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Review and Outlook for the Global Maritime Sector
By Nazery Khalid, Senior Fellow, Maritime Institute of Malaysia
Rough seas, turbulent times
Amid a sea of change brought by the global economic recession and credit crunch, the maritime sector has been subjected to intense forces and challenges that have altered its landscape dramatically. The sharp decline in world trade has wrought serious havoc not seen in the shipping industry for a long time. The shipping sector, which facilitates an estimated 80% of the global trade by volume, has gone on from the darling of investors to a dud in an astoundingly short time. From the heights of record breaking performances in almost all sectors of then industry only two years ago, the maritime industry went on a dramatic free fall that has seen players languishing in massive loss. Some have even failed to survive the economic downturn and financial crisis.
When the full impact of the global economic downturn hit, the maritime industry was among the first activities to feel the brunt. This should not come as a surprise given its pivotal role in facilitating much of global trade. In the shipping sector, shipowners who were basking in the glory of historically high demand, freight rates and asset values, suddenly found themselves reeling from the slump in global trade and the demand for the cargos they carry. Banks cut back lending, leaving shipowners high and dry without access to financing to fulfill their obligations to pay for newbuildings and to come up with working capital to run their business. As a result, they had to cancel orders, leaving shipyards and a host of ancillary services providers high and dry. They were saddled with overcapacity and forced to lay up their vessels and send them to shipbreaking yards. The truly badly hit even exited the business altogether and filed for bankruptcy.
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Tags: · business ethics, Container Security Initiative, Convention on Contracts for the International Carriage of Goods Wholly or PArtly by Sea, environment, financing, human capital, ISPS, Maritime Institute of Malaysia, MIMA, MV Limburg, Nazery Khalid, production and consumption patterns, Rotterdam Rules, rules on carriage of goods, security, shipbuilding, supply chain management, technology, UN Commission on International Trade Law, UNCITRAL
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