STRATEGIC investment decisions are on hold across the shipping industry amid a paralysing bout of geopolitically induced nerves.

The fragmenting state of global trade is now considered a clear and present danger to businesses where fears of an emerging two-tier industry divided down political lines are rife.

Shipbuilding prices, meanwhile, will continue to rise, possibly, but US economic weaponry will not fundamentally affect China’s stranglehold over the global shipbuilding sector.

These are just a handful of the key takeaways from the Singapore Maritime Week edition of the Lloyd’s List Outlook Forum held on Tuesday, as the shipping industry grappled with increasing uncertainty ahead.

“What we absolutely see right now is that the uncertainty and the political divergence that is happening in the world today is having a direct impact on shipping and it is slowing investment decisions,” explained Jayendu Krishna, Head Maritime Advisors, Drewry.

“The uncertainty is real — you don’t know whether a tariff will be there, or not be there, when it will be there, how much will be there? So none of the questions are realistically answerable today… the biggest impact of all that is that you can’t take an investment decision and that is happening at a global level,” said Krishna.

A common theme being picked up throughout Singapore events this week has been the debilitating effect of geopolitical instability and the blistering pace of economic salvos that have been fired out by a US administration in just 64 days.

According to Krishna, that could lead to a lowering of GDP, to the tune of at least half a percentage point in the US and between 2.5%-3.5% in Canada and Mexico.

“And if the retaliatory tariffs happen in the way we think they could I don’t think we can rule out recessionary and inflationary trends, and that’s my biggest fear as a result of this,” he said.

And Krishna was not alone in his concerns regarding the disintegrating state of global trading norms.

When the Outlook Forum audience voted in a series of poll questions, they overwhelmingly pointed to a fragmentation of global trade and financial systems because of a breakdown in US-China relations as being the biggest risk to shipping businesses over the next two years.

That risk was chiefly being felt for the moment in the form of decisions being put on ice. Across all of the panellists, representing owners, class, charterers and managers, the indication was the same — unpredictability slows things down.

“As much as we love volatility in our business, and it gives opportunities, I think the unpredictability and the fact that you need to make long-term decisions in a volatile environment, is also a bit of a challenge right now,” said Hafnia chief executive Mikael Skov.

When Lloyd’s Register chief executive Nick Brown joined the London edition of the Outlook Forum in December, he cited deglobalisation as the biggest risk to the industry. Three volatile months on, his fears have only been exacerbated. The industry is now slowing down just at the point that crucial decisions need to be made.

“I think inevitably things are slowing down, but I also think that we will all be in a much clearer position in six months from now,” Brown explained, pointing out that shipyards being pretty much full for the next two and a half years is providing a buffer.

“Newbuilding prices seem to have peaked and look like they’re coming down,” he noted.

Clarity over what a global carbon price might look like, courtesy of the International Maritime Organisation decisions expected next month; and clarity from the US over the detail of tariffs and which ships will be affected are both important waypoints on the path to being able to make strategic decisions, according to Brown.

“One way or another, today's fuel will become more expensive tomorrow. So, I don’t think we should be slowing down our efforts to try and increase every opportunity for efficiency, whether that's through hardware or software or operating practices,” he said.

While Eman Abdalla, global operations director at Cargill Ocean Transportation conceded that it was “only prudent to take a step back and wait and see how things will evolve over the next few months”, she remained adamant that did mean putting the brakes on progress. She also advocated an industry-wide reminder to those politicians who would seek to narrow to the opportunities of trade.

“I think we need to collectively push back and always emphasize and be extremely vocal about the importance of international trade. We know that hundreds of organisations and companies have actually written to the US administration, asking for them to rethink about before imposing any of these tariffs,” she said.

But despite the challenges, she also said that leadership on safety and decarbonisation must continue.

“We are on the horizon of adopting a lot more dangerous fuels to be able to meet our net zero targets, and I don’t think we are doing enough to protect seafarers as it is today with conventional fuels, let alone with a lot more dangerous fuels. So, there is no room for us to sit back and do nothing. We need to act in different areas until we have a little bit more visibility on regulations and the geopolitical risks,” said Abdalla.

While the panel were unanimously optimistic that the shipping industry remained on track to meet net zero emissions targets by 2050, the audience were less convinced. When polled, 32% stated that synthetic LNG would be the likely fuel of choice for shipping beyond 2040 and 51% were of the opinion that the 2050 targets would not be met.

Asked about who the winners and losers of a fundamentally more expensive shipping industry would be, both the panel and audience concurred that smaller businesses will struggle.

“You’re going to need strong balance sheets, you're going to need scale to be able to go through this, because you have to invest in technology and innovation and change the mindset of your organisation,” said Skov.

But while the panel advocated a role for first movers to invest and move ahead with innovation despite the headwinds, they also noted that was increasingly difficult in an environment where the rules were not evenly applied.

“As global businesses we rely on the fact that the rules and regulations are clear, but also, that they're being enforced,” said Skov.

“But quite frankly that’s my biggest concern right now — while we strive for quality and go above and beyond to stay within the rules, if politicians are not being firm enforcing the law and there are not consequences for the people that break the rules, then I don't know where we're going to end up. You’re going to have an element of anarchy in global businesses if we don’t get a grip on this.”

Highlights from the Singapore Outlook Forum will be available via the Lloyd’s List Podcast next week