Monday, July 16, 2018 | ISSN 0719-241X

The challenging future ahead for shipping

International Chamber of Shipping Annual Review 2017
Edition of May 18, 2017

It’s been almost a decade of struggle to stay afloat for the maritime transport industry. Acquisitions and mergers, have reduced to less than 15 major container lines by 2018 out of the top 20 that existed until 2016, as part of a mitigation measure for oversupply-low demand and weak freight rates that barely cover operating costs.

Constant Change, Continuing Crisis is the name the International Chamber of Shipping has given this phenomenon in its Annual Review 2017, where it analyses the importance of representing the industry with governments on regulatory matters now more than ever. “Policy makers, however, may not always fully appreciate the very challenging economic conditions in which shipping companies are currently operating. It is nonetheless important to emphasise that there is no evidence of any decline in the quality and safety of ship operations worldwide, which continue to be impressive,” the document reads, as to show the complex scenario the industry is operating under.

The ICS foresees a difficult 2017 for the industry. While global maritime trade is projected to increase, this looks likely to be outstripped by the quantity of new vessels that are scheduled to be delivered from shipyards – many of which enjoy significant government support – with the result that there may still be far too many ships chasing too few cargoes.

China to the rescue

Thanks to China’s ‘emerging economy’ status, the shipping industry has a chance of survival. The Asian giant is committed to spending around $US1.5 trillion on infrastructure development around the world as part of its ‘One Belt, One Road’ initiative, motivated by the country’s incredible demand. But in recent years there has been a notable fall in the rate of Chinese GDP growth. While this has averaged around 10% per annum since 1989, Chinese growth in 2016 was the slowest recorded for 26 years.

Domestic consumption becomes the ghost shipping companies begin to fight, as services start to take up larger portions of GDP growth. Unlike manufacturing and infrastructure development, this does not generate the same demand for maritime trade.

Regulation and recycling

As environmental conscience increases among the industry, so do operating costs that demand reduced emissions, ballast water control and more energy-efficient technology.  The collective cost to the industry of implementing the IMO Ballast Water Management Convention, which will enter into force in September 2017, is expected to exceed US$100 billion. The additional collective cost to the industry of complying with the IMO global sulphur in fuel cap in 2020 could be a much as US$100 billion per annum.

Recycling vessels is ‘in’, but in strong competition against new builds and shipyards’ major ‘bargains’ on the back of cheap steel prices. Investment would not be low, since 20-year-old technologies would have to be replaced, but by not introducing new tonnage to the industry recovery could come sooner rather than later by restablishing the supply/demand balance. 

By MundoMaritimo
Source: ICS Annual Review 2017

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