first section: Prospects for the Maritime Shipping Industry in 2018

Beginning of the Departure from the Recession

The history of the shipping industry indicates that the businesses of this industry and its marketplace are cycles of boom and recession, which are repeated periodically.

News ID: 78780

Date: 10 April 2018 - 13:16

The shipping industry is currently spending one of its longest life cycles, estimated to last about 20 years.Although this industry will be far from the peak of its boom for several years, evidence from the beginning of 2018 shows that the exit of the shipping industry from recession has begun. Therefore, shipping market in 2018 seems to have a far better outlook than 2017.

The status of the shipping market in recent yearsIn 2016, the ship’s revenue dropped to unprecedented levels in the global market, reaching $7,364 per day on August. Over the past thirty years, this drop in incomes in the industry has been unprecedented and it can be said with certainty that it has been the lowest level of average daily income of ships during this period.

In the following months of 2016 and 2017, the average ship’s revenue never returned to this low level and generally always improved. The average daily incomes of ships in the industry during the whole 2017 were $10,742 which shows %12.6 up from levels in 2016.

$12,662  In December 2017, the average daily income of ships reached $12,662, which represents an increase of %11 compared to the same period in 2016. Although it seems that theshipping industry’s revenues are recovering, it should be kept in mind that the average levels of ship revenue throughout the year 2017 and on the last month were still 31% and 19% respectively below the daily average income of the ships in the last 25 years.

International statistics show that the growth in maritime transportation will increase by an average of 1% annually until 2030. Of course, this growth rate will be much higher in the bulk sector. Even the bulk market is expected to grow up to 6000 million tons by 2030. Most of this growth is due to imports of China and India. In dry bulk section, most of the commodities are coal and iron ore. As a matter of fact, such growth in bulk sector will be expected for other countries by 2035. In fact, the highest rates among different shipping sectors are expected for the dry bulk market.

In the container segment, we are facing the same situation. The forecast is that by the year 2035 the container trade will have a growth about 3.1 billion tons.

The world economy and the transportation market

The global economy has nearly doubled in the last 30 years, and it is projected to grow further for years to come. By 2040, the current economic conditions are likely to double the current growth rate. Experts believe that one of the main drivers of this trend is the continued growth of the world’s population.

In the year 2018, the world’s population is expected to grow to about 7.5 billion, which will keep current economic growth up, so it will lead to increase of demand in the marine trade sector. In other words, in this year, the global economic growth shows a brighter horizon to the shipping industry than last year. Of course, the main motivator of the growth process will be the expansion of development in developing countries.

In the World Economic Outlook Report, released in January 2018 by the World Bank, despite the projected decline in economic growth in developed countries and the containment of the Chinese economic growth (at a level higher than 6 percent) in order to increase the balance of its development, it is predicted that economic growth will be 4.5 to 4.7% for emerging markets and developing countries between 2018 and 2020. Marine shipping is projected to grow by 3% in 2018 compared to 2017, and the volume of freight will reach about 11 billion tons.

Mahdi Rastegari, director of research and development at the Sina Port and Maritime Services Company, said: “The economic growth trend in developing countries reflects the ongoing shift in investment, production and trade in these countries. The 20% increase in global economic growth in 2017 compared to 2016 has led to the maintenance and growth of the shipping industry in spite of all the destructive trends in this industry.

Although projections indicate that the economic growth rate in 2018 will not change significantly compare to 2017, maintaining this growth rate by eliminating or reducing the impact of destructive trends in the shipping industry will lead to the retention and development of the markets of this industry.”

Dr. Ali Moradi, Ports & Maritime Organization’s directorate of Strategic Studies and Investigations Center, also said: “A change in the pattern of trade will certainly accelerate with a significant increase in the volume of exported goods in developing countries.” This growth reflects the fact that developing countries are importing more commodities and, as a result, they increase the demand for maritime transportation and change the flow of trade. Hence, both developed and developing countries take advantage from maritime transport benefits. Shipping also plays a key role in moving food to all around the world, thus it is a critical component of ensuring global food security.