DEGLOBALISATION is all the rage at the moment, and shipping will have to weather geopolitical shocks with increasing frequency, Nor-Shipping attendees heard this morning.

When asked whether he thought things would get a little smoother next year in terms of the political landscape, Drewry executive chairman Arjun Batra was quite clear in his response: it is going to get worse, and the industry will just have to get used to that.

Batra said shipping should “forget about the trade war”, as it was very much man-made, and focus on more fundamental (and more concerning) factors.

The global economy was at a crossroads, he said, with many developed economies having already reached their peak investment. He highlighted China in particular, which he said had peaked both in terms of its ageing population and labour costs.

Indeed, just last month, SwissMarine chairman Peter Weernink made the bold claim that 2024 would be China’s peak year in terms of coal imports, with seaborne coal trade as a whole following it.

Batra said shipping had benefited from 25 years of “absolutely amazing growth” in global trade. But now the clouds were starting to gather and the deglobalisation process was well and truly underway.

Painful supply chain lessons learned during the pandemic, as well as anxiousness surrounding trade wars (stretching back to Trump’s first term) had prompted a spate of nearshoring by major companies.

That anxiousness and uncertainty had meant deferred investment and, in the case of consumers, deferred spending, Batra said, pointing to recent International Monetary Fund predictions that have seen the odds on a US recession shorten considerably.

The maritime sector was tied to economics, he said. “The faster we grow, the more we trade, the more we buy.”

Another interesting facet to deglobalisation is so-called de-dollarisation.

DNB Bank group executive vice-president Harald Serck-Hanssen was unequivocal in his assessment: the dollar’s role as the world’s currency had already started to “erode”. He compared it to the pound, which had seen its status slowly shrink over decades.

There is no obvious replacement, though. The Chinese yuan, despite increasing its share of global reserves, is still a way off the dollar, as are other candidates such as the euro or yen.

There is, of course, the argument that all this equals inefficiency, which shipping thrives on. The Red Sea crisis, together with the Panama Canal drought, has staved off a rate plunge in the container sector over the past year or so, just as one example. 

But this time is different, Batra said. The US-China “decoupling” and growing protectionism was bad for trade, and bad for investment.

The greater the risk, the higher the return investors want, which means less speculative investments.

The sun isn’t going to shine forever, and those that fixed the proverbial roof while it was shining will be well-placed to roll with the inbound punches.

DNB global head of ocean industries Jan Ole Huseby said his bank had seen reduced lending recently on the back of strong earnings.

Those that used that time to improve their balance sheets would possess the manoeuvrability that will surely be required in the next few years, he said.

Sufficient financial wriggle room would be key, but so will diversification, he told Nor-Shipping, particularly in the face of recent US policy.

Out of almost nowhere, China-built, owned and leased ships have become “an issue”.

“You need to tap into various capital sources in order to not get squeezed in a situation,” Huseby said.

He had seen some of his clients refinancing to reduce their exposure to Chinese lenders.

Those lenders themselves have also been left working out how they can get around the port fees announced by the US trade representative last month, as lessors are nominally the owners of vessels and would therefore be subject to port fees.

The geopolitical situation could change quickly (no matter how unlikely that may seem). Peace talks between Ukraine and Russia could bear fruit and the US and China have showed signs of a détente in their latest trade war recently.

But Batra presented a longer-term view of global economics, and it is not necessarily rosy for shipping. Fragmentation and protectionism will not be good for the industry, even if there are some gains here and there in terms of tonne-miles due to trade lane shifts.