UNCTAD: Trade War and Brexit Uncertainty Take Their Toll
World maritime trade lost momentum in 2018 as a result of heightened uncertainty, escalating tariff tensions between the U.S. and China and mounting concerns over a no-deal Brexit, according to UNCTAD's Review of Maritime Transport 2019.
Volumes in the sector grew by 2.7 percent last year, below the historical average of three percent and the 4.1 percent recorded in 2017.
UNCTAD Secretary-General Mukhisa Kituyi said: “It is a warning that national policies can have a negative impact on the maritime trade and development aspirations of all.”
Seaborne trade also suffered from the need to prepare for an expected surge in ship fuel costs as a result of the 2020 sulfur cap.
UNCTAD expects international maritime trade to expand at an average annual growth rate of 3.4 percent over the 2019–2024 period, driven in particular by growth in containerized, dry bulk and gas cargoes. However, uncertainty remains an overriding theme in the current maritime transport environment, with risks tilted to the downside.
Port traffic down
Reflecting slower maritime trade, growth in global port traffic also slowed, with container port traffic increasing by 4.7 percent in 2018, down from a 6.7 percent growth rate in 2017.
Similarly, container trade growth weakened. In 2018 volumes increased by 2.6 percent, compared with six percent in 2017. This was matched with a sustained delivery of mega container ships, with container fleet supply capacity in 2018 increasing by six percent as compared to four percent in 2017. In an already overly supplied market, these developments further compressed freight rates in 2018.
However, a milestone was reached, with total seaborne trade volumes amounting to 11 billion tons.
Outlook remains poor
The report warns that while global growth could swing in a positive direction, given some upside factors such as China’s Belt and Road Initiative, and the various trade deals that came into force or are in the pipeline, the balance of risks to the outlook remains poor.
The risks are particularly high for the most vulnerable economies. The report highlights a growing connectivity divide – an increasing difference between the most- and least-connected countries.
Several small island developing states are among the countries with the lowest shipping connectivity, as they are often confronted with a vicious cycle wherein low trade volumes discourage investments in better maritime transport connectivity, and faced with low connectivity, merchandise trade becomes costly and uncompetitive.
New trends
At the same time, profound structural trends that started more than a decade ago and have taken hold are slowly transforming the maritime transport landscape. The industry is transitioning away from patterns observed before the global financial and economic downturn hit the world economy.
The report notes that the industry’s operating landscape appears to have shifted to a new paradigm contrasting with the reality of over a decade ago.
In the face of slower global economic and trade growth compared with the pre-2009 era of bullish growth rates, global maritime transport is increasingly now shaped by new demand and trade patterns, increasing regionalization of supply chains and rebalancing in China’s economy, as well as a larger role of technology and services in value chains and logistics.
The sector is also increasingly facing intensified and more frequent natural disasters and climate-related disruptions, which is making climate-risk assessment, adaptation and resilience building for seaports and other coastal transport infrastructure an increasingly urgent priority.
In the face of these new risks, the industry has embraced an accelerated environmental sustainability agenda, with an increased awareness of the impact of global warming, and the imperative of fast-tracking the energy transition towards cleaner fuel sources.
According to the report, a “new normal” for maritime transport is in the making, with effects permeating all aspects of the industry, from demand to supply, markets, ports and regulatory frameworks.
The effects of the paradigm shift are already being felt. Some services, such as those in container shipping and shipbuilding, are consolidating, while others are expanding their scope to include landside and logistic operations.
In addition, some are calling for more governmental support for shipbuilding activities or financing for the technology needed to develop zero-emission vessels.
While adjusting to the new normal may entail some potential challenges, the report observes, it could also open some opportunities. Supporting this process calls for improved planning, adequate response measures, as well as flexible and forward-looking transport policies that anticipate change.
The report is available here.