Geopolitical tensions create shipping conditions that look a lot like the Covid scare
Taking stock of the international shipping world after Greece's Posidonia Shipping Week, one begins to think that it's looking a lot like Covid.
But instead of one crisis gripping world attention, we have four or five to combine. Not as individually compelling, but collectively having much the same impact as the old Covid scare.
That's when port closures and city lockdowns had shippers, carriers, trucks, trains and factories moving as much as they could through rapidly congesting supply chains worldwide. And causing rates to soar.
Those good old days are back. We have five bureaucratically-driven crises, together with the carbon craze spinoff sustained by the "climate emergency". Then there's the Russo-Ukraine War which appears to have bogged down into World War I trench and artillery duels. There is Black Sea action, of course, where the Ukrainians appear to be making yards, but all agree that the Black Sea, is unlikely to play much of a role in the outcome.
The least active but scariest conflict is China's threat to invade Taiwan, coupled with a continuing decoupling trend as Western business realizes Happy Days with China have come to an end. But a shooting war might be sparked by the Philippines insisting on retaining its exclusive economic zone (EEZ) by defying - with the Hague court's backing - China's Nine Dash Line declaration that takes in most of the South China Sea.
This situation is fraught with questions. Will the US defend Taiwan as the treaty says it must, and if needs be, defend the Philippines. And if it fails to do so, will Japan re-arm?
Then there is Israel's Gaza Strip war that has reduced tonnage through the Suez Canal by up to 90 per cent after Yemeni forces have rocketed Red Sea shipping in solidarity with Hamas the de facto government of Gaza. This has and diverted the bulk of shipping around the Cape of Good Hope in South Africa, something not seen since the 1967 Six Day War. The extraordinary success of the Palestinian international public relations campaign drawing masses of crowds flying thousands of spanking new Palestinian flags, which have appeared everywhere out of nowhere the day after the October 7 massacre of 1,200 Israeli civilians.
In response, Western naval forces have been deployed but have only responded with expensive and defensive Star Wars/Iron Dome anti-missile missiles, which were never quite as good as they were cracked up to be. And now that a feminized world is hyper sensitive about bombing Gaza civilians - which forgets that bombing civilians was how World War II brought to an end. Thus, counter attacks strike targets in Yemen that are mostly tyre tracks from missile launching trucks that have driven away the moment their rockets were launched.
An interesting aspect of the Yemeni-Houthi blockade of the Red Sea passage to and from the Suez Canal is that it mostly interferes with Chinese cargo, rendering useless its Greek Port of Piraeus with well developed distribution network serving east and central Europe. But because mostly everyone - Chinese shipping included - is making money from this state of affairs, few complain loudly enough to get anything done.
It was much like the carbon craze, or the disappearing ozone layer of the 1970s, and the fear of chlorfluorocarbons, or the acid rain concern. But as these bureaucratically-driven fears fade, as the fear of Covid has done, other fears take their place. Far from settled, the science is divided on carbon dioxide and the evils thereof. But western governments back - and more importantly, fund - research that supports the "does more harm than good school" while it denigrates and refuses to fund "does more good than harm school".
And with control of the legacy media, prevents debate between the two schools from occurring.
The carbon craze is rooted in global warming or to use the more elastic term, "climate change". No one needs reminding of the impact of Deep State - which can be viewed as an international body of civil servants, academics and journalists - who press mankind to seek the holy grail of "net zero" of carbon dioxide emissions - or any other emission they feel can be regulated or banned.
But it's not going well for the Deep State as the European elections provided a clear turn to the right, an uprising against the regulatory world. With their rich profits in hand, and facing more regulatory mandates and bans, the shipping sector has opted to order new ships rather than become fresh victims of tax collectors of the state that can be relied upon to spend it on something counter-productive like student loan forgiveness or hotel rooms and cash for illegal immigrants, who are mostly alien males of military age whose numbers threaten western traditional values.
Some at the Posidonia shipping conference said the troubled geopolitical times are good for business now, while others said they don’t see an end in sight to current disruptions. This was not necessarily a contradiction.
In addition to rising geopolitical risk, owners have another reason to be bullish. Although there has been some ordering of new ships as earnings soar - making some nervous about whether a boom can truly be sustained - partly because shipowners aren’t sure what the fuel will replace traditional bunker.
“We have not really seen any alternative fuel that is either available, or very promising for the future,” said Ioannis Alafouzos, chairman of Okeanis Eco Tankers told Bloomberg. “We are quite pessimistic about alternative fuels in fact. Frankly speaking, we do not know where we are going, so for the time being we are sticking with conventional engines.”
Some argue that rates are currently so good, that shipping’s efforts to decarbonize are also likely to slow. That’s because such high earnings offer little incentive to put ships in dockyards and carry out work that would make them ready to burn cleaner fuels, according to DNV Maritime.
Meanwhile Houthi Yemeni forces continue to fire salvos of missiles at vessels in the Red Sea in the Mediterranean.
One Greek owner said he expects that the impact of the attacks on shipping in the region could be felt even more acutely in the second half of the year for container and bulk commodity ships as those fleets get even more stretched out.
That leaves owners bracing for a world that is more volatile for longer.
“At what point do black swans become not black swans?” Hing Chao, executive chairman of Wah Kwong Maritime Transport Holdings, which owns a fleet of oil tankers and commodity carriers, said at the Capital Link Forum. “We’re reaching that point in the world unfortunately. As far as shipping is concerned I think in the short-to-medium any kind of disruption would be beneficial to shipping, but medium-to-long term it’s bad for
everybody.”
Perhaps, that that is the sensible and balanced view. |