Three events affected the contours of the maritime shipping industry in 2017. Trade negotiations created uncertainty for import-export markets in the United States and around the globe; the country’s ports finally began to experience the effects of the expanded Panama Canal; and new towing vessel regulations were written into law, affecting how 556 million tons of cargo are moved annually by 5,500 vessels within the US inland waterway system.
Following President Trump’s Jan. 21, 2017, order to withdraw the United States from the 12-nation Trans-Pacific Partnership (TPP), the president notified Congress that the US would seek to renegotiate the North American Free Trade Agreement (NAFTA) with Canada and Mexico. Four rounds of negotiations later, it is reported that the three North American countries have struggled to find middle ground, and the president has threatened to withdraw the US from the agreement. The future of this massive deal — which, according to the Congressional Research Service, has helped increase US exports to Mexico and Canada by 455 percent and 166 percent, respectively, since 1994 — is largely unknown and could have a negative effect on US grain exports to Mexico and imported oil from Canada.
East Coast and Gulf ports have begun to experience the effects of the Panama Canal expansion, and have welcomed record-sized vessels and increased cargo volumes. Many of those ports experiencing 10 to 30 percent year-over-year growth in container volumes, arriving on ships sometimes larger than 1,200 feet and carrying more than 14,000 containers. In response, ship assist tugs have been built stronger, shore cranes constructed larger, and ship channels dredged deeper.
Lastly, keep your eye on towing vessel operators as they react to 46 CFR Subchapter M, published in the Federal Register on June 20, to establish comprehensive safety standards for the inland towing industry. This rule, to be phased in over the next five years, includes strict vessel configuration and structural requirements that will result in companies spending millions of dollars to maintain compliance. We have seen significant M&A activity in anticipation of this regulation, and expect that trend to continue as smaller operators are absorbed by larger companies.
This year, expect the outcome of pending trade deals, the accommodation of larger ships, and response to new regulation to continue to shape the industry.