UNCTAD: Summary review on shipping 2018
Today we present a summary of the report, maritime transport 2018 generated by UNCTAD, a text of 116 pages that can be found in the following link
International maritime transport is at a good moment supported by the growth of the economy in 2017, which is expanding at a rate of 4%, the highest growth in five years. The momentum has the industry moving a total of 10.7 billion tons with 411 million additional tons of which half belonged to the sector of dry bulk.
Containerized maritime transport grew 6.4% after two years stagnant. The dry bulk sector grew 4% from 1.7% in 2016 while the growth in crude oil transportation grew by 2.4% due to the reduction in exports of OPEC members in response to the increase in flow from the Atlantic to Asia. This new trend reformed the geography of maritime transport that was previously concentrated in large exports from western Asia. In addition, the increase in the capacity to refine crude oil – especially in Asia – the increase in the use of LNG as the cleanest source of energy, refined products of oil and gas grew together 3.9% in 2017
The prospects for maritime transport are positive; UNCTAD projects an increase of 4% in 2018 as in the previous year. However, depending on the favorable trends, an annual growth of 3.8% is projected from 2018 to 2023. Volumes through the maritime transport segments will grow with a greater increase in the containerized sector and dry bulk at the expense of tanker. Historical trends are maintained from 2005 to 2017 with an average growth of 3.5%. Likewise, in the dry bulk sector, accelerated growth is in line with the pattern of the previous five decades where the market share of tanker volumes was displaced by dry bulk, falling from over 50% to 33%. % in 2017.
Uncertainty in the panorama
Although the international maritime transport landscape is positive, there are risks how the increase in domestic policies and protectionism affect the outlook. Immediate concerns about the increase in tensions between China and the United States, the two largest economies in the world as well as the tensions between the United States, Canada, Mexico, and the European Union. These tensions can lead to trade wars that would end the recovery and reform of international shipping patterns and overshadow the picture. Similarly, there are other factors that increase uncertainty, including the global transition of energy production, structural changes in economies such as China and the development of value chain patterns.
If it is effectively leveraged in the trends that change the game, how digitization, E-commerce and the China Belt and Road initiative have the potential to increase the strength of international shipping.
Growth in the world fleet
After five years of slow growth, 2017 shows an improvement in the expansion of the global fleet. During this year, 42 million gross tons were added to world tonnage, equivalent to 3.3% in growth. This trend shows a slight impulse in deliveries of new constructions and a reduction in the activity of demolition of ships with the exception of the tanker market where the demolition if it has increased. The expansion in the supply capacity of the ships was overcome by a greater growth in the volume demanded by international maritime transport, altering the market balance and improving both freight and revenue.
In relation to the logistics chain, Germany remains the country with the largest containerized fleet, although it has lost some volume in 2017. Consequently, shipowners from Canada, China and Greece expanded their market share. The Marshall Islands emerged as the second largest country of registry of ships after Panama and Liberia. 90% of shipbuilding was generated in China, Japan and the Republic of Korea while 79% of ship demolitions were carried out in Southeast Asia, particularly in Bangladesh, India, and Pakistan.
The balance between demand and supply
Supported by a strong global demand, it achieves a growth in the capacity in the most manageable fleet and better market conditions. Containerized freight rates increased with averages that exceeded performance in 2016 with earnings reaching $ 7 trillion at the end of 2017. CMA CGM reported the best operating results in the industry, followed by Maersk and Hapag Lloyd. In 2017 the rise in freight rates of dry bulk resulted in gains for the lines that helped cushion the depressed gains of 2016. The tanker market remained under pressure due to the excess supply capacity of this type of vessel. , which exceeded demand by undermining freight rates
Consolidation of the Liner segment
The industry evidenced a greater consolidation through mergers, acquisitions, and restructuring of alliances or consortiums. Despite the trend in market concentration, UNCTAD reports that the maritime lines expanded their service networks to more countries, this offset the reduction in the number of global shipping lines. However, this was not the trend, as the number of operators serving islands, developing states and vulnerable economies decreased from 2017 to 2018.
The three major alliances had 93% of the capacity of the routes East to West. The lines between the alliances competed in freight while the operational efficiency and the profits of the utilization of their capacity helped to maintain the freights at a low level. By joining forces, they achieved a better negotiation with the ports when negotiating the landings and operations.
In a saturated market, consolidation is expected to continue. Two-thirds of the new constructions of containerized ships belong to vessels of more than 14,000 TEUs and only large lines and alliances have the possibility of filling the capacity of these vessels.
