gGeopolitical turmoil, concerns about energy security, and the emergence of competing trading blocs are fundamentally changing the way shipping markets operate, according to speakers at a panel discussion at the Baltic Exchange in Posidonia.
While participants highlighted increasing volatility, regionalism and strategic competition between major powers, they also agreed that the volume of global trade and demand for shipping are likely to continue to expand over the coming years.
The discussion brought together shipowners, brokers, analysts and academics to assess how shipping is adapting to a world increasingly defined by geopolitical tensions, supply chain resilience and changing trade patterns.
For Alex Hubert, director of Hong Glory Bulk, the shift has been unfolding over the past five to six years, marking a clear departure from an era characterized by cheap capital and highly improved global supply chains.
“We moved from a world where risk was zero, money was worth nothing, and moving goods was about efficiency, efficiency and price,” Hubert said. He said lower financing costs encouraged companies to expand supply chains as much as possible while focusing primarily on cost efficiency. However, the pandemic has exposed vulnerabilities that many market participants previously underestimated.
“Supply chains have basically stopped,” he said, explaining that flexibility and security have become as important as efficiency.
At the same time, rising interest rates have transformed the economics of commodity trading. According to Hubert, the cost of financing commodity trade has risen dramatically, making inventory management and the movement of goods more complex and expensive than during the years of very low interest rates.
pile on
These challenges have been exacerbated by geopolitical conflicts and unrest. “When you add to that geopolitics and wars, you have a perfect storm again, where it’s more about flexibility, security and getting your goods on time to your customers,” he said. As commodities become more strategically important, shipping is attracting greater scrutiny as ships effectively become extensions of those supply chains.
The changing geopolitical environment is also changing attitudes to risk across commodity and shipping markets. Hubbert noted that traders and market participants are finding it more difficult to price future exposure.
“If you’re selling a business upfront… you’re not just exposed to the shipping market itself,” he said. Participants must now consider geopolitical events that may arise between the time the trade is agreed and implemented.
“Not everyone is willing to sell risks at the moment,” he added. As a result, trading houses increasingly hold risks internally until conditions become clearer and can be transferred along the chain.
From the tanker sector, George Mangus, co-founder and director of SOKANA, said the industry is witnessing changes beyond the immediate market fundamentals. “Shipping has been on the cusp of collapse of the global world order for some time, 15 years,” Mangus said.
He noted the emergence of “two completely separate fuel distribution systems” linked to an increasingly divided global economy. Rather than focusing solely on trade statistics or shipping rates, Magnus emphasized the importance of mindset. He said industry participants need to adapt their thinking to confront entrenched assumptions about globalization and international trade.
Mangus also highlighted the potential impact of artificial intelligence and broader technological changes on geopolitical competition. “We are once again on the cusp of something unprecedented in the way countries will interact with each other,” he said. He said that the major powers are seeking to maximize their positions under the current rules, while they still can, because the competitive dynamics of the future may look very different. “Everything will change, and this is what we are experiencing now.”
Financing is still available
Providing a research and finance perspective, Eva Tzema, Head of Research and Ratings at Cass Technava, noted that although lenders have gone through periods of increased uncertainty, banks remain active and competitive participants in freight financing.
“There is appetite, of course,” she said, adding that competition among financial institutions has also intensified pressure on Chinese rental houses.
Tzema also noted that China has emerged as a major beneficiary of recent global developments. While acknowledging the strength of the US energy sector, she noted that recent turmoil and concerns about energy security may accelerate efforts by many countries to diversify away from Western-dominated supply chains.
“Personally, I think China is the biggest winner from everything that happened last year,” she said. Tzema said the world was unlikely to return to a US-dominated system in the same way as before, and noted that trade relations were evolving towards a multipolar structure.
Athanasios Platias, professor of strategy at the University of Piraeus, also addressed the possibility of a more fragmented global trading system.
He expected increased regionalism, with the development of stronger trade flows within geopolitical blocs and relatively less interaction between competing spheres.
“We will move to different systems, and that will be through regionalization,” Platias said. “There’s a lot of trade within all of these orders, but not a lot between East and West, for example.”
Platias also examined the implications for shipbuilding, arguing that Western economies were unlikely to re-establish major shipbuilding industries capable of competing with existing Asian ships. In his view, larger shipping companies will be better placed to bridge geopolitical divisions by maintaining access to multiple shipbuilding centers and trading jurisdictions, while smaller owners may struggle.
“Small ship owners will suffer,” he warned, noting that flexibility alone may not offset the challenges posed by a more fragmented trading environment.
Despite concerns about protectionism and geopolitical competition, Platias rejected the idea that globalization is heading in the opposite direction. “Trade is increasing, and it will also increase in energy,” he said, noting that the growing energy demand associated with artificial intelligence and growing middle-class consumption in developing economies should continue to support trade growth.
Source: Baltic Stock Exchange
