A glut of new carrying capacity -- and declining rates and levels of competition -- are continuing and worrisome trends among firms providing maritime transport, UNCTAD's annual survey of the shipping industry reveals.
World seaborne trade – a measure of demand for shipping, port and logistics services – climbed by 4 per cent in 2011, reaching a record high of 8.7 billion tons, UNCTAD’s Review of Maritime Transport 2012 reveals.
But over the same year, world ship supply capacity expanded much faster, at a rate of 10 per cent, reaching for the first time a total of 1.5 billion deadweight tons, the report says. This supply and demand mismatch is bad news for the industry and for market profitability, especially in view of the continued growth in ship supply capacity, and the current fragile and uncertain economic outlook which threatens prospects for a robust growth in demand.
The report notes that in tandem with world seaborne trade, global port throughput expanded in 2011, at a rate of 5.9 per cent. A total of 60 per cent of world seaborne trade by volume was loaded, and 57 per cent unloaded, in developing-country ports. That is a remarkable shift away from previous patterns, in which developing economies served mainly as loading areas for raw materials and natural resources.
Challenges to profitability, declines in competition
The Review of Maritime Transport warns that supply and demand imbalances are squeezing freight markets and tightening the finances of many shipping companies, given that such a situation tends to lower freight rates, compress earnings, and erode profit gains. Still, the net impact of lower rates on trade, especially for developing countries that have disproportionately higher transport costs, could, to some extent, be positive, the UNCTAD report says. The average cost of shipping a 20-foot equivalent unit (TEU) container from Shanghai to Northern Europe fell from $1,789 in 2010 to $881 in 2011. The average rate for shipping a 40-foot equivalent unit (FEU) container from Shanghai to the West Coast of the United States declined over the same period from $2,308 to $1,667.
From 2011 to 2012, the share of country pairs served by direct liner shipping connections remained steady at about 18 per cent; for the remaining country pairs at least one trans-shipment port continued to be required. Over the same period, the average number of liner companies providing services to and from each country’s ports worldwide declined by 4.5 per cent, the report says. Meanwhile, the average size of the largest container ships increased by 11.5 per cent. Between 2004 and 2011, the average number of liner companies dropped by nearly 23 per cent, while the size of the largest ship deployed nearly doubled. A trend featuring increasing containership sizes and carrying capacities and declining competition within the industry has now continued for several years, the report says.
The underlying international legal and regulatory framework supporting transport and trade is also evolving. The Review of Maritime Transport reports on important developments relating to limitation of liability for maritime claims, trade facilitation, maritime and supply-chain security, maritime safety, and environmental issues. Among the noteworthy regulatory developments is a set of technical and operational measures to increase energy efficiency and reduce greenhouse gas (GHG) emissions from international shipping, which was adopted under the auspices of the International Maritime Organization in July 2011. These measures are expected to enter into force on 1 January 2013.
Maritime transport, climate-change concerns and sustainability
This year’s report also focuses on another pressing issue facing the transport sector, namely the need for steps to be taken to reduce the negative impacts of freight transport. The sector faces a dual challenge.
On the one hand, it must reduce its high rate of energy use and curb its GHG emissions so that it becomes environmentally sustainable and can help to control climate change. The International Energy Agency estimates that the transport sector, including freight and passenger transport, consumes over 50 per cent of global liquid fossil fuels. At the same time, the Intergovernmental Panel on Climate Change estimated in its Fourth Assessment Report that 13 per cent of world GHG emissions were transport-related. Unchecked, these emissions are likely to continue to grow in response to increased global economic activity.
On the other hand, the transport sector needs to adapt and build its climate resilience in the face of adverse climate change impacts, especially in ports. While ports are at the heart of international trade and are key nodes of global supply chains, they are also exposed to such climate change impacts as rising sea levels, floods, storm surges and strong winds.
The report finds that there is no single straightforward solution to the challenge of making maritime transport environmentally sustainable. It states, however, that a shift to more sustainable and resilient freight transport systems is necessary. Relevant strategies include adopting more energy efficient transport systems, promoting the use of cleaner fuels, shifting to cleaner modes of transport, and adjusting logistics operation processes. Assessing the potential impacts of climate change on transportation systems and adopting appropriate adaptation measures are key for climate resilience. Climate change considerations need to be mainstreamed into transport planning and investment decisions, the report says. This shift requires considered and coordinated efforts by both public and private entities, and calls for extensive awareness raising, data and information gathering and technology development, as well as an enabling policy and regulatory framework. Meaningful progress in this respect will require the mobilization of much-needed financial resources, including through greater public sector involvement, public–private partnerships, and climate finance options, the report says.
Maritime transport is the backbone of international trade and the global economy. Around 80 per cent of global trade by volume and over 70 per cent of global trade by value are carried by sea and are handled by ports worldwide. These shares are even higher in the case of most developing countries.
UNCTAD’s Review of Maritime Transport has for 44 consecutive years provided coverage of key developments affecting international seaborne trade, shipping, the world fleet, ports, freight markets, and transport-related regulatory and legal frameworks. The Review has also extended its coverage to include inland transport and relevant transport auxiliary services. It keeps track of long-term trends and recent developments.
As in previous issues, the 2012 Review contains critical analysis and extensive unique data, including long-term data series, on seaborne trade, fleet capacity, shipping services, and port handling activities.