The Review of Maritime Transport is a recurring publication prepared by the UNCTAD (United Nations Conference on Trade and Development) secretariat and is designed to foster transparency of maritime markets. The 2021 review covers data and events from January 2020 until June 2021.
This is one of the most comprehensive and thorough industry overviews you can find: 177 pages! Previously we published Part I. of the key takeaways. And now we present additional, major takeaways:
#1. A coordinated recovery and reshaping of the entire industry
The COVID-19 disruption has accelerated pre-existing megatrends – geopolitical, technological, and environmental. These trends have been unfolding slowly over the past decade but now continue to transform maritime transport and trade. In anticipation of future disruptions, carriers, shippers, ports, and inland transport operators will be rethinking their business and operating models to respond to changing market conditions with greater flexibility.
Ensuring a resilient supply chain will require enterprises to assess and manage risks, enhance preparedness and adopt hybrid solutions that are flexible and agile. Stakeholders along the maritime supply chain including carriers, ports, inland transport providers, customs, and shippers should work together to share information and make maritime transport more efficient. Collaboration and visibility will be key to achieving such resilience.
#2. A continuing crisis for seafarers stranded at sea
In 2020, there were 1,892,720 seafarers. Of these, 857,540 were officers, and 1,035,180 were ratings – which are the skilled seafarers who carry out support work. The five largest seafarer-supplying countries were the Philippines, the Russian Federation, Indonesia, China, and India. For the supplying countries, seafarers are important sources of income.
In 2019, the Philippines, for example, earned $30.1 billion from its overseas workers – 9.3% of GDP and 7.3% of gross national income (GNI) – of which $6.5 billion came from its seafarers. However, hundreds of thousands of seafarers remain stranded at sea. Responding to COVID-19, governments closed many borders and imposed lockdowns that prohibited people from disembarking – thus temporarily suspending crew changes.
#3. Global fleet size and capacity grew by 3%
In early 2021, the world fleet totaled 99,800 ships of 100 gross tons and above with a total equivalent 2.1 billion dwt (deadweight tonnage) of capacity, of which 913 million tons (43%) are from bulk carriers and 619 million tons (29%) from oil tankers.
An increasingly important concern is the aging of the fleet, since older ships are generally less efficient and generate higher emissions. In 2021, almost 30% of the global fleet was in ships of between five and nine years old, representing the highest proportion of carrying capacity. In fact, new build deliveries declined by 12% in 2020.
#4. Two-thirds of world shipbuilding was of dry bulk carriers and tankers
Ship deliveries declined by 12%, mainly due to lockdown-induced labor shortages during the first half of the year that disrupted marine-industrial activity. As in 2018 and 2019, the ships delivered were mostly bulk carriers, followed by oil tankers and container ships. Between January 2020 and January 2021, the global order book declined by 16%. The sharpest reductions were for bulk carriers, down 36%, followed by ferries and passenger ships, down 32%. By contrast, other segments grew: liquefied gas carriers (up 10%) and general cargo ships (up 6%).
In 2020, almost half of the recycling was of bulk carriers, reflecting declining charter rates and following the trend of recycling aging tonnage. Until recently, there was a structural oversupply of maritime transport and, especially from the onset of the pandemic, ship owners had been cutting capacity. Since 2021, however, supply has lagged behind demand, leading to higher freight rates.
This situation poses fundamental questions about the future of maritime transport. Owners now have to decide what ships they require to expand and renew their fleets, and must do so in an uncertain environment. This also means taking into account significant regulatory changes, particularly those related to decarbonization and the aim of zero emissions.
#5 Uncertain decarbonization scenarios
International Maritime Organization’s (IMO) aim is to reduce total greenhouse gas emissions by at least 50% of 2008 levels, while reducing carbon intensity by at least 40% by 2030, and 70% by 2050. These objectives are to be achieved through a combination of short-, mid- and long-term measures, with quantitative targets until 2050. At present, the regulatory outlook is uncertain. The IMO has yet to agree on a number of issues, such as the market-based mechanism, and the outcome is likely to be a combination of measures. The interplay between different regulatory regimes, combined with volatility in carbon prices, is generating considerable uncertainty – which is compounded by the difficulty in modeling the outcome of each measure.
The path toward shipping decarbonization involves not just ship design and improvements in technology but also the use of alternative fuels. To achieve IMO’s targets, it is estimated to require an annual average investment of between $40 to $60 billion between 2030 and 2050. Most of this is for producing alternative fuels such as ammonia, hydrogen, and methanol, while also developing new, land-based infrastructure for storage and bunkering.
The energy transition has major implications for ports. Less trade in oil will reduce revenue from storing and distributing fossil fuels. Preparing for a future without carbon fuels, ports are therefore aiming to develop new markets and value-added services.
#6 Freight rates, costs, and impact on prices
As of late 2020 and into 2021, freight rates surged across containerized and dry-bulk shipping markets – hitting record highs. Tanker markets came under pressure with rates reaching low levels.
In the first half of 2020, the demand shock from the pandemic added downward pressure to an overly supplied market and led to a drop in freight rates for dry-bulk shipping. The second half, in contrast, saw a rebound in demand for dry-bulk cargo, particularly for iron ore and grain into China. Combined with slower growth in the active fleet, this pushed up freight rates. This was reflected in the Baltic Exchange Dry Index, which measures the cost of shipping various raw materials, such as coal, iron ore, cement, grain, and fertilizer.
In February 2020, this stood at only 461 points, but by July 2021 had reached 3,257 points. Rates were also affected by delays caused by port congestion. The number of vessels caught up in port congestion rose from 4% of the fleet in the fourth quarter of 2020 to 5% in the first quarter of 2021. This was mainly due to increases in exports of iron ore and grain products from Brazil which blocked up to 100 Capesize and Panamax vessels in Brazilian ports during February and March 2021.
The strength of the dry-bulk market was good for carriers. In May 2020, the average monthly earnings of all bulkers were $4,894/day, but by June 2021 they were $27,275/day – the highest rates in a decade. On the other hand, tanker freight rates fell to the lowest levels ever.
In the first half of 2020, there was a surge in tanker freight rates, boosting profits for tanker shipping companies. In the second half of the year, the COVID-19 impacts weakened demand and rates started to drop in an oversupplied market. By January 2021, oil tanker spot earnings were $5,237/day, and by July had fallen to $2,753/day.
#7 Key performance indicators for ports and the shipping fleet
Fastest loading operations in tonnes loaded per minute:
Australia: 48 tons/minute
Colombia: 28 tons/minute
Brazil: 25 tons/minute
Angola: 113 tons/minute
Qatar: 95 tons/minute
Kuwait: 90 tons/minute
The most recent UNCTAD report highlights several areas where the maritime industry is being reshaped by a combination of external forces, innovation, and the unyielding laws of economics. Much of that reshaping is creating a sense of uncertainty. But with uncertainty comes opportunity, and it is the expectation that the future will be brighter than the past 24 months have been.