Navigating through global downturn
By Chris Hayman - 25 March 2009
IN recent years, shipping's sphere of influence has been moving inexorably eastwards. Asia has become the dominant force in world seaborne trade, affecting both imports and exports, and Asian interests now control more than half of the global merchant fleet.
Industrialisation of Asia, in particular China, has been the driving force of both the tanker and dry bulk markets.
Huge volumes of oil, iron ore and coal have had to be shipped long-haul from areas such as the Arabian Gulf, Brazil, Australia and South Africa, thereby creating a vast demand for shipping tonne miles and employing the very largest wet and dry bulk vessels, which has had a trickle-down positive effect on the rest of the market.
The region's impact has been even greater in the liner sector, where the ability to transport huge volumes of goods, manufactured in low-cost Asian economies to more affluent consumer markets in the US and Europe in cheap and reliable fashion, has underpinned the whole process of globalisation.
Evidence of this can be found in the ranking of the world's top 20 container ports for 2009 as compiled by Seatrade magazine. No fewer than eight of the world's top 10 ports are located in Asia, with Singapore retaining the overall crown and Chinese ports moving up fast.
But, of course, full-year 2008 figures tell only half the story since container volumes began dwindling from late summer onwards, accelerating as the year progressed.
That trend has continued through the first quarter of 2008, with volumes as much as 25-30 per cent down on 2007.
Several decades of steadily rising box traffic, with growth running at double-digit percentages in recent years, have thus been brought to a shuddering halt, with 2008's slowdown almost certain to turn into an absolute decline for 2009.
Where does all this leave Asia, main engine of growth in the first place, in terms of both containers and the major bulk trades?
These questions will frame proceedings on the opening day of this year's Sea Asia conference, taking place next month at Suntec as part of this year's Singapore Maritime Week.
Under the event's central theme of The Asian Voice: Clearer and Stronger, leading maritime figures from across the region will meet to discuss common strategies to combat the current economic malaise. Without wishing to pre-empt those discussions, it's a fair bet to say that liner companies will be discussing ways to further retrench services at a time when over 1,000 ships or 10 per cent of the global container capacity is lying idle. Less main-haul services, more feeder links and urgent research into new niche trades are just some of the options, with emerging Asian economies likely to play an important role in the search for new business.
To their credit, many liner companies in the region have been swift and open in admitting the extent of the problem and embracing corrective action, however painful. But such measures will surely leave those lines best positioned to take advantage of the upturn when it arrives.
Also, it now appears that Asian liner owners have been well served by their relative conservatism in holding back from ordering the very largest new liner vessels - each able to carry between 10,000 and 15,000 TEUs (or twenty-foot equivalent units).
What looked like excessive caution a year or two back now seems more like prudence.
In the dry bulk sector, it was mainly China's insatiable appetite for commodities that drove the bull shipping markets of 2003-8, and Asia may also hold the key to the upturn. The market's demise in the final quarter of 2008 as letters of credit dried up was unprecedented in its cliff-like fall, yet already there are signs of recovery as Chinese imports of iron ore, expected to total around 400 million tonnes this year, have started flowing again.
Likewise, Asian energy requirements will go a long way to determining the global demand for oil and gas shipping going forward.
All these matters and more will find their ideal forum at next month's Sea Asia conference in Singapore, emerging maritime hub for the region. Not only host to the world's largest container port, the Republic has long been an important centre for the oil industry, thanks to its strong refining base, and of late has also added a strong focus on dry bulk trading.
Besides shipbroking, Singapore hosts a thriving ship management community, a growing pool of marine service providers and a core engineering competency of well-established shipyards with unparalleled experience in certain areas of construction and conversion, especially for the offshore industry.
Clearly there is no shortage of suitably qualified experts on hand to discuss how shipping can best navigate its way out of current difficulties, and to help make good on Sea Asia's mission to articulate The Asian Voice: Louder and Clearer.
The writer is chairman of maritime events and publishing company, Seatrade
