iContainers: US-China Trade War, Brexit Exerting Huge Pressure on Ocean Freight

The outcomes of US-China trade war and Brexit, both of which are facing important deadlines in the first quarter of the year, which still remain uncertain, are likely to have significant repercussions on the ocean freight industry over the coming months or even years, Barcelona-based digital forwarder iContainers says.

Namely, the market is awaiting a solution on the tit-for-tat tariffs between the US and China as the duo resumes talks on new trade terms during their 90-day truce, launched at the beginning of December, 2018.

A hard deadline has been set for March 1, after which an increase of additional duties from 10 percent to 25 percent on USD 200 billion worth of Chinese goods will take effect.

“Expect the shipping industry to keep close tabs on the trade war. So much of how the global trade movement will unfold depends on developments there, so it’ll be interesting to see what happens,” says Klaus Lysdal, Vice President of Operations, iContainers.

“These are, after all, the two biggest trade partners in the world with a huge potential to impact the global shipping capacity. Many US companies struggled with the first round of tariffs but hopefully, we will see some mitigation that can allow them to recover.”

On the other hand, a no-deal Brexit looms, raising fears that the approaching exit of the UK from the European Union set for March 2019 will result in trade disruptions at major ports.

Despite the March 29 departure from the European Union, the British parliament has yet to agree on an exit plan. And the uncertainty is causing a growing sense of disquietude among shippers and ocean freight providers dealing with the outgoing EU member, iContainers said.

“Brexit will be another one to watch as we are really going into unchartered waters here. New regulations will need to be drafted and time will be needed for them to be implemented. This will take some getting used to and there’s no saying how seamless the transition will be, if at all,” Lysdal adds.

Commenting on another important date that’s drawing close, the IMO 2020 deadline on 0.5% fuel sulfur content cap regulation, Lysdal said that 2019 is expected to a transition year as carriers and the shipping industry as a whole prepare for the IMO 2020 regulations.

“Usually, we see a number of different approaches from one carrier to another when there are major regulatory changes happening. But so far it looks like the same pattern as everyone tries to put their plans into action.”

According to iContainers, another trend to look out for in 2019 is the continued trucking shortage in the US, as the industry continues to grapple with both chassis and truck driver shortage, the latter of which was partly brought on by the ELD implementation last April.

The online freight forwarder also expects automation efforts to continue to advance. But most progress will likely be made on a smaller scale.

“We will undoubtedly see more automation throughout the industry this year. But by and large, it will be in small pieces of the chain here and there. It’s more a matter of what individual companies can automate in their processes than anything overall that’s going to majorly change the industry, at least in 2019,” Lysdal pointed out.

“But there is more automation coming. Whether it’s with the terminals, carriers, warehouses, truckers or forwarders, it is happening.”