15% of the global grain production goes for export (reaching 10% of the global dry bulk traffic), while the left share is directly used in production countries”.

Grain market has lately changed “Routes stretched, current average length, reching 7,000 miles; one of the major export country is South America which overpassed the US, old dating export leader. As much as China outdid old Europe as global leading buyer.

Still according to Vettosi Italy has a structural problem: ships size and consequently draft have soared however major Italian ports handling this product has very low seabed and might hurt our country in terms of trade.

Meanwhile Gian Enzo Duci Duci, (who recalled an article recently published by The Econmist) was wondering if a slowbalizzation process would be going on. In essence a globalization slow down.

Analyzing data, according to Federagenti's President, the answer could be positive, while global trade percentage on GDP soared from 29% in 1990 to 61% in 2008, and today's rate dropped to 58%.

The ratio between multinationals' gain and the ones recorded by all other global companies dropped from 33% in 2008 to 31% in 2018.

Moreover China's investment dropped by 73% in 2018 versus 2017, going back to regional economoies.

Several intra-Asian companies are listed in Alphaliner top 20 ranking essentially due, according to Duci, to latest concentration process which interested major global carriers.

After 2008 States involvement in the global economy have soared and will probably continue soaring however any forecast would be hard to be issued and for this reason Duci left his presentation slide unfulfilled,

Francesco Bottino