Shipping nations warn global trade is fracturing

Shipping containers at Bangkok port in Thailand in July. (Dario Pignatelli/Bloomberg)

The armed conflicts, trade wars and extreme weather events hammering maritime supply chains are not one-offs, but rather signs of a “structural shift” for global trade, 18 of the most important shipping nations warned on Sept. 8.

“Shipping routes are increasingly instruments of leverage and risk,” said the Consultative Shipping Group, whose members include the U.K., Germany, South Korea, Canada and Singapore, said in a rare joint statement published by Denmark’s maritime authority. 

The Strait of Hormuz, which Iran effectively shuttered after the U.S. and Israel launched strikes against it in February, is a stark example of the global consequences of a regional conflict. Meanwhile, disruptions from the COVID pandemic to Russia’s war in Ukraine show how fragile the global supply chain can be.

The Iran war has pushed up oil, fuel and natural gas prices, stoking global inflation. President Donald Trump’s administration has been under pressure to end the conflict, at times declaring the Strait of Hormuz clear of mines and offering U.S. naval escorts to transiting vessels.

“Allowing fragmentation to deepen, undermines the global rules-based maritime framework and increases the risk of disruptions at key maritime chokepoints,” the group wrote. “As the closure of the Strait of Hormuz demonstrates: When shipping supply chains fragment, the global economy fragments with it.”

One industry executive with knowledge of the situation said he was not confident enough to send vessels through even under U.S. escort, because the danger of an attack by drone, for example, was still too great. He said last week that U.S. officials had privately advised vessels to wait before attempting to exit the Persian Gulf.

The supply chain snarls of the COVID era have also had lasting consequences on global shipping, creating a more volatile but potentially more profitable market, according to A.P. Moller-Maersk A/S CEO  Vincent Clerc.

The world’s second-biggest container line is moving away from a decade-old strategy of trying to contain the volatility with investments in land-side logistics, Clerc told reporters Sept. 9 in Copenhagen. Instead, he said the company will add capacity to better take advantage of higher freight rates.

“We’re gonna need more ships,” Clerc said.

Maersk ranks No. 7 on the Transport Topics Top 50 list of the largest global freight companies.

U.S.-China tensions

While the message didn’t mention either China or the U.S. by name, the world’s two biggest naval powers have contributed to the fragmentation and rise in tensions the letter references. 

Trump’s trade war, which has embroiled China and nearly every other U.S. trading partner, is proving a stress on international commerce, 80% of which is transported by sea. Meanwhile China has aggressively moved in recent years to increase its military presence in the South China Sea, much of which it claims despite the objections of surrounding nations in southeast Asia.

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Chinese President Xi Jinping and U.S. President Donald Trump at the Zhongnanhai Garden in Beijing on May 15. (Evan Vucci/Pool Photo via Associated Press)

The two economic heavyweights have been at odds in recent years, including in the seas. The U.S. is toughening its the rhetoric against China with calls to boost domestic demand and reduce reliance on exports for growth, just before Chinese President Xi Jinping is scheduled to meet Trump in Washington later this month. 

The two sides have maintained a fragile tariff truce over the last year that’s set to expire in November. If the truce isn’t extended, higher tariffs and other trade restrictions could return — including hefty fees for Chinese-made and Chinese-owned ships calling at U.S. ports that caused panic across the shipping industry when they were proposed, and briefly in place, last year.

“Uncertainty about future access to ports or routes can affect long-term commercial planning. When countries begin to pursue diverging approaches, regional initiatives or stalled multilateral processes weaken the coherence of the system.” 

More widely, the increasing use of economic pressure as a leverage tool is effectively fragmenting the global shipping industry, the group warned. That division ultimately leads to higher costs for businesses and consumers, as well as greater commercial and environmental risk.

A rising number of vessels — “hundreds of ships” — are now circumventing sanctions by operating outside of standard insurance, safety and transparency frameworks, the group said. 

“The result is a two-tier system, one governed by rules, the other by opacity, ultimately weakening both.”

The Consultative Shipping Group called for consistent enforcement of international rules across jurisdictions, which requires transparency and information sharing between relevant authorities. 

“We call on all maritime nations to actively support and uphold the core principles governing shipping, from freedom of navigation to the international legal frameworks governed by multilateral institutions such as the IMO,” the statement said, referring to the United Nations International Maritime Organization.