12 >> 11 are always by global


Issue 1 2020 - FBJNA


high, bulk a gricultural


products will continue to be negatively affected. Since these commodities


the


first to incur sanctions, buyers have become accustomed to finding alternative providers of soybean, rice, and corn,” she says. “The true danger for U.S. agriculture is permanent


loss


of some markets to foreign competitors.” Coffee—the world’s second-


most traded commodity—and rubber, “which have been largely unaffected


trade


issues, are likely to continue to be imported at the same rate as last year,” she says. Containerized exports,


especially resins and poultry, which is a $2 billion industry in Louisiana, “could actually show significant growth in the coming year,” she says, while predicting that steel and non-ferrous


“We anticipate retail volumes will continue to grow as retail


manufacturing is well-established in Asia and the U.S. consumer appetite remains strong.” --Jim Newsome, SCPA.


Foreign Trade Council’s Vice President, Global Trade Issues, sa“A number of companies are now forced to seriously consider diversifying their supply chains because of trade tensions,” he says, “and I think the challenge there is that the tensions are not just with China. Where do you go that isn’t subject to trade tension?” Citing transatlantic issues,


especially with Brexit looming, he says, “It’s trying to find backups and alternatives as these tensions develop and multiply.” Port


officials say they’ve got the diversification thing


“If trade tensions remain high, bulk agricultural products will continue to be negatively affected.”


-- Brandy D. Christian, Port NOLA/New Orleans Public Belt Railroad Corp.


metals will see declines. Thomas Gibson, President


and CEO of American Iron and Steel Institute, says domestic steel demand, aſter increasing in 2017-’18, will probably end 2019 “in negative territory.” “The demand environment will be challenging in 2020, as well,” he says. “Although the broad U.S. economy is unlikely to see a downturn, conditions in many of the sectors most critical to steel demand are unsettled.” He sees some promise for


greater light-vehicle production, but other steel-intensive capital goods, such as construction equipment, heavy-duty trucks and farm equipment, among others, are expected to contract. Construction and energy sectors are soſtening, too, he says. Like many others interviewed here, Jake Colvin, the National


covered. Business


In addition, Journal last


Freight year


reported on billions of dollars’ worth of infrastructure projects at several ports. In Jacksonville, Florida,


Robert Peek, Director and General Manager, Sales and Marketing, says JAXPORT’s business breaks down into about one-half containers and a


quarter each in bulk/breakbulk and autos. Noting that Asia trade rose 3% in FY2019, he says, “Our diversification model, in both trade lanes and commodities, helps reduce the impact of any volatility.” Same goes for South Carolina


Ports Authority. President and CEO Jim Newsome names several commodities that highlight SCPA’s diversity. Refrigerated cargos of poultry, medication and produce are up 80% since 2011, while lumber, manufactured goods, vehicles, synthetic resins, clothing, furniture and household goods rose, too. “In


addition,” he says,


echoing Borossay’s comment about Americans’ wallets, “we anticipate retail volumes will continue to grow as retail manufacturing is well- established in Asia and the U.S. consumer appetite remains strong.” American Apparel &


Footwear Association, meanwhile, sees punitive tariffs remain: up to 25% on the majority of apparel, footwear, travel goods, accessories and textiles, says Nate Herman, the organization’s Senior Vice President, Policy. Noting a rise in trucker bankruptcies and a decline in decking volumes at the Ports of Los Angeles and Long Beach, the biggest ports for AAFA members, he adds:


“The trade war with China is bringing a


///OUTLOOK


Maritime Consultancy Sees Challenges in 2020


By John Jeter


On Jan. 14, the day before the U.S. and China signed the so-called Phase 1 agreement, Drewry, the U.K.-based maritime and research consulting firm, released a “Market Opinion,” titled, “Multipurpose shipping earnings to recover 6% in 2020.” “The outlook for multipurpose shipping,


comprising both breakbulk and heavy- lift vessels, is brightening despite rising geopolitical risk and economic uncertainty,” the article says. Before that, FBJNA reached out to


Drewry’s Rahul Sharan, Lead Analyst, Dry Bulk Shipping, and Simon Heaney, Senior Manager, Container Research, to get their specialized perspectives. Here’s a slightly edited result of the Q&A:


Q: Regarding global growth forecasts, what commodities will be most affected in terms of shipping volumes? A: A slowdown in manufacturing could affect demand for steel and, in turn, demand for iron ore and coking coal. Similarly, any significant slowdown in industrial production will impact demand for thermal in most of the developing countries.


