Another miserable year

COMMENT: The port and shipping industry really do not have much to look forward to these days. Despite all the recent scrapping of ships of all types, there is still a surplus of tonnage that slack demand cannot fill, writes Ben Hackett.

Demand remains at very low levels in North America, weak in Europe and downright negative in other areas bar Australia. There are few signs that economies will pick up in the coming year suggesting that demand will remain weak for the next 12 months. This is not good news for ports, terminals and shipping lines.

Conflicts in the Middle East, Eastern Africa and political uncertainty in Europe and the US are not helpful. If things were not bad enough, the success of Donald Trump in reaching the White House raises huge question marks about global trade if he proceeds to dismantle or re-negotiate trade agreements. There is no reason to believe that he will not do so. That puts further downward pressure on global trade, particularly if tariffs are brought into play. 

History tells us that if one nation applies tariffs, then others will respond accordingly. Unless there is a sense of reality we may well see the beginning of a recession in response to retaliatory trade measures.

Who gets hurt? The providers of transportation and the service industries that support international trade. But let us not forget that many US and European companies are heavily invested in places like Mexico, Vietnam, and China. Their business is threatened and it is hard to see why US companies would bring back their huge monetary reserves in response to a tax cut. The two concepts do not add up.

Economic growth will splutter in response to this increased uncertainty and consumers may well decide that they do not need the latest gadgets and fashions. Industry may decide to delay investments which will hit the major commodities. Maybe the one bit of good news is that Trump is promising to spend a trillion dollars on infrastructure. You can bet your boots however that it will not be with Chinese steel or foreign cement.

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