Potential implications on the freight industry following 2024 U.S election / Signal Ocean

The potential implications of the new 2024 U.S. election and the resulting presidential administration on the freight industry are substantial, particularly across the agricultural and energy shipping sectors. If tariffs on U.S. grain exports to China are increased, American grain exports could face further decline, shifting demand toward alternative suppliers like Brazil and affecting the traditional U.S. - China grain shipping routes. In energy markets, if sanctions on Russian and Iranian oil are eased, there could be an influx of crude oil, which may lower global oil prices and shift trade routes and tanker demand across the Middle East, Europe, and Asia. Conversely, a focus on bolstering U.S. fossil fuel production could increase coal and oil exports, particularly to regions facing energy shortages, which would drive demand for bulk carriers and tankers along U.S.-to-Europe and Asia routes.

Agricultural Market Dynamics

Continued tariffs on U.S. grain exports to China are likely to drive China toward sourcing more agricultural products from Brazil and other South American producers. Using data from Signal Ocean (Image 1), we see monthly grain shipments to China increasing since late 2022, as the U.S. works to recover lost market share. In October, just before the 2024 U.S. election, American grain exports surged, with shipments to China reaching 60% of Brazil’s total grain shipments—a significant jump from September's 25% and August's 10%, showing a notable rebound in U.S. exports.

The Trump administration may consider renegotiating trade terms with China to regain ground in agricultural exports. However, if tariffs persist, the U.S. agricultural sector may continue to seek new markets in Southeast Asia or Africa, while China strengthens its ties with Brazilian producers. This shift could lead to increased competition in the global grain market, impacting prices and the profitability of American farmers.

Oil Market Dynamics and Potential Influence on the Russia-Ukraine Conflict

In the energy sector, following the 2024 U.S. election, a second Trump administration may prioritize efforts to mediate or end the Russia-Ukraine conflict to stabilize global energy prices, which has faced supply disruptions due to the war. Trump’s foreign policy approach could encourage European leaders to resume imports of Russian crude oil, potentially if a peace agreement is reached. The reentry of Russian oil into the European market would likely lower energy costs across the region, which would have downstream effects on various sectors, including manufacturing and logistics. In image 2, we can view the monthly quantity of crude oil flows from Saudi Arabia to China compared to the monthly quantity of tonnes from Russia to China, where it seems that although China is still purchasing from Russia, the Saudi Arabian has not yet lost its dominant position to cater the Chinese energy demand market.

Europe’s Energy Rebalancing and the Arabian Gulf’s Eastern Pivot

If Europe resumes Russian crude oil imports, energy sourcing may rebalance, with Europe turning to nearby regions, while Asia strengthens ties with Arabian Gulf suppliers. This rebalancing could shift oil prices and shipping patterns, as tankers increasingly traverse East-West routes between the Gulf and East Asia. Gulf nations may also bolster infrastructure and trade agreements to meet growing demand from Asia, reshaping oil trade flows.

In the near term, impacts on the dry bulk grain sector may be more pronounced. The 2018 tariffs marked a major shift in U.S. trade policy, especially affecting U.S. grain farmers. The Trump administration enacted tariffs on a range of Chinese imports to address trade imbalances and intellectual property issues, and in retaliation, China imposed tariffs on American agricultural products. This caused disruption for U.S. farmers who relied on China as a primary export market.

Impact on the Dry Bulk Freight Market

If U.S. grain exports shift to new markets in Southeast Asia and Africa, dry bulk demand could grow along these routes, increasing freight rates for bulk grain transport. Additionally, easing tensions in the Russia-Ukraine conflict and realigned European energy sourcing could lead to shifts in bulk shipping for coal, crude, and other materials, potentially lowering rates on certain routes as stability returns to the global supply chain.

Increased agricultural trade between Brazil and China may raise demand for dry bulk carriers on Brazil-Asia routes, potentially boosting freight rates. As the dry bulk market adjusts to new trade patterns and energy demands, fleet allocation and capacity management will be crucial for shipping companies aiming to capture emerging opportunities amid geopolitical changes.

Downward Trends in Grain Flows from the U.S. Gulf to China Supramax / Panamax Vessel Size

Over recent years, monthly grain shipments from the U.S. Gulf to China have trended downward. Signal Ocean data on Panamax and Supramax vessel movements (Image 3) reveals occasional spikes—especially in late Q2 of 2022 and again in 2023—but these short-term gains have not offset the general decline. Modest rebounds observed in September and October this year remain within a broader downward trend seen over the past three years.

Impact of the 2024 U.S. Election and Speculation on Trade Policies

The 2024 U.S. election introduces added uncertainty to the U.S.-China agricultural trade. Once Trump returns to office, there is speculation that additional tariffs could be placed on U.S. agricultural exports to China, potentially reducing Chinese grain purchases from the U.S. Gulf. This scenario could dampen sentiment in the dry bulk freight market, particularly for Panamax and Supramax vessels, which are commonly used for grain cargo.

Tonne Days Growth and Trade Route Shifts

The growth in tonne days—a metric of distance and cargo volume—mirrors grain flow patterns, linking trade volume to vessel demand. Despite recent spikes, the longer-term decline in tonne days for the U.S.-China grain shipments suggests a broader shift. As China sources more grain from Brazil and Argentina, tonne days are likely to increase on Brazil-China and Argentina-China routes, favoring vessels between Latin America and Asia. This could lead to a reallocation of Panamax and Supramax fleets from U.S. Gulf routes to South American routes, impacting freight rates.

Market Implications for Panamax and Supramax Segments

Competitive pressures on U.S. grain exporters, driven by tariffs and trade barriers, may depress demand for Panamax and Supramax vessels on U.S.-China grain routes. Conversely, Brazil’s growing grain exports to China may boost demand for these vessel types on Brazil-Asia (image 4) routes, potentially driving up charter rates.

Looking forward, if tariffs on U.S. grain exports increase after the 2024 U.S. election or if political relations with China deteriorate, the dry bulk freight market may continue seeing a decline in U.S.-China grain flows. Rising demand for South American exports could reshape global grain trade and increase volatility in vessel rates across different routes. Vessel operators may need to adapt fleet strategies, deploying ships on longer Brazil-Asia voyages, which could impact operational costs and logistics planning.