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IUMI 2010 ZURICH

This review discusses macro factors, shipping and seaborne trade, emerging challenges, and relevant issues to monitor in the field of shipping and global trade. It highlights the impact of economic growth, demand and supply dynamics, freight rates, and the recovery of trade after the "Great Trade Collapse". It also explores the role of shipping in the face of environmental and energy challenges.

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IUMI 2010 ZURICH

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  1. IUMI 2010 ZURICH 12 – 15 September Shipping and global trade: A review ofmajordevelopments Hassiba Benamara UNCTAD

  2. CONTENTS I. Macro factors • Economic growth and merchandise trade II. Shipping and seaborne trade • Demand: seaborne trade • Supply: fleet developments • Freight rates III. Emerging challenges and some relevant issues to monitor • Environment • Energy • Other

  3. I. Economic growth and merchandise trade

  4. The first and deepest contraction (-1.9%)… … in global output since the 1930s World GDP (real), 1971-2010 UNCTAD and WTO, 2010

  5. Broad-based and varied speed World GDP (% annual growth), 2004-2010 UNCTAD, 2010

  6. The “Great Trade Collapse” World GDP and trade (real), 1971-2010 UNCTAD and WTO, 2010

  7. Adverse trade shocks across regions World merchandisetrade (real), 2009 UNCTAD , 2010

  8. An unprecedented trade contraction • Merchandise exports dropped about 7 times more rapidlythan global GDP (elasticity ≈ 2 in 60s and 70s and 3.4 in 90s). UNCTAD estimate for 1971-2010 ≈ 2.5. • Demand shock and synchronized drop. Multiplier effect: • Product composition of the fall in demand (e.g. consumer goods and durables, higherincomeelasticity). • Trade in goods drops fasterthantrade in services whichaccount for a largershare of GDP. • Globalised production and increased trade in parts and components. • Deepening and widening of global supplychains. • Limited trade finance (in addition to demand shock).

  9. BUT…… there are signs of recovery in economic indicators…

  10. Business confidence is improving… Manufacturing Purchasing Managers’ Index, 2007-2010 IMF, WEO Update, July 2010

  11. …so does consumer confidence… Retail sales, 2007-2010 IMF, WEO Update, July 2010

  12. …and industrial production Industrial production, 2007-2010 IMF, WEO Update, July 2010

  13. GDP growth turned positive in Q2-2009… …UNCTAD expects GDP to grow by 3.5% in 2010 World GDP (% annualgrowth), 2007-2010 IMF, WEO Update, July 2010

  14. World exports forecast to grow… …by + 9.5% in 2010, 7.5% in developedeconomies; 11% ROW (developing and EIT) Merchandise exports, 2007-2010 IMF, WEO Update, July 2010

  15. Commodity prices are also rising Commodity price indices (actual and forecast, 2000=100), 2000-2011 World Bank, 2010

  16. Longer term outlook and a new global design Major industrialized countries • Twenty years up to 2009: +2.2% • Next twenty years forecast: +1.8% Major developing countries • Twenty years up to 2009: +6.3% • Next twenty years forecast: +5.9% World average • Twenty years up to 2009: +2.9% • Next twenty years forecast: +3.5% World exports (tons): - Expected to double in the next 20 years. Source: IHS-Fairplay, as presented to IAME 2010, Lisbon, July 2010

  17. II. Shipping and seaborne trade

  18. Unsheltered from shocks in the wider economy… Total a Year Oil Other dry cargo Main bulks (all cargoes) 1 442 448 676 2 566 1970 1 871 796 1 037 3 704 1980 1 755 968 1 285 4 008 1990 2 163 1 288 2 533 5 984 2000 2006 2 698 1 849 3 135 7 682 2 747 1 972 3 265 7 983 2007 2008 2 732 2 079 3 399 8 210 b 2 649 2 102 3 092 7 843 2009 …seabornetradecontracted (-4.5%) in 2009 World seabornetrade (tons), 1970-2009 +1.1% -3% -4.5% -9% UNCTAD RMT, 2010

