THIS year’s sharp fall in sea
freight costs is a mixed blessing for developing countries, making
it cheaper to ship their exports but signalling waning demand for
their goods, a United Nations agency said recently.
And the fall in demand for shipping
from recent record levels spells trouble for countries like China,
South Korea and Vietnam that have built up shipbuilding industries,
the UN Conference on Trade and Development (UNCTAD) said.
Demand for shipping hit a record
high earlier this year in a global boom that saw prices of food and
fuel soar. The financial crisis has punctured that boom and demand
The Baltic Exchange Dry Index which
measures the cost of moving raw materials by sea, has plummeted more
than 11 fold to an eight-year low since peaking in May this year at
11,793, UNCTAD said in its 2008 Review of Maritime Transport.
The index, a composite of shipping
prices for various dry bulk products such as iron ore, grain, and
coal, closed on Monday at 827, a level last seen in February 1999.
“This shows that the unfolding
financial crisis has spread to international trade with negative
implications for developing countries, especially those dependent on
commodities,” UNCTAD said.
Economists point out that freight
charges can be a more significant barrier to trade than tariffs are,
so a fall in shipping costs should be good news for exporters,
especially as bulk commodities are more sensitive to transport
UNCTAD noted that both exporters
and importers of food and other commodities were benefiting from the
lower freight costs, which also eased inflationary pressures.
But a rapidly falling index also
reflected reduced demand for shipping services and the commodities
they transported, negatively affecting many developing countries, it
International seaborne trade rose
4.8% to surpass a record eight billion tonnes in 2007, while demand
for shipping services jumped 4.7% to 32.93 trillion tonne miles.
World container throughput rose
11.7% to 385 million twenty-foot equivalent units (TEU) a measure of
containerised cargo equal to a standard 20-foot container.
”However, port investment, will now
be curtailed until the international trade flow situation becomes
clear,” UNCTAD said.
Trade experts say that investment
in ports and similar infrastructure is vital for developing
countries to help them take advantage of more open trade conditions.
The total capacity of the world’s
merchant fleet had grown to a record 1.12 billion deadweight tonnes
by early 2008, with record orders for 10,053 ships with further
capacity of 495 deadweight tonnes on the books, UNCTAD said.
By the middle of this year some of
these orders were being cancelled, hurting major shipbuilding
nations, it said.
UNCTAD added that the collapse in
shipping rates could force operators to scrap older vessels. That
would put further downward pressure on steel prices but boost
employment in ship-breaking nations such as Bangladesh and Pakistan