THE push by the maritime industry to deploy increasingly larger container ships is the root cause of the financial struggles and slow growth in the shipping sector, and is putting ports in developing countries at a disadvantage, a report by the UN Conference on Trade and Development (UNCTAD) said.
The UNCTAD Review of Maritime Transport 2016 said that although seaborne shipments surpassed 10 billion metric tons for the first time in 2015, which was a slight increase of 2.1 percent from the 9.8 billion metric tons carried in the previous year, the growth rate was the slowest since 2009 in the aftermath of the global financial crisis, and is unlikely to improve significantly over the next few years.
The UNCTAD report noted that in 2015, the industry’s carrying capacity grew faster than shipping volume, climbing 3.5 percent to 1.8 billion deadweight tons. Because of the excess capacity, freight rates were pushed to record lows as shipping lines competed for cargo to fill the growing number of larger vessels.
“With global trade growing at its slowest pace since the financial crisis, the immediate outlook for the shipping industry remains uncertain and subject to downside risks,” Mukhisa Kituyim, UNCTAD Secretary General, said in a statement included in the report.
“The push for ever larger ships is at the root of the industry’s problems, there’s just not enough cargo right now to fill the newly acquired, bigger vessels,” he added.
At the end of August, the container shipping industry suffered its biggest ever bankruptcy when Hanjin Shipping, the world’s seventh-largest shipping line, was placed under court receivership after incurring more than $5.7 billion in debts and failing to come up with a restructuring plan.
Developing countries disadvantaged
The UNCTAD report explained that the motivation for larger capacity container ships was to reduce operating costs. The larger ships do reduce costs on a per-container basis, but result in higher total system costs, requiring larger and more expensive facilities. For developing countries, where transport costs are already higher than in other regions, this has placed them at a disadvantage, the report said.
“With the exception of a few Asian countries such as China, most developing country ports lack the infrastructure for bigger ships. So unless they spend heavily on upgrading their ports, developing countries face fewer port calls, less competitive markets and higher shipping costs,” the report explained.
For example, Maersk Lines’ “Triple E” class container ships, with 18,340 TEU capacity, have a draft of 16 meters. Manila’s two main container terminals, the Manila International Container Terminal (MICT) operated by International Container Terminal Services Inc. and the Manila South Harbor terminal operated by Asian Terminals Inc., are unable to accommodate ships of this size, having a berth depth of between 12 and 13 meters.
UNCTAD expressed concern about the impact on developing countries, pointing out that in 2015, they accounted for 60 percent of the goods loaded and 62 percent of the goods unloaded of all seaborne shipping.