The recent proposal made by the Trump administration to levy sizable fees on vessel operators using Chinese ships coming to US ports has been one of the most widely discussed topics at the bi-annual members’ meeting of the International Iron Metals Association (IIMA) held in San Sebastian, Spain, on March 24-26. Though it is unclear if the fees will in fact be imposed, the impact on the import pig iron market may be rather big and some shipments have been on pause as more companies are avoiding loading vessels for the US market.
The proposed fees range from $1 million to $1.5 million for Chinese-owned vessels, Chinese-built vessel or operators with orders within the next 24 months from Chinese shipyards. If the proposal is accepted fully, the impact on the market will be “catastrophic”, market sources said. According to Denny Sabah, head of business development at Clarksons, 47.1 percent of the existing dry bulk fleet is Chinese-built, while China accounts for 71.6 percent of the bulker orderbook. Moreover, he added that 80 percent of the container market will be affected.
This has resulted in a number of companies already starting to avoid going to the US this week. If prompt shipments are going more or less smoothly, shipments with slightly longer lead times or future shipments can be postponed. “Nobody knows if and when it will come into force. If you are sailing now, it is risky,” Denny Sabah said. A final hearing on this topic is scheduled for March 26, seeking public comments.
A number of Brazilian pig iron producers, polled by SteelOrbis, have said that for now the impact on pig iron shipments to the US is unclear. “I do not believe it will be implemented, if saying the truth, but everything is possible. For now, freight rates are stable,” one of the Brazilian producers said. Freight rates from northern Brazil to New Orleans are at around $20/mt, with a rate of $25/mt from southern Brazil.
Nevertheless, a few market sources have said that freight rates have already increased by $3-5/mt, when the seller tries to find a non-Chinese vessel that is going to arrive in the US in May or June.
“The main problem is that it is unclear if all the proposed vessels will be included. If only Chinese-built vessels are charged, we will be able to find alternatives, but if all [including companies with Chinese orderbooks], it will be hard,” one trader said.