Until the political impasse is resolved, the shipping market will remain volatile.

    Donald Trump's erratic foreign policy is causing oil traders to be reluctant to sign long-term tanker leases, further exacerbating the uncertainty facing shipowners, the Financial Times reported on February 24.

    Long-term deals are hard to come by

    Shipowners and commodities trader Vitol said U.S. President Donald Trump's trade war and intervention in international conflicts are making traders wary of entering into "time charters." Such long-term chartering agreements, usually for a period of several years, provide certainty to shipowners and charterers in terms of transport costs and rental income.

    Trump's policy has heightened doubts about future costs and risks in a market already facing multiple challenges, including the Russia-Ukraine conflict and the impact of Houthi attacks on ships in the Red Sea that have forced ships to reroute routes and pushed up freight rates.

    Mikael Skov, chief executive of Hafnia, one of the world's largest tanker operators, said the new US administration was making "new announcements" "every day". "Oil traders, other shipowners... Almost everyone agrees that it may be more difficult to do long-term deals now."

    Mr Skov added that the uncertainty had affected the valuation of second-hand vessels. "Very few people will buy a boat unless they can get a three - to five-year lease."

    Earlier, Norden, the Danish operator of large tankers and dry bulk cargo, also noted the uncertainty facing the industry and forecast a net profit range of $20 million to $100 million in 2025.

    Canadian tanker owner Teekay also noted significant uncertainties in the market when it issued guidance for 2025 on Feb. 19. "It is difficult to predict how the tanker market will evolve in 2025 and whether there will be new geopolitical events," Teekay said.

    Andrea Olivi, global head of shipping at Trafigura, a commodities trading giant based in Singapore, said people were "definitely more cautious" about signing long-term shipping contracts. This uncertainty involves not only tariffs, but also the Russia-Ukraine conflict and the use of Red Sea routes. In the past year, because of Houthi attacks on merchant ships, most shippers avoided the Red Sea and circumnavigated the Cape of Good Hope, causing shipping times and costs to soar.

    However, the possibility of a return to the Red Sea route increased after the Houthis said last month they would scale back attacks in response to a Gaza ceasefire. Andrea Olivi noted: "Any significant change in the situation in the Red Sea will have a huge impact on freight rates. A lot can happen in the next three to six months."

    On tariffs, Teekay said the threat of U.S. tariffs on crude imports from Canada and Mexico could boost some tanker trade. The company said the levy could increase U.S. seaborne trade with other countries and push more Canadian and Mexican oil to Asia. But at the same time, US tariffs on China could curb Chinese oil demand and imports.

    Markets are Mired in uncertainty

    In the case of Ukraine, shipowners are concerned about the reshaping of oil trade by any peace deal. Since Russia launched special military operations in February 2022, its oil exports have been subject to extensive sanctions by the United States and other Western countries.

    Jan Dieleman, head of Marine transport at commodities trading group Cargill, said uncertainty over geopolitics and trade routes had also raised doubts about access to Marine fuel, known as bunker fuel.

    Cargill and Hafnia announced this week that the two companies will combine their Marine fuel supply businesses to gain scale and improve customer reliability, as well as ensure energy price security.

    While the shipping market may face potential shocks, head tanker operators such as Hafnia remain bullish on the long-term market prospects for shipowners. Ageing global fleets, they argue, mean owners will scrap old ships, limiting capacity supply and pushing up rates.

    However, Sean Miller, co-head of tankers at leading London-based SSY shipping brokerage, said the market was "Mired in geopolitical uncertainty".

    Miller said: "To normalize the market, first you need to resolve a number of political gridlock, and second you need to assess the subsequent ripple effects." Until that happens, the shipping market will remain volatile."

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