Trends In International Shipping 2012
The latest economic crisis and partial recovery that followed, made visible a couple of emerging trends in international maritime shipping. Five of them have been marked as very important by the UNCTAD's Review of Maritime Transport 2011 report. These trend are shortly descrbed in this hub.
A Global new design
Emerging economies such as BRIC states (Brasil, Russia, India, China) are reshaping global economic landscape. Fast and strong growth in these countries that continued during the recent crisis is changing traditional economic relations and shifting economic influence from West and North to East and South. This has a great influence on shipping industry as trade patterns are changing in response to the new global design.
The development of new trades, namely intra-Asia-Pacific trade, intra-emerging economies trade (e.g. China-Latin America) and China-Africa trade is expected to cause a shift of global trade focus towards developing economies as they continue to experience growth of urbanization, growth of consumer demand and never ending relocation of lower value manufacturing to new locations (e.g. from China to Indonesia).
These developments are going to affect market segments differently and cause changes in international transport patterns . For example, the development of South-South trade lanes (e.g. West Africa - Oceania, West Africa-East Africa, East Coast South America-Oceania, East Coast South America-East Africa) could see Cape of Good Hope Route to become a viable alternative to the Suez Canal route.
There are some questions and uncertainties from the perspective of shipping that could undermine future growth if ignored. Potential growth of regionalism, multilateral trade negotiations, proliferating trade agreements, possible growth of trade protectionism, efforts of balancing global economic growth and trade flows, energy security, oil prices, transport costs, climate change and environmental sustainability are some of the crucial issues that need to be taken into consideration when future of international maritime shipping is in question.
Energy security, oil prices and transport costs
Rapid growth of global trade recorded over the last couple of decades relied on easily available and affordable oil. Considering recent developments, era of cheap oil has ended, and with it one of the crucial factors that enabled global trade growth.
As fuel prices can account for as much as 60 per cent of a ship's operating costs, a rise of oil prices will increase transport costs and undermine future trade growth. A recent UNCTAD report states that a 10 per cent increase in oil prices would raise the cost of shipping a container by 1.9 to 3.6 per cent, while a similar increase in oil prices would raise the shipping costs for one ton of iron ore or crude oil by up to 10.5 per cent and 2.8 per cent respectively. Report concludes that in the longer term a change in the fuel costs may alter the patterns of trade as the competitiveness of producers in different locations changes as a result of increased transport costs. It is worth noting that the effect that increased freight rates have on final products differs greatly across the market.
Except transport costs, high oil prices raise a number of questions for international shipping. How to deal with technology requirements on newly built ships regarding changes in fuel type and technology? What is the potential of a modal shift from other modes of transport to shipping, given the better relative energy efficiency of ships compared to other modes of transport? Another issue is regulatory driven transition to low sulphur fuel, introduced by MARPOL convention that will become effective 2015 in ECA's (Emission Control Area), and 2025 globally.
Cutting carbon emissions from international shipping and adapting toclimate change impacts
Carbon emissions from international shipping result from the burning of heavy oil in ships’ bunkers.Like other economic sectors, international shipping is facing a dual challenge in relation to climate change. International shipping relies heavily on oil for propulsion and generates at least 3 per cent of global carbon emissions and these emissions are projected by the International Maritime Organization (IMO) to treble by 2050. Relevant measures being considered as response to this problem include operational and technological as well as market-based instruments, such as emissions trading scheme and a levy on ships’ bunker fuel.
However, international shipping and more broadly maritime transport is also facing the challenge of adapting to the current and potential impacts of climate change. Little attention has been paid so far to the impact of climate change factors such as sea-level rise and extreme weather events on maritime transport, especially ports – the crucial nodes of the global chains linking together buyers and sellers, importers and exporters, and producers and consumers. One recent study has estimated that, assuming a sea level rise of 0.5 m by 2050, the value of exposed assets in 136 port mega-cities will be as high as $28 trillion. The challenge is thus significant, and raising awareness and improving understanding of the impacts of climate change on maritime transport and the associated adaptation requirements, including funding needs, are fundamental.
The extended timescale of climate change impacts and the long service life of maritime infrastructure, together with sustainable development objectives, imply that effective adaptation is likely to require rethinking freight transport networks and facilities. This may involve integrating climate change considerations into investment and planning decisions, as well as into broader transport design and development plans.
Environmental sustainability and corporate social responsibility
Greater public awareness is driving demand for industries to adopt the principles of corporate social responsibility (CSR) including environmental sustainability. This is particularly illustrated by the growing demand for greater transparency which means that customers and business throughout the supply chains, whether internal or external to the shipping industry, are demanding that social and environmental targets be set and fulfilled to ensure better performances.
This is illustrated by the liner operators who are increasingly adapting their market strategies to emphasize the ecological and social dimensions as factors of competitiveness business. An example is the ordering by Maersk Line of the triple E-class 18,000 TEUs ships. The design of the 18,000 TEU ships is named triple E-class, reflecting three principles: economy of scale, energy efficiency and environmental improvement.
Maritime piracy and related costs
Despite international efforts to address the problem of maritime piracy, IMO reports that a total of 489 actual or attempted acts of piracy and armed robbery against ships occurred in 2010. This represents an increase of 20.4 per cent over the 2009. Consequently, 2010 is marked by the IMO as the fourth successive year that the number of reported incidents increased. The scale of the attacks and the size of the vessels targeted are raising further concerns in the international community. This threatens to undermine one of the world’s busiest shipping routes (Asia–Europe) and chokepoint (the Suez Canal).
Piracy activities raise insurance fees and ship operating costs, and generate additional costs through rerouting of ships. It is argued that if piracy attacks increased 10 times, it would lead to a reduction of 30 per cent in total traffic along the Far East–Europe trade lane, and that only 18 per cent of the total traffic would sail through the Cape of Good Hope. One recent study has estimated the total cost of maritime piracy in 2010 at $7 billion–$12 billion per year, including the ransoms, insurance premiums, rerouting ships, security equipment, naval forces, prosecutions, piracy deterrent organizations and the cost to regional economies.
Thus, in addition to the security risk involved in sailing through piracy ridden areas and related direct costs (e.g. loss of life, injury, loss of ship or cargo, etc.), transiting through the Suez Canal or rerouting via the Cape of Good Hope both entail other significant costs (e.g. delays, higher insurance premiums, opportunity costs, fuel costs, revenue loss for the Suez Canal Authority/Egypt, etc.) which pose a burden to the shipping industry and will ultimately be borne by global trade.