The volume of traffic in ports
Global port capacity and cargo handling capacity expanded rapidly during 2017, following two years of low performance. According to the estimates of 2017, the 20 most important ports handled 9.3 billion tons, increasing from 8.9 billion tons in 2016, an amount equivalent to the growth of world trade. UNCTAD estimates that 752.2 million TEUs moved in 2017 through the ports in the world, an increase of 42.3 million in reference to the previous year. This figure is compared to the total volume of containers handled in a year through the port with the highest handling in the world, Shanghai in China.
Port operations, performance, and bargaining power
The new alliances and the increase in the size of the ships have affected the relationship between shipping lines and ports. This relationship has been strengthened and made more complex by the increase in the bargaining power of the shipping lines and their influence. In turn, the size of the ships has allowed the alliances to force the ports to adapt their infra and supra-structure. Although maritime service networks have benefited from improvements in their efficiency, ports have not evolved at the same pace.
Together, these trends have increased the competition between container ports to ensure landings, leaving the decision on dispatch capacity, arrival ports and structure of services in the hands of shipowners. In essence, it is the destination of a port. This dynamic has been complicated because maritime lines are usually involved in port operations, which in turn redefines the approach to port concessions.
Port tracking and performance for strategic planning and decision making
Global ports and terminals need to track and measure their performance as this allow for better strategic planning and decision making as well as reporting on investments and future financing. As ports are a fundamental link in the supply chains of countries and as integrators of the global economy, the importance of monitoring and measuring operational, financial, economic, environmental and social performance increases.
Thanks to several advances in technology, the ports can count on availability of this improved data. In addition, it can reinforce the work done under the port administration program of UNCTAD and the Port Performance Scorecard.
Challenges and Opportunities of digitization
Technological advances in the maritime industry such as autonomous ships, drones, applications in the blockchain, maintain considerable promise for the supply side of maritime transport. However, there is still uncertainty in the maritime industry about the possible safety and incidents of cybersecurity as well as the negative effects on the work of the crew, which mostly come from developing countries.
While the development and use of autonomous vessels entail several benefits, it is not yet clear whether this new technology will be accepted by governments, particularly traditionally conservative ones in the maritime industry. There are legitimate concerns about the safety of the operations of autonomous vessels and their reliability. Diminishing the role of seafarers and consequently, the loss of their jobs is a strong concern.
Regarding blockchain technology, many initiatives and collaborations have shown potential to be used in cargo tracking; visibility in the supply chain; recording vessel information including global risks and threats; integrating smart contracts; the maritime policies and digitizing as automating the documentation and reserves save costs and time for the release and movement of the cargo. Combining onboard systems and digital platforms allows ships and their cargo to link to the internet of things. One of the challenges is to establish interoperability so that the information or data can be exchanged with each other, ensuring at the same time its cybersecurity and the protection of private and sensitive commercial information, also under the recent vision of the general regulation of data protection of the European Union
Many of the technological advances are applicable in ports and terminals and offer an opportunity for stakeholders to innovate and generate additional value in efficiency, improve productivity, greater safety, and environmental protection. In light of these developments, ports and terminals around the world need to re-evaluate their role in international maritime logistics and prepare to welcome and leverage the innovations and technology generated by digitization.
International maritime commitment to reduce greenhouse gas emissions
Based on the Paris agreement under the UN climate change convention and the 2030 agenda for sustainable development, in particular, objective 13, take urgent action to combat climate change and its impacts. Complementing, the International Maritime Organization achieved the determination of the reduction in the participation of international maritime transport of greenhouse gas emissions. Initially, the first reduction strategy was adopted in April 2018 and projected a 50% reduction by 2050 compared to 2008. The strategy identifies short, medium and long-term measures with their deadlines and impacts on the states, taking take into account the needs of developing countries. It also identifies support measures including capacity development, technical cooperation, research, and development. Innovative emission reduction mechanisms, including market-based measures, have been proposed for the medium term and will be decided between 2023 and 2030. Parallel to the long-term measures after 2030.
Regulatory developments include the entry into force of the amendments to the International Convention for the Prevention of Pollution of Ships, 1973/1978, to force the collection of data in fuel consumption systems on ships of 5,000 tons and above. Likewise, the limit of sulfur in fuel will be established at 0.5% as of January 2020 under the Sulfur 2020 rule. This measure will improve the health of people and the environment close to ports.