MercoPress. South Atlantic News Agency

Dramatic drop in maritime transport of commodities, says UNCTAD

A United Nations report released Tuesday shows that international seaborne trade surged to record levels last year but has since declined because of the financial crisis, jeopardizing the health of many developing countries, especially those that depend on commodities.

The UN Review of the Maritime Transport (RMT) finds that seaborne trade surpassed 8 billion tons last year and reached a peak at the start of this year. But the report, issued by the UN Conference on Trade and Development UNCTAD, highlights that the Baltic Dry Index (BDI) – an indicator that predicts future economic activity by measuring global supply and demand for the commodities shipped aboard dry bulk carriers – declined by over 90% between May 2008 and early this month. Such a decline indicates that the unfolding financial crisis has spread to international trade, with negative implications particularly for commodity-reliant developing countries. While a drop in fright rates would be an immediate effect of a falling BDI – which would be beneficial for exporters or importers of food and commodities – a declining index is also accompanied by reduced demand for shipping services, increasing the effects of the financial crisis and global demand for goods. The report reveals that by 2008 the total world merchant fleet had expanded by 7.2 per cent to reach 1.12 billion deadweight tons. Likewise, the order book for new vessels in 2008 was at its highest level ever, with over 10,000 ships, marking a 28 per cent increase on the current merchant fleet. As of mid-2008, however, evidence of cancellations for new ships emerged, a move which could have a major impact on the ship-building industries of countries such as China, the Republic of Korea (ROK) and Vietnam. Shipping operators faced with considerable losses may also decide to scrap older tonnage, which has potential implications for steel prices as well as for jobs in major ship-breaking nations including Bangladesh and Pakistan. Such intensified ship-scrapping activities pose further challenges for safety, health and environmental conditions in these developing regions. In the meantime, the declining BDI has also led international port terminal operators to announce the suspension of some major port expansion plans owing to the foreseen decline in demand for shipping services. With more than 80 percent of international trade in goods carried by sea, and an even higher percentage of developing-country trade carried by ships, the Review of Maritime Transport, an annual publication prepared by UNCTAD, is an important source of information on this vital sector. The report also contains a chapter on legal and regulatory developments, with a focus this year on the region of Latin American and the Caribbean.