Chennai, 13 Jan 2021:
The “blue wave” political scenario is now a reality. And with it, the likelihood of much higher stimulus. That, in turn, would support much higher consumer spending — and imports — just as stimulus did in the second half of last year.
With COVID hospitalizations at record highs, almost 4,000 U.S. deaths per day and vaccine distribution slow out of the gate, a full-year boom scenario may sound implausible. But it just got more likely, courtesy of this week’s two Democratic Senate wins.
According to Jefferies Chief Economist Aneta Markowska, “What seemed like an outside probability just a few weeks ago looks increasingly likely to become reality.”
Container network already maxed out“All the ships that can sail are out at sea and all the containers that can hold cargo are in use,” said Vincent Clerc, head of ocean transport at Maersk, at a briefing on Wednesday, according to Bloomberg.“We hadn’t foreseen just how COVID would change consumer patterns,” Clerc said, explaining the surprise container boom. “People use a much, much higher portion of their wages on goods [versus services],” Clerc added.Digital freight forwarder Flexport reported Thursday that the “January [Asia-U.S.] market remains extremely strong from both a rate level and booking perspective.”
If the blue wave spurs additional stimulus that keeps volumes elevated for much of this year, government spending would indirectly buoy profits of container lines, container-ship lessors, container-equipment lessors — and their shareholders.
Containers lines would earn high spot rates for longer than they would have without added stimulus. Lines would also be in a better position to negotiate higher contract rates. Meanwhile, ship and equipment lessors would see charter rates remain higher for longer or rise even further off current peaks.
On the vessel side, there was not much difference between both Trump and Biden, though shipping topics never really came up in a meaningful way. Biden, like Trump, will be a continued supporter of the Jones Act, which – reserves coastwise trade for vessels built, and owned in the States, crewed by US mariners.
Biden’s ties to Pennsylvania, his “rust belt” birthplace, and the importance of Philadelphia in the election, will not be unnoticed by observers of the shipbuilding scene. Biden has stressed his ties to organised labour, and had gained the support of a number of maritime unions in the election.
On the cargo side, one obvious likely improvement will be the US trades with Cuba, set back by Trump after an opening by Trump’s predecessor Barack Obama, where Biden served as Vice President, 2009- 2019 – easing decades of sanctions. Increased movements of general cargo, both breakbulk and unitized, and vehicles would benefit both US and other carriers already serving the Caribbean islands.
The US heartland , steel-making states like Michigan and Pennsylvania (won by Biden) and , Ohio (went Republican) were frequent campaign stops for both Donald Trump and Joe Biden. Agricultural stalwarts such as Iowa, Missouri and Kansas were solid “red” states (going for Trump) but fit into the Biden mantra of supporting working Americans. Macro trade flows will see limited impact from a change in Administrations; farmers have noted Biden’s support for biofuels.
The shipping industry will be impacted in a major way, albeit over a timeframe lengthier than a US election cycle, by regulations and initiatives related to climate change. The oil business will likely be under much more pressure to ramp up its non-fossil fuel initiatives, generally, under a Biden regime.
However, macro tanker market influencers, related to fleet supply, OPEC+ actions, and by overall oil demand, not red versus blue, will drive tanker markets. The US saw exports increase during the Trump years, following an Obama late 2015 initiative, due to bigger picture fundamentals, rather than by explicit Presidential actions.
The offshore wind energy, which has seen projects pushed back several years by Trump administration inertia, will be loudly applauding the Biden victory. Under a Biden administration- with cooperation from the Legislative branch, US shipbuilders, and long-suffering owners of oil service vessels, would welcome efforts to facilitate offshore wind projects, driving US energy consumption away from fossil fuels, in a more timely manner.