Protecting the pie: Global tensions are filtering through to the container industry

Protecting the pie: Global tensions are filtering through to the container industry
The effects from Russia's economic stutter may filter to container shipping Credit: Jürg Vollmer

In years gone by, it was easy to accept the notion that economic prosperity and free market collaboration were inextricably linked.

Indeed, the first half of the last decade provided significant economic growth for many of the world’s developed economies and the emerging market BRIC (Brazil, Russia, India and China) countries began to take off.

However, the era when British Chancellor Gordon Brown sincerely believed that he had eliminated “boom and bust”, is now all but a distant memory.

Fast-forward to the present day and there are an increasing number of disputes around the world regarding nationalism, immigration and free trade, with suspicion and distrust abounding.

In this environment, business is susceptible to a myriad of hazardous issues and the container industry is no exception.

Relationship status: it’s complicated

In India, security services have effectively banned ports from purchasing cranes from Chinese manufacturer, Shanghai Zhenhua Heavy Industries Co. Ltd (ZPMC), due to growing hostility between the Asian giants.

Within the last few weeks, terminal operator DP World unloaded a delivery of four new quay cranes at India’s largest port, Jawaharlal Nehru (JN) Port, in Mumbai.

A DP World spokesperson told CM: “The necessary permissions from the Port Authority have been granted for the purchase of ZPMC cranes and we have not been informed of any ban by government authorities.”

Yet there is plenty of speculation that the story is not over. LiveMint claims that JN Port has not sought security clearance for the cranes although it is its responsibility to do so.

Whether the Indian authorities take any action remains to be seen. One also has to wonder whether Chinese officials will consider a tit-for-tat response.

Several thousand kilometres away, the effects of the crisis between Ukraine and Russia continue to worsen as both Russia and the EU have adopted sanctions against each other.

Thankfully for many Baltic ports, most of the containerised foodstuffs destined for Russia come from the Far East and thus, have been unaffected by the measures.

Bleak prospects for Russia

Nevertheless, the sanctions are certainly no help for the Russian economy, which is poised to enter recession in 2015, amid remarks from Western commentators that Russian President, Vladimir Putin, has lost the “economic war”.

According to the Russia central bank governor Elvira Nabiullina, the rouble, which has lost more than half its value against the US dollar this year (much of that in the last few months), depends “directly” on energy prices; oil is incredibly low at the moment, with Brent crude falling below $60 a barrel.

The scale of Russia’s currency woes was perhaps best revealed by the action the central bank took on 16 December – hiking interest rates by a massive 6.5% to 17%.

While two thirds of Russia’s exports come from the oil and energy sectors, the rouble’s devaluation plus the fact that household disposable incomes are forecast to decline by 2.8% in 2015 mean demand for imports into Russia is low.

In one instance, the Port of Haminakotka in Finland, has postponed the start of its container train project into Russia because there simply are not enough containers to be transported.

Currently, these economic issues are mitigating the general trend of increasing containerisation in the region but the greater fear is a longer term fall in investment.

Members of the container industry certainly do not want to get involved in a fight for a share of a shrinking pie. In certain climates though, they might not have a choice.