Due to the profound influence of various geopolitical factors, international trade is constantly evolving, and shipping fleets and cargo flows are becoming increasingly divergent. This is one of the biggest risks facing the world and us, and the most likely scenarios in the future are "comprehensive competition" and "partial competition". The former involves all countries joining Western or Eastern trade groups, while the latter involves some countries maintaining neutrality and trading with both.


1. For shipping logistics practitioners and those who are concerned about the current development of shipping, the scenario of "partial competition" is already very familiar because it is happening and deepening. The most obvious ones are oil transportation, as well as container and dry bulk shipping. Geopolitics is dividing the global shipping system in two, with some countries attempting to center in, with both parties involved and maintaining open choices.



2. For oil transportation, geopolitical division is beneficial for tanker freight rates, which was analyzed and predicted a day before the start of the Russo Ukrainian War in early 2022. The current view remains unchanged, and the growth of transportation capacity in the next two years will also be very limited. Of course, it may also turn unfavorable in extreme situations in the future. The Russo Ukrainian War shifted Russian crude oil from short-term trade in the EU to long-distance trade to China and India, and shifted Russian diesel from the EU to alternative buyers for transportation to North Africa, Asia, and South America. The European Union has replaced the lost Russian oil with more distant supplies from the United States, the Middle East, and Asia. Transportation demand is measured in ton miles: cargo volume multiplied by distance. The trade model after the Russo Ukrainian War was far less effective than the pre war model, greatly increasing the tonnage and mileage of oil tankers, which was a bonus for freight rates. Previously, after imposing sanctions on Iran, the same distance effect also occurred. The sanctions shifted Iran's crude oil previously exported to the European Union and India to a longer route to China; And sanctions against Venezuela, transferring the country's crude oil exports from the United States to China. Geopolitics has also led to disagreements among tanker fleets, with one side trading in US dollars and using Western insurance and financial providers. On the other hand, currently accounting for 10% or more of global oil tanker tonnage, it is the so-called "shadow fleet", which refers to ships with opaque ownership and do not trade in US dollars or use Western services. The shadow fleet initially appeared after sanctions against Iran, grew after sanctions against Venezuela, and surged after the Russo Ukrainian War. Buyers from the Middle East, China, and India continue to purchase old-fashioned crude oil and finished oil tankers, causing the shadow fleet to continue to grow. In the longer term, the higher the global GDP growth, the better the demand for oil, and vice versa. The smaller or negative GDP growth, the smaller the demand for oil. The current world is shifting from multilateral cooperation to geopolitical competition, and by 2050, the economies of all countries will be hit, resulting in negative impacts on oil transportation.



3. For containers, it is not as obvious as oil transportation, but it is also a trend of friends' trade and economy. The Russo Ukrainian War has intensified geopolitical attention to "friend trade", which refers to container trade between trustworthy countries with common values. If friends support becoming a standard trade model, shipping companies will need to start creatively thinking about how to continue serving the conflicting parties. This will also put countries such as Vietnam and India in a very awkward situation. It is understandable that they are currently attempting to play the role of both neutral parties. But one day, the great powers of the East and the West will decide for themselves whether they belong to their own side. There is also a scenario where the "partial competition" model in today's shipping market may evolve into "comprehensive competition", with no one being able to play an intermediate role. Shortly after the Russo Ukrainian War, almost all major container shipping companies except MSC ceased providing services to Russian ports. What makes me wonder is how MSC can continue to trade with Russia and the United States. MSC has not withdrawn from the Russian market and still maintains a significant position in Russian trade, with branch operations in all three Russian portals, while other major shipping companies have completely withdrawn from the market. Other small independent shipping companies have filled the gap left by the departing ocean liner companies, including players from Türkiye, Dubai and China who are actively studying this field. In addition to the Russo Ukrainian War, one of the potential geopolitical risk points that the world is currently most concerned about is * *, so the unfavorable factors of container transportation also include geopolitical instability, which will pose a high risk to future demand for container transportation. The return of manufacturing to the United States and nearshore procurement to Mexico will reduce the volume of cross Pacific trade. In addition, container shipping is more susceptible to the impact of global GDP than tanker shipping, and global GDP will be negatively affected by geopolitical competition and multilateral cooperation. A more unfavorable factor for oil transportation is that you can look ahead to the scenario of a large number of container ships being launched, and then look at the global economy and foreign trade orders.



4. For dry bulk cargo, it will be more difficult to predict, as the diversity of goods categories makes it difficult to form a unified direction of force, and the diversion of dry bulk cargo after the Russia Ukraine War is also more complex. Measured by total cargo volume, dry bulk cargo is actually the world's largest shipping segment market. The impact on dry bulk cargo is similar to that of oil tanker transportation, with reduced trade efficiency, longer distances traveled by bulk carriers carrying Russian goods, and no non Russian goods loaded on the return leg, resulting in lower utilization rates. This is positive for freight rates in the short term. However, in the long run, the demand for dry bulk cargo is largely driven by global GDP, especially the Chinese economy, and theoretically both will be affected in the context of "geopolitical competition" trade scenarios. After the Russo Ukrainian War, the European Union banned the import of Russian coal. It now purchases coal from further places (Colombia, South Africa, United States, Australia). Russia's coal exports have shifted towards long-distance transportation to India and China. Since the war, with the readjustment of trade flows, the average duration of full load has deteriorated from 19.07 days to 34.82 days, an increase of 82.6% year-on-year, indicating low efficiency and a decrease in effective transportation capacity. According to third-party reports, China's imports of Russian dry bulk cargo have increased by 25% in a year, while India's imports of Russian dry bulk cargo have increased nearly threefold. More and more bulk carriers are almost entirely dedicated to Russian trade, although not necessarily a 'shadow fleet' like the oil tanker market, these vessels rarely deviate from their routes for other transactions. Since the beginning of the war, the number of bulk carriers directly returning to Russia after unloading Russian dry bulk exports has increased by about two-thirds. There are also more and more examples of 'choosing sides to stand in line'. On Monday, trade giant Louis Dreyfus announced that it will stop processing Russian grain exports from July 1st. A week earlier, trading companies Cargill and Vitra announced that they would stop processing Russian grain exports. On the other hand, everyone has also noticed that the Brazilian government announced on March 29th that China and Brazil have reached an agreement to no longer use the US dollar as the intermediate currency and instead trade in their local currency. This agreement will enable China and Brazil, the largest economy in Latin America, to directly engage in large-scale trade and financial transactions, exchanging the Chinese yuan for the Brazilian legal tender, the real, and vice versa, rather than using the intermediate currency of the US dollar. According to foreign media reports, the bilateral trade volume between China and Pakistan reached a record high of 150.5 billion US dollars last year.


5. This is the most observed trend in shipping and is for reference only. We do not discuss the background and right or wrong of geopolitics. What we analyze and discuss is only the possible impact this trend will have on our trade, shipping, and logistics. This will allow some people to see the future first, plan and prepare in advance.