Uncertainty on trade flow evolution
Demand for shipping in the future will remain greatly dependent on the global economy and GDP, as well as the world’s population, Pierre Cariou, Senior Professor at KEDGE Business School (France’s biggest business school), says. In a presentation delivered at the International Transport Forum’s (ITF) Future Maritime Trade Flows Roundtable, Mr Cariou noted that shipping will continue to be a derived demand. Previously, shipping sector innovations — such as containerisation — were the main world trade development drivers, the professor said. However, he added that globalisation and GDP growth drivers of growth in maritime trades were unlikely to carry on.
His comments were part of conclusions to a report on altering demand for maritime trades. Other takeaways from the document include how a general trend towards decarbonisation of the global economy is affecting coal and crude oil, the two biggest commodities moved at sea, and that relocating production close to centres of consumption could lower demand.
“Now the key question is whether or not new maritime innovations — such as fast/autonomous/zero-emission ships — will take place to tackle the challenges of the new era of digitally-enabled trade,” Mr Cariou said in his presentation.
Flowing into the future
“There’s growing uncertainty on how the maritime trade flows will evolve in the future,” added Angela Bergantino, full professor of applied economics at Italy’s University of Bari Aldo Moro and chair of the Future Maritime Trade Flows Roundtable, in a video summarising the event.
The general trend towards decarbonisation of the global economy is affecting coal
“The demand for traded goods is influenced by a variety of factors, such as the level of integration of the global economy, population growth and middle-class growth patterns in developing countries,” explained the ITF. “Transport of fossil fuels, such as oil and coal, represents a large share of maritime transport flows, so diversification of energy supplies and transitions towards renewable energy will have significant impacts on maritime trade flows.”
According to the ITF, demand for traded goods moved by sea could be sensitive to maritime trade cost developments. The International Maritime Organization’s 2020 global sulphur cap of 0.5% mass by mass might nearly double maritime transport costs, and potential future greenhouse gas mitigation measures for maritime would add extra costs. These price hikes could mean less maritime trade and modal shifts towards intercontinental train corridors. Another potential outcome is reconfiguration of maritime flows towards the cheapest and shortest routes.
Simultaneously, maritime firms’ business strategies also directly impact trade flows, according to the ITF. The organisation gave the example of how container shipping has been driven by a model based on economies of scale that has caused sector concentration. This, the ITF said, could lead to the emergence of a few “mega-hub” ports that get the majority of the maritime trade flows.
“International freight flows are not simply the outcome of the inter-regional interplay of demand and supply of traded goods,” noted ITF. “They are determined to a considerable extent by infrastructures such as inter-oceanic channels, by maritime transport costs and [by] business strategies of maritime companies.”
Past and future
From looking back at previous developments in maritime trades, Mr Cariou raised two questions. Firstly, whether the decline in the proportion of energy trades within total maritime transportation — from around 60% in 1970 to 30% in 2017 — is likely to carry on and whether these trades will reduce in absolute value. Secondly, whether the increase in dry bulk cargoes and container trades, supported by developing nations since the start of the millennium, will continue in the times ahead. The three “critical factors” examined in Mr Cariou’s report are energy transition routes; future alterations in trade, GDP or population; and further future drivers of maritime trades.
Mr Cariou’s cited predictions from academia as well as key shipping players and considered new routes, the circular economy, global value chain alterations in trade intensity, decarbonisation and new technology (such as 3D printing, electric vehicles, robots and additive manufacturing). He also forecast a move towards different kinds of vessel, smaller parcel sizes and less cargoes because of the combined impacts of the Fourth Industrial Revolution and the ageing consumer base. Further, he said that the requirement for time-to-market with more intra-regional trades could cause “a profound move” towards back-shoring or re-shoring.
Source: The Baltic Exchange