  19. All shipping segments negatively affected… Seaborne trade (% change), per cargo type, 2009-2010 2009 2010f Iron ore 8% 6% Coal 1% 9% Grain -2% 2% Bauxite and Alumina/Phosphate Rock -27% 18% Major dry bulk 1% 7% Minor dry bulks -13% 9% Other dry cargo -9% 6% of which container -9% 11% Oil -3% 3% Total seaborne trade (tons) -4.5% 5.2% …but major dry bulk cargo heldstrong; China factor UNCTAD, RMT 2010; Clarkson Shipping Review (spring 2010), Dry Bulk Outlook, August, 2010, and Container Intelligence Monthly, August, 2010

  20. 2009, a dramatic year in the history of container shipping (-9.4%) Global container trade, 1990-2010 UNCTAD, based on Clarkson Research Services and Drewry Consultants

  21. Fleet developments

  22. Growth in ship supply capacity continues… …1.27 billion dwt at the beginning of 2010, 7% increase World fleet by vessel type in million dwt, 1980-2010 UNCTAD, based on IHS- Fairplay data

  23. Record new deliveries and an impressive orderbook World tonnage on order, 2000-2010 (000’ dwt) UNCTAD, based on IHS- Fairplay data

  24. Wider supply and demand imbalance… …as illustrated by container shipping Supply and demand in container shipping, 2000-2010 UNCTAD, based on Clarkson Container Intelligence Monthly

  25. Freight rates

  26. D/S determine freight rates… • The year 2009 was a bleak year for freight rates in all market segments. • By the end of 2009, rates in all sectors have recovered from their earlier lows albeit still significantly below their pre-crisis levels. • Freight rates for 2010 were volatile and future prospects remain uncertain.

  27. Baltic Tanker Indices, 2005-2010 …tanker rates fell with falling oil demand UNCTAD , based on Lloyd’s Shipping Economist data

  28. Dry cargo freight indices, 2004-2010 …dry bulk rates supported by demand from China… 3000 2500 2000 1500 1000 500 0 Jul-09 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Nov-09 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Sep-09 Jan-10 Jan-04 Sep-04 Jan-05 Sep-05 Jan-06 Sep-06 Jan-07 Sep-07 Jan-08 Sep-08 Jan-09 May-09 Mar-10 Mar-04 May-04 Mar-05 May-05 Mar-06 May-06 Mar-07 May-07 Mar-08 May-08 Mar-09 Tramp Trip UNCTAD, based on ISL-Shipping Statistics and Market Review

  29. Container freight rates, 2005-2009 … container rates supported by a series of counter-measures UNCTAD, based on Containerisation International data

  30. Summary of key points (1) • 2009, a record in history. • Prospects are improving; recovery varying in speed, driven by emerging developing economies (e.g. Asia). • Various forecasts for 2010/2011 (UNCTAD, IMF, WB, IHS-Fairplay, …); all positive. • World merchandise trade is forecast to grow in 2010 and 2011(e.g. WTO and World Bank). • World seaborne trade also forecast to grow in 2010 and 2011.

  31. BUT…… the outlook remains fragile in view of various downside risks…

  32. Summary of key points (2) • Sustainability of recovery, strength and shape (V, U or W)? • Public debts • Unemployment and bank lending • Stimulus packages (duration/end) • Is observed trade recovery driven by new demand? • Supply-side pressures • Known and unknown crises

  33. III. Emerging challenges and issues to monitor • Energy: access, security and prices • Climate change: mitigation and adaptation • Seafaring crisis? • Supply chain security and piracy • Other global crises: e.g. food, water, financial… • Geopolitics • Other ?

  34. Focus on two emerging global challenges Climate change & energy: interconnected • Climate change mitigation action has implications for ship design, engines, fuel systems, operations, services, management, value, etc. • Indirect implications through changes in demand for shipping services. E.g. climate induced changes in trade structure, flows and patterns through impacts on sectors such as energy production and consumption, agriculture and food products, demography and human settlement, etc. • Climate change mitigation and adaptation require energy. However, there are signs of a looming energy crisis. Shipping is heavily reliant on oil for propulsion and not yet in a position to effectively and widely adopt substitutes.

  35. Conclusion?

  36. Addition information… …and publications by UNCTAD, including on oil prices and maritime freight rates, maritime transport and the climate change challenge, as well as supply chain security are available at: UNCTAD Trade Logistics Branch www.unctad.org/ttl/legal UNCTAD’s annual Review of Maritime Transport and quarterly Transport Newsletter are available at: www.unctad.org/transportnews

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