Shipping industry struggles amidst trade war uncertainty

The global shipping industry is set for a tough time, according to the Wall Street Journal, due to higher fuel prices, weak freight rates and trade war uncertainty.

Weak freight rates are due to overcapacity—there are too many ships in relation to cargo, even though the shipping industry has seen aggressive consolidation in recent years that has left only a few key players.

Oil prices have spiked due to the tensions in the Middle East and the collapse of the Iran nuclear sanctions deal (costing around $418 per metric ton as of today), leading to fuel costs that are 50% higher than this time last year.

On top of all this, a trade war between the US and China—and the US and Europe—looks set to make things worse.

Maersk and Hapag-Lloyd have released profit warnings, while operator GoodBulk withdrew a $140 million Nasdaq IPO, as shipping stocks are not currently an attractive prospect.

Maersk doesn’t expect to be hit too hard by the current tariffs but predicts that “a continued escalation could result in severe consequences for global trade.”

(Source: Wall Street Journal)