Q: Can you address some commodities in more detail? A: Within dry bulk, the most affected could be demand for steel, iron ore, coking coal, bauxite and thermal coal. China consumes a large part of steel domestically. A slowdown in China’s demand will hamper its domestic steel production which depends considerably on imported iron ore. If steel production goes down, the imports of iron ore might go down as well. At the same time, demand for coking coal will also get affected.


Q: What about trade wars/tariffs? A: The trade war between the U.S. and China is already affecting the dry bulk market. Soybean and sorghum trades between the U.S. and China have come down sharply over the past year. Additionally, if the trade dispute continues for a longer duration, the Chinese economy might further get affected hurting its industrial production which in


once-in-a-generation shiſt for our industry, highlighting the need for today’s supply chains to be diverse.” Even more fundamentally,


Jess Dankert, Vice President for Supply Chain at the Retail Industry Leaders Association, says that while her members


“Our diversification model, in both


trade lanes and commodities, helps reduce the impact of any volatility.” -- Robert Peek, JAXPORT.


turn will badly affect iron ore trade.


Q: Please discuss regulatory issues. A: There won’t be a contraction in container demand in 2020. The market will continue to grow, but it will do so at a slower pace than it has been accustomed. In our Container Forecaster quarterly report published at


the end of


December, we predicted global port throughput growth of 3.3% for 2020, up from the estimated 2.3% rise of 2019. The new emissions regulations won’t affect


demand, but, clearly, it does have big op-ex implications with fuel being the single largest cost facing lines. Depending on carriers’ success in recouping this additional cost from customers, we anticipate even greater cost-saving measures to counter this cost increase, which could come in the form of staff redundancies, even slower steaming and more direct calls at previously transshipped ports to save on feeder costs.


Q: Capacity vs. demand? A: The market is suffering from structural overcapacity built up aſter years of over- ordering. That situation isn’t about to change overnight. We peg fleet growth for 2020 at 3.7%—i.e., above that of demand—so the supply pressure will intensify next year. Things should start to balance out from 2021


onwards as a more conservative approach to new ship ordering seen over the past couple of years will start to eat into that supply-demand deficit. However, we anticipate that the market will continue to remain oversupplied for the next five years, at least, albeit less so with each passing year.


Q: How will shipping rates change in the coming year? A: Despite the worsening market imbalance, all- in container freight rates will almost certainly rise next year. Price inflation will be driven by the higher fuel surcharges, without which we believe rates would decline. Another influence is the decreasing level of


competition within the key trade lanes. Most remain at least moderately concentrated, meaning that carriers cannot call the shots, but the direction of travel is definitely moving away from fully competitive markets and gives them ever-increasing selling power.


continue to “keep a pulse on where buyers’ habits are going,” RILA keeps an eye on infrastructure. “We’re looking at the


performance of ports and the gateways into our country that are the key points of commerce, and making those continue to be globally competitive and to make sure that the performance of our transportation and infrastructure network keeps pace with those that are leaders around the world,” Dankert says.


That subject is bound to a


focus at RILA’s LINK2020: The Retail Supply Chain Conference in Dallas Feb. 23-26.


It could


shape up to be a leading issue this year. Michael Blume, AF&PA’s


Manager, Government and Industry Affairs, puts it this way: “Investment in the nation’s infrastructure


is essential to


ensuring our products move safely and efficiently across the nation’s rail and highway systems.”


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