US–China/Japan deficit may spell pain for COSCO Shipping & Ocean Network Express

7 March 2018, Global – Following the recent US tariffs on steel and aluminium imports, the Trump administration is reportedly scrutinizing Chinese imports in view of the outsized US$375 Billion US-China trade deficit. Also of concern is the US$69 Billion US-Japan trade deficit. Should the US impose tariffs on Chinese or Japanese imports in a bid to reduce these massive trade deficits, this will have a disproportionately negative impact on COSCO Shipping and Ocean Network Express (Kawasaki Kisen + Mitsui OSK + Nippon Yusen Kaisha) on the Container Shipping front. If China or Japan then retaliates with curbs on US grain imports, it will also spell pain for the Dry Bulk Shipping industry.

THE UNITED STATES HAS A HUGE TRADE DEFICIT WITH THE ASIA PACIFIC REGION, TWO THIRDS OF WHICH IS DRIVEN BY ITS TRADE DEFICIT WITH CHINA

The US had a US$559 billion trade deficit with the Asia Pacific region in 2017; more than three times larger than its US$174B trade deficit with Europe. China accounted for US$375 Billion followed by Japan (US$69B), Vietnam (US$38B), Malaysia (US$25B), India (US$23B), South Korea (US$23B), Thailand (US$20B), Taiwan (US$17B), Indonesia (US$13B).

Chart: United States’ Trade Surplus (Deficit) with Asia Pacific Region (2017)

Chart: United States’ Trade Surplus (Deficit) with Asia Pacific Region (2017)

 

COSCO SHIPPING AND OCEAN NETWORK EXPRESS  HAVE A COMBINED 35% MARKET SHARE OF THE TRANSPACIFIC CONTAINER SHIPPING TRADE

Global container shipping companies that will feel the largest impact from any reduction in trade volume between Asia Pacific and the United States would be COSCO Shipping (1919:HK) and its majority-owned Orient Overseas (316:HK) which have the largest market share at 18%. This is closely followed by Ocean Network Express (new container shipping joint venture formed by the Japanese shipping giants Kawasaki Kisen 9107:JP + Mitsui OSK 9104:JP + Nippon Yusen Kaisha 9101:JP) at 17%.

Chart: Global Container shipping companies’ Market share on Transpacific trade (2018)

Chart: Global Container shipping companies’ Market share on Transpacific trade (2018)

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