Developments in Global Maritime Trade

Global maritime trade grew at 4 percent in 2008, registering the fastest growth rate in five years. The United Nations specializing in trade (UNCTAD) expects a 3.8 percent compound annual growth between 2018 and 2023. Due to stronger global demand, more manageable fleet-capacity growth  and overall better market conditions, freight rate levels improved significantly in 2017, except for those of the tanker market. Container freight rate levels increased, with averages surpassing performance in 2016 and with profits in the container shipping industry reaching roughly $7 billion by   the end of 2017. CMA CGM and Maersk Line reported best operating results. The tanker market remains under pressure largely due to increased supply capacity which undermined freight rates. There is a healthy balance between supply (supply of vessels) and demand (demand for vessels) as fleet expansion is accompanied by increased seaborne trade volumes.

There is consolidation in the shipping industry due to mergers and acquisitions. Three global liner shipping alliances dominate the industry along the East-West container routes. Despite this consolidation, several individual carriers have emerged to provide a range of shipping services. The development of mega carriers and larger vessels have increased the need on the part of port operators to adapt to these changes. It is critical for ports and terminals to reevaluate their role in the maritime logistics and embrace digitization-driven innovations and technologies.

The shipping industry has also agreed to participate in the efforts to reduce greenhouse gas emissions. Shipping accounts for 2.5 percent of global greenhouse gas emissions. Liner shipping accounts for a quarter of these emissions. In April 2018, the shipping industry agreed to reduce emissions by 50% by 2050 compared with 2008. It identifies short, long- and medium-term measures and their impacts on countries. One of the measures being discussed is slowing down ships by mandating speed limits on the high seas (set maximum annual average speeds for container ships). There are doubts whether this is a good move to reduce emissions. Some believe that reducing speed on container ships that operate on weekly schedules, for example, will require additional ships to maintain those schedules thus contributing to additional gas emissions.

 

There are several issues that are likely to shape the outlook pertaining to the shipping industry.

  • An immediate concern to the shipping industry relates to trade tensions between US and China as well as tensions between the US, Canada and Mexico. Escalating trade tensions could adversely affect trade volumes and seaborne trade.

 

  • The trend toward digitalization and e-commerce and the implementation of the Belt and Road Initiative have important implications for the shipping industry.

 

  • Increased supply (new vessels) could lead to excessive new capacity with adverse effects on freight levels, transport costs and earnings.

 

  • The consolidation and restructuring in the shipping industry must be examined in terms of their implications for competition. It is important that there be no abuse of dominant position by the big players.