Seaborne trade remains vulnerable to a throng of downside risks, according to the latest UNCTAD report.
Seaborne trade remains uncertain and at risk from a multitude of factors, including weak global demand and investment, political uncertainties, doubts about the future pace and direction of European integration and a further loss of momentum in developing countries, the United Nations Conference on Trade and Development (UNCTAD) has said.
In its Review of Maritime Transport 2016, UNCTAD predicts that world GDP growth will grow by just 2.3% in 2016. This is 0.2% lower than the 2.5% recorded in both 2014 and 2015.
Prospects in developing counties will remain generally weak, it adds. While lower commodity prices are expected to reduce the average rate of economic growth in commodity-exporting countries by almost 1% annually between 2015 and 2017.
The negative impact on the growth of energy-exporting countries will be even greater, it predicts, at around 2.25% per year in the same period.
“Although a slowdown in China is bad news for shipping, other developing countries are continuing to enter the shipping market, bringing with them the potential to drive further growth”
Elsewhere, in developed economies, the weak performance recorded since the 2008 economic and financial crisis is set to continue. In addition, UNCTAD says that the long-term consequences of Brexit – Britain’s exit from the European Union – have yet to be fully understood.
Negative signals in the macroeconomic framework are also continuing to dampen maritime cargo volumes. And, although some estimates indicate a slight improvement in 2016, projected growth rates are still below UNCTAD’s estimated average of more than 3% in 1970-2014.
Meanwhile, major dry bulk commodities are expected to grow marginally, reflecting a continued drop in coal trade, says UNCTAD. While containerised trade volumes are predicted to recover slightly in 2016.
Nevertheless, seaborne trade continues to grow despite its particularly bleak conditions, with volumes exceeding an estimated 10bn tonnes in 2015. And, although a slowdown in China is bad news for shipping, other developing countries are continuing to enter the shipping market, bringing with them the potential to drive further growth, says UNCTAD.
Exploring untapped potential
Although vertical specialisation and the fragmentation of production in China and the US might have peaked, there still appears to be scope to enhance the international division of labour by integrating regions that have been at the margin of global supply, such as Africa, South America and South Asia.
“Developing countries may benefit by exploring untapped potential and opportunities,” says UNCTAD. “At the same time, and while south-south trade is gaining momentum and regional trade liberalisation agreements are being negotiated or concluded, planned initiatives and the expansion of transit passages and sea bridges have the potential to stimulate trade and reshape world shipping networks.”
UNCTAD adds that the growth potential associated with such developments may be “significant”. For example, if fully implemented, the One Belt, One Road Initiative may boost trade, increase demand for maritime transport services, raise seaborne trade and provide opportunities for developing countries to strengthen their position both as users and providers.
Globally, developing countries currently account for 60% and 62%, respectively, of goods loaded and unloaded, reveals UNCTAD.
New technologies, the data revolution and e-commerce all have the potential to significantly transform and disrupt the shipping industry, presenting challenges and opportunities alike. This includes new business models, digitisation, and the greater integration of small and medium-sized enterprises.
UNCTAD speculates that developing countries may leverage related trends to cut costs, raise productivity, develop capacity and enable access to new business opportunities. It is unclear how these trends will materialise on a broader scale, however it is still important for all countries to keep these developments in mind, monitor their evolution and assess their particular implications for their transport and logistics sectors and wider economies, societies and environments.
“An improved understanding of the trends and their implications may help countries ensure that these are effectively integrated into relevant planning and investment-related decision processes, and aligned with the 2030 Agenda for Sustainably Development,” adds UNCTAD.
Curbing ship emissions
What’s more, UNCTAD expects the international climate agenda to further shape the maritime transport operating landscape as the sector confronts climate change mitigation and adaption.
Future trends in emissions from international shipping remain uncertain, and subject to international efforts and commitments to curb greenhouse gas emissions, including the efforts of the parties to the United Nations Framework Convention on Climate Change.
“Curbing greenhouse gas emissions from international shipping is an imperative, as freight transport, including maritime transport, grows in tandem with the global population, consumption needs, industrial activity, urbanisation, trade and economy,” says UNCTAD.
Despite the current slowdown in the growth of world seaborne trade, UNCTAD adds that maritime freight volumes are expanding. So too is the demand for maritime transport services.
At the same time, shipping’s excessive use of oil for propulsion translates into significant emissions of airborne pollutants and greenhouse gases. International Maritime Organization (IMO) data shows that carbon dioxide emissions from international shipping are expected to increase by 50-250% by 2050, depending on economic growth and global energy demand.
Continued work within the frameworks of IMO and the United Nations Framework Convention on Climate Change is of “critical importance”, says UNCTAD, adding that the sector must emerge as a key player in implementing effective climate change policy action, as well as a sustainable development agenda.
It continues: “Supporting this objective, UNCTAD has been increasingly considering climate change as part of its ongoing work in the field of trade logistics, and carrying out substantive work to improve the understanding of issues at the interface of maritime transport and the climate change challenge.”