London, 01.02.2017 – 2016 could go down in history as the year in which a gradual retreat from globalization took its first concrete steps.
The UK’s shock referendum vote in favour of leaving the European Union was followed by the equally surprising victory of Donald Trump in the US Presidential election. Both occurrences have bolstered nativist and protectionist sentiments in a number of countries, fuelling the prospect of a return to economic nationalism that arguably threatens the existing global trade order.
It is telling that isolationist sentiment is not currently voiced in Asia, a region which perhaps more than any other has benefitted from the prosperity and dynamism that this more interconnected world has brought.
Indeed, at the recent World Economic Forum in Davos, China’s President Xi Jinping took to the stage – the first time that a Chinese President has addressed the forum – to champion the cause of global trade and open markets.
And as if to emphasize the current seismic shifts in the geo-political landscape, the same week saw President Trump effectively put an end to the Trans-Pacific Partnership, a trade deal between a dozen countries of the Pacific Rim, including the USA, which aimed to bring enormous benefits to its signatories.
Its collapse, along with the aforementioned doubts in other Western countries about future trade expansion, leaves a gaping void in the direction of Asia’s international commerce. Global trade is expected to have expanded more slowly than world GDP in 2016, the first time that has happened in 15 years. In Asia, exports are estimated to have grown just 0.3 per cent last year in volume terms, a precipitous decline from the 8 per cent average of the past 20 years. Traditionally, poorer countries have found exports the most reliable route to kick-starting development, but that road could now be severely hampered, if not yet entirely closed.
Growth in cargo volumes at mainland China’s top eight ports also slowed in 2016, with throughput rising 3 per cent to 153.3 million TEU compared with 3.7 per cent in 2015.
Back in the black?
It is ironic that against this background liner container shipping may have started to set sail towards a (more) profitable existence. Some forced mergers, a slew of acquisitions and the start of serious capacity reductions have laid the groundwork for wiping away much of the red ink on the industry’s profit and loss account. Still, recent warnings that two of Japan’s big three carriers are expected to report record losses come March 31 underscores the sector’s continued financial fragility and riskGiven the deep doubts surrounding today’s trading environment – and the liner industry’s penchant for value-destroying capacity builds at the merest hint of rosier times – it makes sense for stakeholders to tread cautiously.
As Drewry Maritime Consultants recently pointed out, a new entrant has already emerged from the ashes of Hanjin’s bankruptcy in the shape of Korea Line, a bulk operator that has bought some of Hanjin’s transpacific assets. That venture may or may not succeed, but the crucial point is that whatever the perceived market dominance of the incumbent global carriers, the scope for competition at the margin to keep rates in check is still there, especially as laying up excess slot capacity generally means attractive charter rates for non-vessel owning newcomers.
Drewry has also identified as much as 1.7 million TEU of newbuilds getting wet in 2017 (assuming none slip into next year) with over half being 14,000 TEU or above. But as most of these big ships will go straight into the Asia-North Europe market they are likely to push out smaller units into secondary routes such as Asia-Mediterranean, Transpacific and the Asia-Middle-East.
This raises the spectre of more cascading into secondary markets, effectively passing overcapacity onto trades that are unlikely to have the demand growth to absorb it.
The implications for container terminals across Asia could be profound. Structural adjustments in the liner shipping sector and an uncertain economic outlook could result in lower terminal handling charges, reinforced by fierce competition in regions such as South-East Asia as ports battle to price competitively in order to secure critical mass volumes from the new vessel-sharing alliances that will come into operation in April.
A sustainable future?
TOC Asia 2017 will examine this uncertain backdrop to regional and global container trades. Harnessing TOC’s customary delivery of lucid and powerful business intelligence, attendees will be able to debate the immediate future for liner shipping, the evolution of cross-border supply chains and the impact of the digital revolution on container logistics.
Featuring an impressive line-up of expert speakers, including Tommy Lui, Head of Development - iDSMED Medical Systems, Fung Group, Warren Ng, Director, Operations - South East Asia, Adidas, John McCauley, VP Transportation & Logistics, Cargill, Robbert van Trooijen, Chief Executive, Asia Pacific Region, Maersk Line, Tan Hua Joo, Executive Consultant, Alphaliner, and many more, TOC will chart optimal paths towards sustainable commercial viability for all stakeholders along the container supply chain.
Taking place on 25-26 April 2017 at the Marina Bay Sands, Singapore, TOC Asia is once again staged as part of Singapore Maritime Week. For full details of this year’s event, please visit www.tocevents-asia.com
25-26 April 2017
Marina Bay Sands
About TOC Worldwide
For 40 years, TOC Worldwide has provided the market-leading conference and exhibition forums for the global port and terminal industries and their customers. With a change of name to TOC Container Supply Chain, the TOC event portfolio is now evolving fast to attract a wider audience of container supply chain professionals.
Taking place each year in the world’s four key shipping hubs – Europe, Middle East, Americas and Asia – each TOC is now a complete container supply chain event for its region, bringing together cargo owners, logistics providers, carriers, ports, terminals and other key members of the container supply chain to learn, debate, network and foster new business solutions.
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