RECENT DEVELOPMENT OF MARITIME LOGISTICS
1. Development Trends on Global Container Shipping Global economic condition and industry perspectiveGlobal economic condition and industry perspective
CHAPTER 2
RECENT DEVELOPMENT OF
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Fig. 1 GDP, trade and maritime containerised transport. 1985–2007.
Source: S´anchez, Ricardo J.(1)
containerized trade and world gross domestic product (GDP). The growth rate for seaborne containerized trade is higher than the growth rate of world GDP and total seaborne trade. There has been sustained growth even during years of past recessions.
The economic crisis of 2007–2010, also known as the Great Recession, has seriously damaged the global economy. In 2009, the world GDP declined by 1%, for the first time in the post-World War II era. The recession has also hit global trade, with trade volumes declining by as much as 25% in 2009 from 2008’s level, the largest single year drop since World War II.
Lower commodity prices, tighter credit, and increasing protectionism all contributed to the drop in trade demand during the recession.(2)
The container shipping industry has been badly hit by the recession.
Throughout year 2009, container volumes have declined, liners and terminal operators have suffered from diminishing profits or even losses, new container ship ordering has almost halted, vessels have been laid up by ship owners, and freight rates and charter rates have reached record low levels. The crisis has quickly caused a shake up in the container shipping industry.
There are quite a few reasons for the quick spread of the downturn to the maritime industry. One of the major reasons is that the demand
for maritime transport services, especially container shipping services, is derived from economic growth and trade volume. As the economic condition is bad during the recession, the demand for trade, as well as the need for maritime transport services to carry goods from manufacturers to customers, has diminished. Another side effect of such strong dependency is that the global seaborne trade and container shipping is likely to rebound and recover from the recession slower than other sectors.(3) Another factor that affects the industry is the ever increasing gap between supply and demand for container shipping. The recession has caused a sudden and unexpected drop in the demand side. However, most of the orders for new ships were placed during a period of rapid growth for both the container shipping industry and the demand for shipping services. As these orders are approaching their delivery date, the growth in the supply side of the container shipping industry will outpace the growth, if not contraction, in demand. In 2009, the total container fleet is expected to grow at 9.6 percent while the demand is expected to go down by 9.1 percent. The growth rates of supply and demand in global container shipping from 2000 to 2009 are shown in Fig. 2. We can see that before the current crisis, the growth rates of demand and supply closely matches each other. However, in 2009, there is a huge gap between the growth rates for demand and supply. The gap in the growth rates would likely lead to the gap in the actual figure
Fig. 2 Growth rate of supply and demand in global container shipping.
Source: the UNCTAD secretariat(3)
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Fig. 3 Expected container fleet.
Source: S´anchez, Ricardo J.(1)
of demand and supply, which will likely cause huge overcapacity in the industry. Furthermore, as new vessels typically take years from point of order to delivery, the existing orders are likely to keep the growth rate high on the supply side for several years and thus enlarge the overcapacity problem until they are fully delivered in 2011. Figure 3 illustrates the expected total container fleet at the end of each year to 2011, based on current orders. We can see from the chart that the speed of the capacity expansion is quite fast, and the problem of overcapacity would likely to remain in years to come. This overcapacity problem has been recognized by many industry experts, and carriers have adopted several measures to deal with the problem. Orders are being cancelled or delayed by carriers, and excessive capacity is being removed by laying up idle ships and demolishing older vessels.
Many industry experts feel that the unavailability of trade financing during the downturn has also made a significant contribution to the rapid spread of the downturn in the maritime industry. Since the recession started as a financial crisis and banks are taking extra caution on lending, it is much harder for carriers, shippers and port operators to obtain sufficient financing for projects. According to the UNCTAD Secretariat, the shortage of financing is most severe in developing economies, with unmet demand estimated to range between $100 billion and $300 billion annually.(3)
The recovery from the recession started at the end of 2009 and continued into the first half of 2010. The global economic condition has
become better, and the recession has been considered to have ended in the first half of 2010. However, there is still substantial risk in the shipping industry in 2010. In a survey conducted in September 2009 by AMR Research, “the recovery cycle” has been identified as the biggest risk in 2010. The main reasons given in the survey include “potential commodity price increases, limited internal skills after work force reductions, and problems meeting new demand with constrained capacity, low inventory and transportation constraints.”(4)Europe-based shipping industry analyst group Seabury has forecasted that global seaborne container trade will grow about 11 percent this year over 2009.(5) There is much uncertainty in the container shipping industry as well as the global economic condition during the recovery cycle in 2010. Many carriers remain cautious about the economic prospect, and some shipping executives still feel that the downturn has not brought enough needed consolidation and efficiency to the container shipping industry and overcapacity may still be a big problem during the recovery.(6)
1.2. Recent trends in container shipping industry
The world container ship fleet continues to expand in 2008 despite the economic crisis. Table 1 Development in World Container Ship Fleet shows the development in global container ship fleet for the past decade. We can see that there were 4,638 ships by the beginning of 2009, with a total capacity of 12.14 million TEUs. This represents an increase of 8.5 percent in the number of vessels from 2008 to 2009. In terms of TEU capacity, there is a 12.9 percent increase. Another interesting trend in the world container fleet is that the average vessel size increased from 2516 TEU in 2008 to 2618 TEU in 2009, representing a 4 percent growth. For new container ships, the
Table 1 Development in world container ship fleet.
World Growth
total 1987 1997 2007 2008 2009 2009/2008
Number of vessels
1 052 1 954 3 904 4 276 4 638 8.47
TEU capacity
1215 215 3 089 682 9 436 377 10 760 173 12 142 444 12.85 Average
vessel size
1 155 1 581 2 417 2 516 2 618 4.04
Source: the UNCTAD secretariat(3)
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trend towards larger vessels is much clearer. In 2008, the average size of new container ships entering service is 3489 TEU, an increase from 3291 TEU in 2007. On 31 October 2009, there were 218 new 2009-built fully cellular container ships in service with average carrying capacity of 4,125 TEU.(3)
Another trend in the world cellular fleet is the trend towards more gearless vessels. Among 2008-built container ships, nearly 80 percent of vessels and 90 percent of TEU capacity are gearless, comparing to only about half of the vessels built 10 years ago. This is also because of the development in port facilities, since more and more ports are equipped with modern handling equipment, especially specialized gantry cranes. The trend towards gearless vessels is likely to encourage ports to invest further in port handling equipment.(3)
2. Liner Shipping