UNCTAD report says shipping to face tough challenges

Geneva based United Nations Conference on Trade and Development (UNCTAD) has said, in its annual ‘Review of Maritime Transport’, that falling rates, levels of competition and a glut of new carrying capacity continue to worry shipping companies. It adds that although seaborne trade upped by 4 per cent in 2011 to a record 8.7 billion tons, supply of tonnage zoomed up much faster at 10 per cent to reach a record 1.5 billion deadweight tons. With supply outstripping demand, freight rates have fallen to unprofitable levels for most shipping companies. The continued growth in ship supply capacity, and the current fragile and uncertain economic outlook that threatens prospects for a robust growth in demand, will continue to impact market profitability, UNCTAD says. 

That the tonnage overhang threatens shipping- the backbone of international trade and globalisation- is nothing new. Interestingly, though, the load/discharge ratio for developing countries has changed considerably. From a time not long ago when ports in these countries loaded mainly raw materials and natural resources, last year’s figures show that 60% of global trade by volume was loaded in these countries, and 57% discharged.  Noting this, the Review stresses that supply and demand imbalances are squeezing freight rates and putting pressure on shipping companies, which may be a net positive for developing countries that have disproportionately higher transport costs.

Other statistics are revealing. The average size of the largest container ships has increased by 11.5 per cent, and, in the last seven years until 2011, the average number of liner companies has dropped 23 per cent, reinforcing the trend of declining competition and larger ships that has been going on for quite a few years. 

Along with these changes, the evolution of legal and regulatory frameworks- especially those connected with limitation of liability for maritime claims, trade facilitation, maritime and supply-chain security, maritime safety, and environmental issues- is also worthy of note, the Review points out, underlining that new IMO rules for the technical and operational measures to increase energy efficiency and reduce greenhouse gas  emissions from international shipping are expected to enter into effect next month. 

The sector faces a dual challenge with regard to environmental issues, UNCTAD says. One, the industry- that consumes half the world’s liquid fossil fuels- must reduce its high rate of energy use, move away from heavy oil and curb its GHG emissions so that it becomes environmentally sustainable. Also, with climate change experts saying that 13 per cent of world GHG emissions come from transport, the sector needs to shift to more sustainable and resilient freight systems. 

For this, more energy efficient transport systems, promoting the use of cleaner fuels, shifting to cleaner modes of transport and adjusting logistics operation processes will be necessary. Climate change considerations need to be mainstreamed into transport planning and investment decisions, the Review says. If this is not done, unsustainable patterns are likely to intensify, increasing the potential for global energy and environmental crises. Fortunately, governments and industry are becoming increasingly aware of the need to mainstream sustainability criteria into their transport planning and policies, the report says.

 UNCTAD's Review of Maritime Transport has provided 44 years of uninterrupted coverage of key developments affecting international seaborne trade, shipping, the world fleet, ports, freight markets, and transport-related regulatory and legal frameworks. 

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