Shipping to benefit from global economy's 'new normal'

11/18/2017

With most economic indicators across the globe pointing to positive territory at the moment, BIMCO has said the shipping industry’s growth outlook amid the ‘new normal’ could not be better

It noted that the International Monetary Fund has raised expectations for global output by 0.1 percentage point to 3.6% for 2017 versus 3.6% in 2016.

For the shipping sector, the IMF’s forecast for world trade volumes has also been revised 0.2 percentage points higher to 4.2% for 2017, which is a substantial boost from the 2.4% growth seen in 2016.

In the US, despite dismal wage growth figures, the nation is seeing robust demand for containerised goods, which seems to indicate an uptrend in consumer spending.

“The possibility of rising wages is encouraging for the container shipping industry, as higher wages translate into higher household income which promotes higher spending on consumer goods, all indicating additional room for growth in demand,” said BIMCO.

The IMF has lifted US growth estimates to 2.2% from 2.1% in 2017 and 2.3% from 2.1% for 2018.

Things seem to be looking up in Europe as well, with Germany, France and Greece posting record high manufacturing purchasing managers index levels for September.

“There is an overall strengthening in the European manufacturing sector and it is now growing at the fastest pace since 2011. This strong manufacturing growth, combined with rising exports indicates that the growing output in Europe is being consumed outside of European borders and therefore the production uptick benefits both short and deep-sea shipping activity.”

The IMF has thus raised growth forecasts for the Euro Area by 0.2 percentage points for 2017 and 2018 to 2.1% and 1.9% respectively.

In Asia, stronger global demand and policy measures taken by the Japanese government to support its fiscal stance has led the IMF to raise economic forecasts for the nation by 0.2 percentage points to 1.5% for this year, and by 0.1 percentage point to 0.7% for 2018.

This year has also seen China raising its efforts to cut emissions and air pollution via the reduction of commodities produced locally and the increase in imports for such commodities. This has benefited the dry bulk shipping industry.

The IMF has forecast China’s economic growth at 6.8% in 2017 and 6.5% in 2018.

Although all these seem to present a much-improved scenario for global shipping, BIMCO noted that segments in the industry may be facing gloomy or darker prospects for earnings owing to self-inflicted damage and not from a lack of support and demand.

“This self-inflicted damage creates a fundamental imbalance causing supply to outgrow demand, the effects of which will last for several years in some segments if there is no focus on bringing down supply growth.”

“For the demand side to reap the full benefits of this possible global upturn, globalisation must be embraced and the gains from open trade must be a key focus of the policymaker’s agenda, replacing any inward-looking policies,” said the organisation.