The future is on hold: uncertainty stymies shipping strategy

“THERE’S no value in making long-term decisions right now,” lamented one shipowner over lunch recently.

All norms have been overthrown.

In a market where free trade is under threat and geopolitical tensions are escalating, decisions get deferred, investment gets scaled back and doing nothing starts being passed off as pragmatic stewardship.

Knowing what will happen with US-China tariffs for the next 90 days is not the same as being able to invest with any strategic conviction.

Regulation has offered little in the way of clarity so far this year and investment is stalling in response to uncertainty.

For a shipping industry, that is a major problem and large swathes of the industry currently find themselves stuck a self-induced state of paralysis.

For some, certainty in shipping has always been an illusion. Disruption is a profitable opportunity, pure and simple.

For others, like our hesitant owner, it’s a case of seeking refuge in shipping’s traditional values.

“Stay liquid, don’t overorder, don’t overleverage and keep your cash — all the old tenets of shipping are proving truer now more than ever,” he offered, knowing that such retrospective options are only open to those who had managed their risk prudently to start with.

The first half of 2025 has rendered the prospect of a mid-year outlook on trading conditions something akin to soothsaying.

The myriad potential trajectories that could be pursued, change by the day — leaving forecasts redundant before they are read.

The headline takeaways, though — that tariffs are inherently detrimental to economic growth, trade volumes, production costs and consumer prices — remain worryingly consistent across that multiverse of possible outcomes.

The negative demand shocks re-routing trade flows and juggling deployment schedules of ships right now, will ultimately be a downward drag on trade volumes, regardless of any short-term tonne-mile uplift, or policy U-turn bump that might emerge.

A further slowdown was not what the industry needed this year.

While historic policy progress has been made towards shipping’s net zero 2050 goal, decisions inside the International Maritime Organization are yet to catalyse the required generational injection of green investment.

Well before free trade was on the brink of collapse and geopolitical tensions were simply simmering rather than rapidly escalating, there was an existing hiatus of investment in shipping, due to uncertainty over what the future looks like in terms of decarbonisation.

The big questions: do we build ammoniapowered ships, hydrogen, biofuels? Can we get away with liquefied natural gas? These all remain fundamentally unanswered in the minds of the executive decision makers.

Green energy projects are being cancelled or scaled back, and the once bold ambitions towards sustainable energy from the majors have collapsed into a fossil fuel future, for the moment.

Cut through the rhetoric and it becomes increasingly clear that nobody has any certainty — and so we have, as an industry, held off, hedged bets and paid through the nose for optionality and the least-worst set of decisions.

Green headwinds were anticipated in the context of Trump-induced climate policy reversals, but this has all been compounded by a wider uncertainty. Strategic investment is effectively on hold across the global supply chain.

This is not a carbon story — and this cannot be reduced down to a question of tariffs.

What we are watching emerge here is the beginning of a new global economic and market paradigm, not the end state.

The catalyst is a shift back to international economic policies driven by narrow selfinterest and this is likely to be a fundamental change that will have lasting implications.

Reading the runes of every single tariff statement, U-turn and counter U-turn is not going to provide a solid basis for planning strategically.

What does seem clear is that trade is set to become more fractured — potentially along regional lines — as the major trading blocs battle for competitiveness.

The outlook for seaborne trade volumes is weakening.

What follows is less predictable.

Protectionism is likely to spread as economies around the world rush to safeguard their domestic industries. Just as the US puts pressure on China, other blocs will turn to protectionist measures to manage the spillovers.

What that means for an industry like shipping, where short-term disruptions are profitably embraced but strategic investment is conducted with 20-year horizons, is not yet in any way clear.

But markets are at the start, not the end, of repricing in the new economic landscape. Risk premiums reflect much more benign conditions than the global economy is likely to face in the years ahead.

Brace yourselves; this is not going to be a short, sharp shock. It is going to be a long, painful recalibration.

Lloyd's List Daily Briefing 18 May 2025

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