Large vessels blamed for slowest shipping growth since 2009

Large vessels blamed for slowest shipping growth since 2009
With a capacity of 19,100 teu, the CSCL Globe is one of the largest container vessels

A UN organisation has blamed the use of increasingly large vessels for the shipping industry’s worst year since the financial crisis.

Seaborne shipments increased by 2.1% last year – the slowest growth in the industry since 2009 – according to the United Nations Conference on Trade and Development (UNCTAD), which has released its annual review of maritime transport.

UNCTAD’s secretary-general, Mukhisa Kituyi, said: “The push for ever larger ships is at the root of the industry’s problems. There’s just not enough cargo right now to fill the newly acquired, bigger vessels.”

“With global trade growing at its slowest pace since the financial crisis, the immediate outlook for the shipping industry remains uncertain and subject to downside risks,” he stated.

In particular, the poor performance of container shipping, which carries about 95% of the world’s manufactured goods, and limited growth of the dry bulk commodity trade off-set an improvement in oil shipping.

Despite slow growth, the industry’s carrying capacity continued to grow, jumping 3.5% to 1.8bn deadweight tonnes in 2015 and pushing freight rates down to record lows.

Chinese demand, low commodity prices, over-supply of ships, and geopolitical uncertainties in some oil and gas producing countries all add to the current downside risks affecting shipping, added a statement from UNCTAD.

“Shipping companies have sought to reduce their operating costs by building and buying ever larger ships,” the organisation noted. “But this may prove costly for developing countries, where transport costs are already higher than in other regions. With larger ships, total system costs go up, and smaller trading nations are increasingly confronted with oligopolistic liner markets.”

By volume, developing countries (which include China in the UN’s data) accounted for 60% of the goods loaded onto ships in 2015 while their share of goods unloaded was 62%, up from 41% in 2006.

“Most developing country ports lack the infrastructure for bigger ships,” UNCTAD’s statement added. “So unless they spend heavily on upgrading their ports, developing countries face fewer port calls, less competitive markets, and higher shipping costs.”

Shamika Sirimanne, director of UNCTAD’s division on technology and logistics, highlighted that developing countries can also cut their costs by keeping their ports competitive.

She said: “Many industries and businesses in developing countries could be much more competitive if their ports were more efficient.

Delays in African ports add roughly 10% to the cost of imported goods and even more to exports, she added.

New infrastructure projects such as the expansions of the Panama and Suez Canals do however, make the long-term future outlook for shipping a positive one, claimed the UN body.