Impending change in the US government seen impacting the dry bulk commodity market
Drewry expects volatility in trade to rise, impacting coal and grain trades when Donald Trump takes charge of the White House. Analysis of the trade tensions during 2016-20 sets the foundation for a renewed focus on the imposition of tariffs and bilateral relations between the US and China and US-Iran. While diversification of trade partners in China’s imports has already been underway, the recent ratification of Brazilian sorghum solidifies China’s quest to reduce reliance on the US.
The impending change in the US government in January 2025 could impact the dry bulk commodity market, shaping the shipping demand in the coming years.
In line with the renewed focus on fossil fuel energy during the US presidency from 2016 to 2020, expansion in domestic coal production will be a major beneficiary in the upcoming term. Heightened coal production will aid exports from the country, boosting dry bulk shipping demand.
Trade impact
The most pronounced impact of the new presidency will be on major trade partners such as China. Given the precedence of a tumultuous relationship during 2016-20, a direct impact on the US-China trade relations is incumbent. China, the largest market for US agricultural goods, registered a plunge in soybean imports, which tumbled to rock bottom in 2018 due to escalated trade tensions. Grain trade also remained low until an agreement was reached in 2020 between the two countries.
Since then, China has been diversifying supply sources of grain and soybean to reduce its dependence on the US. With the change in the government in 2025, some critical dynamics are already reshaping the trade.
Many US traders are already bracing for fresh tariffs and frontloading soybean exports. Many of these have been contracted to unknown destinations, giving rise to speculation that China is stocking up soybeans.
A potential new area of concern is the sorghum trade between the US and China. China, the world’s largest sorghum importer, sources seven million tonnes per annum on average and plans to diversify and import from Brazil. The US accounts for 56% of global sorghum exports and 94% of the shipments head towards China. While Brazil produces ample sorghum, its exports are minimal. However, China’s ratification of imports from Brazil will result in increased shipments from 2025.
Moreover, the neighbouring countries of the US will also face the heat with the recent announcement of a 25% tariff on imports from Canada and Mexico. It is more likely that the duties will be included in higher import prices of commodities as major imported goods into the US from these two countries (such as aggregates, iron ore and cement) would still be more economical than shipments from farther locations. Any retaliatory measures are unlikely to be severe trade disruptors as Mexico’s dependency on US corn persists.
As global trade patterns and trade relations undergo twists and turns, some economies are likely to face a direct impact. About 70 million tonnes of dry bulk commodities are traded in Iran, comprising 30 million tonnes of imports and 40 million tonnes of exports. With a looming threat of sanctions on the country, shipping demand will be hurt if trade is disrupted. However, the gap emanating from all export commodities, such as iron ore, cement and steel products, will be filled in by other sources, cushioning the shipping demand.
Conclusion
Heightened volatility in trade relations is projected with the new presidency of Trump which will expedite the stockpiling of certain commodities such as soybean and corn in Mexico and China in the short term. Amid the strained relations between the US and China and US-Iran during 2016-2020, a resurgence in escalated tensions is imminent, even though of a lesser magnitude. The diversification of Chinese imports will continue even though dependency on US grain and soybeans will not be completely removed, as per the Drewry analysis.
source: Exim News Service: London, Dec. 19