US-China trade war worries turning shippers cautious, container maker says
Singamas, the world’s second-largest shipping container maker, says that the trade spat has not cut into shipping volumes, yet
Singamas Container Holdings, the world’s second-largest maker of shipping containers, said its clients were turning cautious as a trade war escalated between the US and China, and that the second half of the year could become increasingly challenging as the rhetoric heats up.
Chairman and chief executive Teo Siong Seng told a briefing on the company’s first-half results on Tuesday that rising tensions between the world’s two biggest economies had not yet cut into shipping volumes or hurt the company’s business, but “people are watching it very carefully”.
“As long as the US demand is there, the supply chain will be prolonged,” he said, adding that some shipping could be shifted from China to other countries in Southeast Asia, such as Vietnam, Cambodia or Myanmar. “If anything, the demand for boxes will go up,” he said.
However he noted that while container orders were full up to September 2018, buyers had become more cautious when placing orders because of concerns over the trade war as well as rising interest rates and currency fluctuations.
The company, a subsidiary of Singapore-based transport and logistics company Pacific International Lines Ltd, reported a loss of US$2.1 million in the first half of the year, compared with a profit of US$16.6 million in the first six months of 2017. The rising cost of materials sent its manufacturing segment, which accounted for more 98 per cent of its revenue, to a pre-tax loss in the first half, it said.
Singamas warned in July that it would report a first-half loss because of an increase in the costs of raw materials, including corten steel, used to make its containers and because of a rapid appreciation of the yuan against the dollar in the first few months of this year. The company has manufacturing facilities throughout mainland China.
The yuan has since lost 8 per cent of its value against the dollar since a peak in March, which Singamas said has helped moderate its costs recently.
Revenue rose 63 per cent to US$969.2 million in the first six months, compared with US$545 million in the first half of 2017.
Shipping containers have been removed by the US from its list of proposed tariffs, so the direct impact would fall on users.
A.P. Moller-Maersk, the world’s largest shipping company, warned on Friday that global trade could be reduced by 0.1 per cent to 0.3 per cent because of the tensions. But the impact could be much greater on the US, with imports from China reduced by up to 4 per cent and US exports to China cut by as much as 6 per cent, it said.
The US has already placed tariffs on US$34 billion of Chinese products and US President Donald Trump told Reuters on Monday that there was no time frame for ending the dispute.
In the first half of this year, Singamas manufactured 458,374 20-foot equivalent units (teu), up from 310,070 teu in the same period last year, the company said. The average sales price of a 20-foot dry shipping container was US$2,203 in the first six months of 2018, up from US$1,902 in the first half of 2017.
China International Marine Containers Group, the world’s largest shipping container maker, is set to report its first-half results next week.