United Nations Conference on Trade and Development (UNCTAD) says seaborne trade expanded by a healthy 4 percent in 2017, the fastest growth in five years, and is forecasting similar growth this year.
In it's 50th edition of 'Review of Maritime Transport' for 2018, the Agency says it expects volumes across all segments are set to grow in 2018, with containerized and dry bulk commodities expected to record the fastest growth, but at the expense of tanker volumes.
However, UNCTAD warns of trade wars and increased inward-looking policies.
'Escalating protectionism and tit-for-tat tariff battles will potentially disrupt the global trading system which underpins demand for maritime transport,' says Mukhisa Kituyi, Secretary-General of UNCTAD.
The warning comes against a background of an improved balance between demand and supply that has lifted shipping rates to boost earnings and profits.
Freight-rate levels in the container and dry bulk sectors improved significantly in 2017 supported by stronger global demand, more manageable fleet capacity growth and overall healthier market conditions. The tanker market is singled out as the exception, as rates collapsed during 2017 mostly due to a woefully over supplied market.
Supply-demand improvements, particularly in the container and dry bulk shipping segments, are expected to continue in 2018, UNCTAD forecasts. Freight rates may benefit accordingly, although supply-side capacity management and deployment remain key. The Agency projects an average annual growth rate in total volumes of 3.8 percent up to 2023.
On the supply side, after five years of decelerating growth, 2017 saw a small pick-up in world fleet expansion. During the year, a total of 42 million gross tons were added to global tonnage, equivalent to a modest 3.3 percent growth rate.
Liner shipping consolidation, technological advances, and climate change policy are key drivers of change in global shipping, the report says.
Consolidation activity in liner shipping continued unabated as the liner shipping industry witnessed further consolidation through mergers and acquisitions and global alliance restructuring.
As of January 2018, the Top 15 shipping lines accounted for 70.3 percent of all capacity. Their share has increased further with the completion of the operational integration of the new mergers in 2018, with the Top 10 shipping lines controlling almost 70 percent of fleet capacity as of June 2018.
Three global liner shipping alliances dominate capacity deployed on the three major East-West container routes, collectively accounting for 93 percent of deployed capacity. Alliance members continue to compete on price while operational efficiency and capacity utilization gains are helping to maintain low freight-rate levels. By joining forces and forming alliances, carriers have strengthened their bargaining power vis-à-vis the seaports when negotiating port calls and terminal operations.
Growing consolidation can reinforce market power, potentially leading to decreased supply and service quality, and higher prices. Some of these negative outcomes may already be in effect. For example, in 2017–2018, the number of operators decreased in several small island developing States and structurally weak developing countries.
Shamika N. Sirimanne, Director of UNCTAD’s Division on Technology and Logistics, says:
'There is a need to assess the implications of mergers and alliances and of vertical integration within the industry, and to address any potential negative effects. This will require the commitment of all relevant parties, notably national competition authorities, container lines, shippers and ports.'