On February 12th, the United States issued an executive order imposing a 25% tariff on all steel and aluminum imports, set to take effect on March 12th. This decision was made despite warnings and objections from both European and Chinese entities, reports Breakwave Advisors.
Difficult Times
The UK faces challenges due to its lack of EU-level bargaining power in trade disputes, particularly regarding US tariffs on steel and aluminum. Initially, the UK government downplayed the impact of the tariffs, citing that steel exports to the US were a small percentage of total UK steel exports. However, a deeper analysis reveals that the US market is more significant than initially portrayed, especially when excluding European destinations. Industry figures indicate substantial trade value between the two economies.
Following backlash from British steelworkers, the UK government announced a £2.5 billion investment strategy to support the domestic steel industry, including utilizing British steel in infrastructure projects like the Heathrow airport expansion. This strategy aims to mitigate the potential damage from US tariffs, which could significantly impact UK steel exports.
The US tariffs also pose a threat to the already struggling Supramax market in the Atlantic. The UK government’s plan to boost domestic steel usage could reduce demand for vessel transport in the region. The immediate effect of the tariffs is expected to be a decrease in steel cargo originating from the UK, which will likely put further downward pressure on Supramax demand. Geared bulk vessels, particularly Supramaxes, play a significant role in global steel shipments.
Supramax Strengthens
Data indicates that the Atlantic Supramax market was already struggling, particularly in the UK-Northwest Europe area, due to an oversupply of vessels and weak demand. This resulted in significantly lower average rates for the Baltic route S4B in January 2025 compared to January 2024. The oversupply continues to exert downward pressure on rates.
Despite this, Supramax rates surprisingly strengthened this week due to increased activity. This may be attributed to US importers front-loading shipments from Atlantic Basin origins before the implementation of US tariffs in March. Additionally, the second quarter marks the start of the grain export season from East Coast South America (ECSA), and with potential increased Chinese demand for Brazilian grain, the Panamax market could see a boost. This could then positively impact the Supramax market.
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Source: Breakwave Advisors
