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Slithering through uncertainty: Shipping in the Year of the Snake

As the Chinese zodiac ushers in the Year of the Snake, the shipping industry faces a volatile mix of geopolitical tensions, economic risks, as well as opportunities for profit

While some companies are scratching their heads over looming risks, others are gearing up to seize a once-in-a-lifetime opportunity to make a windfall

AS THE Year of the Snake slithers in, shipping finds itself navigating treacherous waters. Much like the snake — symbolising both wisdom and cunning in Chinese culture — the sector must adapt to shifting global dynamics, balancing risk and reward.

By now, no one would doubt geopolitics could steer shipping’s fate. The stage was set when Donald Trump was elected the US president, portending a tense geopolitical drama for the world. Shipping plays but one part in this perilous, uncertain story.

Facing Trump’s threats to take back the canal, Panama has maintained a tough stance in words, but its actions tell a different story. According to the country’s comptroller-general Anel Bolo Flores, the financial audit of Panama Ports Company — controlled by Hong Kong tycoon Li Ka-shing’s Hutchison Whampoa group — is “severe and strong”.

Flores’ remarks about the government’s failure to generate sufficient revenue from surging cargo volumes suggest that the audit is not as simple as some media reported — merely to prove that the canal is not under Chinese control.

Apart from possible disruptions to port operations and shipping lanes, this also signals the growing risk of Chinese firms becoming collateral damage in great power games.

Yes, Trump seems to intentionally moderate his harsh China rhetoric upon taking office. Even his recent 10% extra tariff threat was both anticipated and muted compared to his earlier 60% bluster.

However, betting he genuinely seeks reconciliation with China appears riskier than viewing this as a pause to first resolve Middle East and Russia-Ukraine conflicts.

Biden had already handed ammunition, including by finding that China unfairly dominates shipping and shipbuilding, paving the way for potential trade actions. Beijing’s reported call for impact assessments shows policymakers and companies are taking this seriously.

 

 

 

While some businesses are scrambling to mitigate looming risks, others are seizing this once-in-a-lifetime opportunity to profit.

Given China’s massive presence in global maritime, restrictions on its activities could severely disrupt global logistics and supply chains.

Yet, as many industry executives privately admit, shipping likes disruptions. If some capacity is forced out, the remaining players stand to benefit. Tanker players still remember the very large crude carrier spike in 2019 fuelled by the US sanctions on Cosco units.

And bear in mind the shipping market never lacks risk takers, such as owners of tankers trading Russian oil — many suspected to be Chinese.

This business is so lucrative that owners purportedly recoup investments in months. Per industry whispers, obscure operators controlling dozens of vintage VLCCs via shell companies have minted covert billionaires specialising in sanctioned trade.

Bunker suppliers also smell profits. Ships earning freight premiums willingly pay fuel premiums upfront as sanctions tighten. Illicit players often provide services established ones cannot, sometimes even facilitated by employees at established firms acting as intermediaries. Pool services are being offered to help shadow owners “go clean” and operate tankers bought with dark trade windfalls.

The Year of the Snake also represents transformation. It’s when Trump and his supporters will start reshaping America, undoubtedly altering global order. It’s also when shipping will embrace a critical juncture for its decarbonisation journey and technological innovation.

We cannot be certain what the upcoming Chinese New Year will bring. But as the new year arrives, let us wish the changes ultimately move towards good, to shipping and to the world.

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