The United Nations Conference on Trade and Development (UNCTAD) said global seaborne trade is doing well and supported the 2017 upswing in the world economy, but also expressed concern about “increased inward-looking policies and the rise in trade protectionism,” especially trade tensions between the United States and China, Canada, Mexico and the European Union.
Those remarks are contained in UNCTAD’s annual Review of Maritime Transport, released Wednesday. (The report, written before this week’s announcement of the new U.S.-Mexico-Canada Agreement, is available for free download.)
The report said total maritime trade volumes reached 10.7 billion tons in 2017, an increase of 411 million tons or 4 percent, half of which was dry bulk commodities. It expected a similar 4 percent growth this year.
Global containerized trade increased by 6.4 percent in 2017. While the liner shipping industry saw further consolidation through mergers and acquisitions and global alliance restructuring, UNCTAD said it “observed growth in the average number of companies providing services increase” since it started monitoring capacity deployment in 2004.
“Several individual carriers — both inside and outside alliances — expanded their networks to a larger number of countries. This more than offset the reduction in the global number of companies after the takeovers and mergers,” UNCTAD said. “However, this was not a broad-based trend. The number of operators servicing several small island developing states and vulnerable economies decreased between 2017 and 2018.”
The three global liner shipping alliances that dominate capacity deployed on the three major east–west container routes (the 2M, Ocean Alliance and THE Alliance) collectively account for 93 percent of deployed capacity, the report said. But it noted the individual carriers that belong to the alliances “continue to compete on price while operational efficiency and capacity utilization gains are helping to maintain low freight rate levels.
“In an oversupplied market, consolidation is expected to continue,” the report said. With two-thirds of containership orders for vessels with capacity of more than 14,000 TEUs, “only large carriers and alliances are in a position to fill these mega ships.”
In addition to concerns about protectionism, the report pointed to several other trends it said are shaping the sector’s outlook:
• Digitalization, which it said could result in better cargo tracking and supply chain visibility, a reduction in the time and cost involved in the documentation related to transporting and clearance of cargo, as well as autonomous ships.
• E-commerce, though the report noted “the extent to which container shipping is able to benefit from e-commerce is unclear in view of the relatively small share of cross-border business-to-consumer e-commerce flows and the participation of alternative modes of transport.”
• “The ability of the sector to leverage relevant technological advances.” The report said “the value of shipping can no longer be determined by scale alone.”
• China’s Belt and Road Initiative, which it said has the power to “generate growth and boost seaborne trade.” However, the report also noted expanding rail service between China and Europe has attracted some high-value, time-sensitive goods that previously would have been moved by sea. It also noted pipelines built as part of the initiative could displace some tanker traffic.
• “Overly optimistic carriers competing for market share may order excessive new capacity, thereby leading to worsened shipping market conditions.”
• Continued consolidation and “the potential for market power abuse by large shipping lines and related impact on smaller players.” Competition authorities and regulators “need to be vigilant,” the report said.
• The impact of market concentration and alliances by shipping companies on ports.
• The International Maritime Organization’s requirement that shipowners reduce sulfur dioxide emissions by Jan. 1, 2020, in their engine exhaust by either using low-sulfur fuel or scrubbers as well as well as the IMO’s goal to have shipping reduce its “carbon footprint” by 50 percent.