Boom days are over for the shipping industry !

UNCTAD says boom days are over Source: Malaya Date: November 6, 2008 Page: B12 Author: Genivi Factao Boom days are over for the shipping industry according to the United Nations Conference on Trade and Development (UNCTAD). UNCTAD’s Review of Maritime Transport 2008 that said that the late 2007 to early 2008 marked the high point of the shipping boom. International seaborne trade in 2007, driven by emerging and transition economies, surpassed a record 8 billion tons. The strong demand for shipping services helped push to unprecedented highs the cost of moving dry bulk commodities internationally, as echoed by the Baltic Dry Index (BDI) through the first quarter of 2008. The BDI is a composite of shipping prices for various dry bulk products such as iron ore, grain, coal, bauxite / alumina and phosphate, and is a useful indicator of price movements. However, the BDI has declined more than 11-fold, from 11,793 points in May 2008 to 891 as of early November. “This shows that unfolding financial crisis has spread to international trade with negative implications for developing countries, specially those dependent on commodities,” the report said. A rapidly falling BDI is also accompanied by reduce demand for shipping services, increasing the effects of the financial crisis and global demand for goods. This will negatively affect many developing economies. The industries show an immediate effect of declining freight rates, which also lead to lower prices for delivered, traded goods. Both exporters and importers of foods and other commodities thus benefit from lower freight costs, and inflationary pressured are eased. For most commodities shipped in bulk, freight rates account for a high portion of the final value of the goods. Because trade in commodities or low-value manufactured goods such as steel product dominates developing countries’ trade, a drop in shipping rates benefits their trade under normal circumstances. The global merchandise trade had grown by 5.5 percent in 2007, almost 2 percentage points higher than the growth of the word’s Gross Domestic Product (GDP) for the year. Dynamic emerging developing and transition economies drove the increase in international seaborne trade 4.8 percent in 2007. In tandem with economic and trade expansion, demand for shipping service increase to reach 32,932 billion ton-miles –a 4.7 percent jump. Word container port throughput grew by an estimated 11.7 percent to reach 485 million TEUs in 2007, the Review said. However, port investment, running up at a pick levels until recently, will now be curtailed the international trade flow situations becomes clear.