Trump and Biden - how will the winner affect the world's ocean shipping industry?

Trump and Biden - how will the winner affect the world's ocean shipping industry?

With the US Election Day approaching, analysts urgently analyze the impact of the election results on the shipping industry. With just three weeks left, financial analysts are weighing the potential impact.

If Joe Biden defeats Donald Trump to become the next president, the Democrats will control a majority in the house of Representatives and gain a weak advantage in the Senate. The outcome of the U.S. election will affect the U.S. government's stimulus spending, energy policy, trade relations, geopolitics and environmental regulation, as well as the resulting shipping rates. "All in all, the fate of shipping may depend on who wins the presidency and all the other macro factors that drive demand," said Joan chapel, a shipping analyst at evercore ISI

1. Policy stimulus measures to stimulate expenditure have artificially and greatly expanded the demand for container transportation. The most important industries to benefit include maritime transportation, truck transportation and multimodal railway. As of October 13, China US West Coast Container spot rates exceeded $3800 / feu (40 foot container equivalent unit). That's the "stratospheric" level that has been hovering since mid September. Aneta markowska, chief economist at Jefferies, said in a conference call on October 1: "during the outbreak of the new crown, the labor market suffered a huge blow. But the fiscal stimulus is so large that it can offset its impact. Personal income rose by 4.7% year on year in August. If you look at the total amount of personal income, fiscal policy basically eliminates the recession. " In other words, the federal government uses debt to subsidize consumer spending and indirectly subsidizes the income of transportation companies, including non-U.S. shipping companies. In recent weeks, stimulus money has fallen. The election results will determine the length and amount of indirect subsidies to the transportation industry by the U.S. government in the future. "We believe the Democratic Party will pass a massive fiscal stimulus for the new crown," said Sarah Bianchi, political policy analyst at evercore ISI. This may be in stark contrast to the policies that the Republican administration will adopt in 2021. In the latest round of debate, Senate Republicans have shown that they have lost patience with large spending programs. With the Republican Senate and President, spending could fall sharply. "Democrats are also more likely than Republicans to raise taxes to stimulate the economy. But shipping companies are not worried because most of them are non-U.S. entities and pay little or no U.S. taxes. Shipping tax concerns are related to the future impact on economic growth. Especially considering that the money printing in the United States can't last forever.


2. The US oil production and export Morgan Stanley energy team led by analyst Devon McDermott predicts that the Democratic Party may impose stricter permits on us pipelines than the trump administration, reduce the ability to break ground on federal land, limit methane emissions, combustion and other strengthened regulations. All of this could hinder domestic oil growth in the United States. Meanwhile, Morgan Stanley believes Biden's victory may lead to stricter fuel efficiency rules, which will have a negative impact on domestic gasoline demand. "If Biden wins, we can see fuel efficiency standards return to policies similar to those of the Obama era," McDermott said. It is estimated that over time, this will lead to a reduction of up to 435000 barrels per day in US oil demand. "

A key variable in tanker demand is U.S. exports, as these goods are usually shipped to Asia over a long period of time, absorbing a large supply of shipping capacity. Increasing U.S. crude oil exports will increase spot rates for oil tankers, benefiting Tanker Owners. For U.S. crude oil exporters, Trump's win is more favorable than Biden's, the Morgan Stanley report said. If Biden wins, not only will U.S. crude oil production and export quotas be cut, but also the laws that allow U.S. crude oil exports to be abolished. In December 2015, the U.S. Congress amended the act on allowing the United States to export crude oil to countries other than Canada. Morgan Stanley's report said that if Biden wins, it is possible to ban U.S. crude oil exports. If so, it will tighten the global shipping market to the detriment of Tanker Owners.

