According to experts like Victor Restis, the current shipping crisis shows no signs of abating. In this article, we’ll take a closer look at the ten main reasons for this state of affairs.
1) Rapid Expansion of Trade
Over the past two decades, the dramatic expansion in global trade has put ever-greater strains on the world’s shipping capacity. This is especially true for container shipping, which now accounts for most of the world’s seaborne trade in manufactured goods. According to a recent study by Drewry Maritime Research, containerized shipping volumes grew at an average annual rate of nearly 8% between 2000 and 2014.
2) Shrinking Fleet
As a result of this rapid growth in demand, the global container fleet grew by 21% from 2000 to 2015. However, the net increase in container ship capacity was much lower (9%) because about 1,000 ships measuring at least 15 years old were scrapped during this time period. Therefore, the current shipping fleet makes up a much larger share of the available vessel capacity than it used to. By way of example, Greek-owned vessels made up just 5% of global seaborne trade in 1985 but 16% by 2015.
3) Aging Fleet
The age profile of the global shipping fleet is also considerably older today than it was 30 years ago. In 1980, 45% of all cargo ships were less than ten years old, and less than 11% had been built more than 20 years earlier. In 2010 around 27% of the world’s cargo ships were older than 30 years, and 16% had been built more than 30 years previously. Older vessels are typically less fuel-efficient, making them more costly to operate.
4) Emerging Asian Giants
The expansion in global trade has largely been driven by consumer demand in emerging markets like China, where import volumes have grown at an average annual rate of 17% since 2000. As a result, China now accounts for 12% of all seaborne trade while Chile, South Korea, and other rapidly emerging economies account for another 10%. This forces carriers to carry goods between their own country of origin or flag and far-flung countries that they would never have considered before if it wasn’t for soaring export traffic from these developing markets.
5) Lower Freight Rates
The upsurge in trade volumes has been more than enough to compensate for the impact of falling freight rates, which have fallen by around 30% over the last four years. However, the rapid growth in trade volumes has also placed enormous strains on carriers’ networks, so they are now more reluctant than ever to search for new business opportunities that are not directly related to their main trades. As a result, more of them stick closer to home rather than expanding transport services outside their traditional service area. This is playing havoc with existing supply chains and forcing shippers to add time and cost to their routes.
6) Global Economic Crisis
Shipping companies were already struggling with sharply lower freight rates when the global economic crisis hit in late 2008. This led to a sharp increase in ships laid up as marine operators sought to reduce costs. Around 2,000 ships were laid up worldwide at the height of the financial crisis, representing around 7% of the global container fleet.
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