The trade war is escalating, and the oil tanker market might stand to gain
At the start of the week, the U.S. administration announced tariffs of 25% on Mexican and Canadian goods (10% on Canadian energy) and 10% on Chinese imports, set to take effect at the beginning of March (a month later than initially announced).
While these tariffs could weaken the global economy in the event of a trade war, the oil tanker market is expected to benefit from changes in crude trade flows. In response, China has already announced levies on American products, indicating the first signs of a potential trade war. These levies will begin on February 10, allowing ample time for discussions between the two countries (which Trump has already mentioned).
The demand in ton-miles is expected to rise with the development of new import routes
According to Fearnleys Research, trade is expected to become more intricate, leading to longer shipping distances. Mexico can easily redirect its exports to Asia and Europe, while Canada faces greater challenges since pipeline exports to the United States account for a significant portion of its production. Canada might respond by maximizing pipeline exports, lowering prices, or increasing stockpiles, which could boost tanker demand.
To offset the reduction in imports from Canada and Mexico, the United States might source crude oil from South America or the Middle East, which would further increase ton-mile demand and support tanker rates. Coupled with OFAC sanctions on Russian oil, this could strengthen an already bullish tanker market.
Additionally, the container segment is expected to be the hardest hit due to the decline in demand for Chinese imports and the overall economic uncertainty.
Source: Fearnleys Research and Reuters