Trends In International Shipping 2013

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This hub is based on the information presented in the UNCTAD's Review Of Maritime Transport 2012. The whole publication can be downloaded from their web site. This text summarizes the most important trends in international shipping as identified by the mentioned report.

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Transport and the climate change challenge

Transport is attracting a lot of attention in the debate about reduction of the greenhouse gas emissions. Both adaptation and mitigation strategies that tackle emission issues are increasingly recognized as important and this trend will continue.

Ports are very vulnerable to climate change and its consequences, because of their location in coastal zones. Besides the risks that physical infrastructure is exposed to, there are also economical risks that arise from the key role that port play in complex world-wide supply chains. This issue can have the greatest impact in small islands developing states because of their isolation. Studies show that rise of the sea-level of 0,5m would expose assets worth $28 trillion around the world.

Port adaptation strategies need to be implemented before climate change impact starts to happen, because of the long port infrastructure lifetime. Planning and implementation of the adaptation strategies is currently suffering lack of attention from industry stakeholders because of the difficulties of expressing the cost-benefit ratios over such long periods of time. But organizations such as IMO and UNCTAD are working on putting these issues in the limelight of the international shipping community.

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Changing trade patterns

The recent (and ongoing) economic crisis has accelerated the shift of influence and economic power from developed to developing countries. This shift currently results in multipolar global economic environment. Forecasts suggest that developing economies will continue to grow at an average rate of 4.7% per year until 2025, while at the same time developed economies will grow at 2.3% average rate. As developing economies’ share in global GDP grows (from 36.2% in 2010 to 44.5% in 2025), the share of developing countries in international trade flows is also growing (from 30% to 42% for the period 1995-2010). Large part of trade growth is generated by South-South lines and intraregional trade.

Trade pattern shifting will continue as East Asian countries become largest trading block by 2015, and by 2030 world’s largest trade corridor will not include USA or Europe. With new emerging Asia markets, such as Thailand and Vietnam, Asian intraregional trade will remain crucial driving force of the trade pattern shifting in years to come.

Bunker fuel prices 2005-2013
Bunker fuel prices 2005-2013 | Source

Rising bunker fuel prices and operating costs

Bunker fuel prices follow increase in global oil prices. Fuel costs have very strong effect on transport companies, since fuel costs made up to 60% of earned freight earnings in 2011 (up from 36% in 2010). Between 2008 and 2011 annual fuel costs for Panamax bulker increased from $3.3 million to $5.5 million.

In addition to fuel costs, other operating costs have also increased due to increase in commodity prices (maintenance cost) and insurance cover against piracy, and all of that happens in a time of excess tonnage and falling freight rates. Key strategy for cost control in these conditions has always been slow steaming which is utilized across industry, but especially in the container trade. Average speed reduction in this segment was 13% in 2011, and this strategy will continue to be utilized in the future. There are some drawbacks of slow steaming, first of all increase in transit times which may not be acceptable for some supply chains.

Regarding bunker fuel, another major development is requirement that IMO’s MARPOL convention makes for ships to use low- sulphur fuel. This less polluting fuel is estimated to have up to 50% price differential over conventional bunker fuels which could induce shift of transport modes towards surface transport in some regions.

Overall, solutions to the above mentioned issues is will be sought between cost management, which will involve a range of strategies, such as slow steaming, and by introducing some new technology based solutions that will tackle issues connected with pollution and climate change.

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