3. Relations with Iran and Venezuela. Biden's victory may affect the balance of supply and demand in Iranian and Venezuelan tanker markets. Under Trump's leadership, both countries face severe sanctions. In theory, easing the sanctions on Venezuela would allow Venezuela to export more long-distance crude oil to Asia, which is favorable for tanker rates. But in practice, exports will be limited by the country's financial collapse. The bigger impact will be to make Charterers feel more comfortable with tankers that they have previously been rejected for docking in Venezuela. More efficient tanker capacity is detrimental to rates, as the US China route is 2.5 times longer than the Iran China route. Under the leadership of the trump administration, US foreign policy toward Saudi Arabia has been reoriented. President Trump's decision in 2018 to withdraw from Iran's nuclear agreement and re-establish sanctions has the support of Saudi Arabia. "If Biden is president, Middle East policy is likely to change," the Morgan Stanley report said. Biden hinted that he would see a "reassessment" of us Saudi relations. " "If Biden wins and there is a new strategy in US Saudi relations, we see the potential risk that Saudi Arabia may try to recapture oil market share from us shale," the Morgan Stanley report warned On the one hand, more Saudi Crude oil flows to Asia, replacing the longer distance of the Atlantic basin crude oil, which is detrimental to tanker demand. On the other hand, Saudi Arabia's last tap was in March, when the spill forced tankers into floating storage tanks at spot rates of more than $200000 a day. As a result, not all the potential consequences of Biden's victory are bad for tankers. If it's just exports from the United States, Venezuela and Iran, the tanker equation is complex enough. But if you add Saudi Arabia, it's much more complicated. "Under the leadership of the Obama administration, a series of events have led to changes in US Saudi relations," the Morgan Stanley report said. First, the shale gas revolution has made the United States one of the world's largest oil producers. Second, the 2015 Iran nuclear agreement has brought closer ties between the United States and Iran. Finally, in December 2016, the U.S. government decided to restrict arms sales to Saudi Arabia due to the Yemen incident.


4. The relationship with China, whether it is container, oil tanker, dry bulk cargo, liquefied gas transportation industry, the future relationship between the United States and China is indistinct. "Obviously, improving relations with China and possibly reversing protectionist policies bode well for trade," said Joan chaple. We believe that container ships are the most direct beneficiaries, followed by dry bulk cargo. In the Republican red sweep victory, it's hard to imagine a scenario conducive to Global trade. "

Mr. Bianchi of evercore ISI said the Biden administration's behavior toward China would be very different, but trade tensions remain. "The democratic government will take a different attitude towards China than the trump administration, relying more on allies and traditional diplomatic means," she said. However, given China's unpopularity among the American people, as well as the thorny issues of intellectual property and technology transfer in the future, Biden's approach may also be different from that of the Obama Biden administration. " Even so, under the leadership of the new government, the easing of the war of words may be good for shipping stocks. "Over the past three years, the shipping industry has been caught in the crossfire of a trade war between China and the United States," said Clarksons's team. Market and investor sentiment are affected by changes in both sides' statements. If a new president takes office, this suspense may be eased. The election results may have a meaningful impact on investors' attitudes towards the shipping industry. "

5. Decarbonization process in the long run, elections may play an important role in the dynamics of shipping decarbonization in the coming decades. The next four years will be a critical period for the negotiation of shipping decarbonization rules. These regulations will affect the supply of shipping capacity, chartering behavior and freight level. The goal of the International Maritime Organization (IMO) to reduce greenhouse gas emissions by 50% by 2050 is in line with the Paris Agreement. The trump administration promised to withdraw from the Paris Agreement. IMO building

If Biden wins, the United States will continue to abide by international agreements. This may bias the balance towards the United States and support more active regulatory action by the IMO. And that could include a global shipping carbon tax. "Europe is adopting renewable energy and limiting greenhouse gas emissions more quickly," Clarkson's report said. The United States is gradually following suit. We expect this process to continue if the existing trump administration remains in power. But if Biden wins, the process could be faster, especially given that green transition is one of the core themes of his campaign. "At the same time, sanctions have forced many Iranian tankers into floating tanks. If these vessels used as "floating tanks" resume commercial service (assuming they are still technically capable of doing so), the supply of tanker capacity will increase, which is negative for rates. "If Biden wins, the nuclear deal with Iran could return to the negotiating table," Morgan Stanley said Overall, the sanctions have had a huge impact on tanker rates under trump. Most notably, the US sanctions on COSCO's branches in September 2019 pushed the spot rate of supertankers to more than US $150000 a day. "Using sanctions as an economic tool" was a key issue during the US election, according to Clarksons platou securities analyst team. The election will determine the extent to which this tool will be used.

key word: ship

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