BIMCO: Trade war with China could cut US soybean shipping

The following is text of a news release from BIMCO:

(LONDON) — The shipping of soybeans from the United States to China is one of the most significant "one commodity" cargoes that may become affected by the trade war between the U.S. and China.

Soybean trade lanes will be affected if the Chinese buyers shy away their traditional suppliers because of the extra cost from the proposed tariff on U.S. soybeans, a move that may favor Brazilian ones further, which also hold a higher protein content. As U.S. soybean exports are currently out of season, the first indication of the effect will be an indirect one, as the Brazilian soybean exports’ season is just about to lift off, peaking in May to July.

“The uncertainty in the shipping market has already been felt," said Peter Sand, BIMCO’s chief shipping analyst. "Anecdotal evidence of fewer U.S. Gulf cargoes heading for China is an indicator of this. Changes in pricing of soybeans is another effect already seen. In terms of volume, the coming months will show us exactly how much Brazil can further ramp up its exports to China. Brazil is already the leading provider of soybeans to China, but unable to become a full substitute for U.S. exports this year.”

China is the world’s largest consumer and importer of uncrushed soybeans; the U.S. is the largest producer and Brazil is the largest exporter.

In 2017, the dry-bulk shipping industry transported 51 million tonnes of soybeans at an approximate distance of 11,000 nautical miles from Brazil to China.

During the same year the U.S. exported 33 million tonnes, as it lost a bit of its share in the Chinese market. China established stricter import standards from Jan. 1, 2018, which started to bite the U.S. during the fourth quarter of 2017. That also meant that shipping of soybeans between the two countries was down by 18 percent (2 million tonnes) in first two months of 2018. Over the past two decades, one nation only, China, has increased its appetite for soybeans to any meaningful extent.

Should China decide to enact the import tariff on U.S. soybeans, the relevant question becomes: To what extent can, and will, Brazil step in to make it up for U.S. exports?

The answer to that is: anywhere between 0 percent and 82 percent, probably depending on the price.

Brazilian exports take place throughout the year, but 80 percent of it is shipped in Panamax and Supramax ships during the months of April to September. This is an exact opposite of the U.S. exporters, who ship 80 percent of their soybeans from November through March.

“For the shipping industry, traders, exporters and importers, this delayed impact gives leeway for them to adjust their business to a ‘new reality’ in due time before the real effects of a trade war involving global shipping of soybeans is felt," Sand said. "Let’s hope that it will not be carried out, as a trade war is harmful to everyone."

By Professional Mariner Staff