Global trade slowdown to dampen PH shipping volumes | mb.com.ph | Philippine News
Home  » Business » Shipping » Global trade slowdown to dampen PH shipping volumes

Global trade slowdown to dampen PH shipping volumes

A slowdown in global trade and weak demand for Philippine products are seen to dampen shipping volumes to and from the Philippines.

The Asian Development Bank (ADB) said in its Asian Development Outlook (ADO) Update that among the threats to sustained economic growth for the Philippines this year will be weaker-than-expected demand from major markets for Philippine exports.

In the ADO Update, ADB raised the forecasts for the gross domestic product (GDP) growth this year to 6.4 percent from its March projection of six percent. But for 2017, growth is seen to dip slightly to 6.2 percent although still above the previous forecast of 6.1 percent.

HARBOR TURNED TRUCK PARKING AREA – Eight-wheel trucks, some loaded with container vans, are stuck inside the Manila North Harbor on Feb. 25, 2014, as they are barred from using Manila streets from 5 a.m. to 9 p.m. following the implementation of Manila City Ordinance 8363 or the expanded truck ban. (Ali Vicoy)

MANILA NORTH HARBOR

The World Trade Organization (WTO) also reduced its global trade forecast, warning that anti-globalization rhetoric and Brexit were pushing trade growth to its slowest pace since Britain’s financial crisis.

The WTO said that global trade was now estimated to expand by just 1.7 percent this year, compared to its April projection of 2.8 percent. The new figure is also a far cry from the year-ago growth projection of 3.9 percent.

WTO said growth in trade had fallen to its slowest pace in around seven years when the global financial crisis hit.

It warned that “creeping protectionism,” coupled with lacking trade liberalization and perhaps the growing role of the digital economy and e-commerce might help explain the recent declining ratio of trade growth to GDP growth.

Weak demand could be aggravated by problems in the international container-line industry triggered by the collapse of South Korean giant Hanjin Shipping Co. Ltd.

Think tank Economic Intelligence Unit (EIU), for its part, said that the fall of Hanjin Shipping, the world’s seventh largest container line, was an evident sign that the industry has hit a crisis point, and a massive transition will be needed to turn profitability around.

The Hanjin Shipping debacle for now has little effect on the country’s trade since local exporters said they do not extensively use Hanjin vessels.

But a study by SeaIntel cited by the EIU report showed an instant capacity reduction of six to eight percent on trans-Pacific trade and a five to six percent reduction on the Asia-Europe trade as a result of the debacle.

“Hanjin also has major stakes in the ports of Busan and Osaka, which will most likely see high-capacity disruptions, and impaired profitability, as these ports will lose ship calls from Hanjin,” according to the EIU report.

It added that ports have also denied access to Hanjin vessels, amid fears that the company would not be able to pay the fees to dock and store its containers, leaving most of Hanjin’s ships stranded at sea.

The company’s financial woes can be traced back to the financial crisis in 2008, which severely hampered global growth and trade and had a knock-on effect on the shipping industry, which lost an estimated $15 billion, the report said.

“The crisis surrounding Hanjin highlights the severity of the container shipping industry’s slump, which is experiencing its deepest and longest downturn in over six decades. This year itself, major container shipping lines have seen operating profits plunge, with earnings being exceptionally volatile,” the report noted.

A study by credit watchdog Moody’s Investors Service also indicated a consistent fall in profits and poor economic climate will drive a negative outlook for the shipping industry over the next 12 to 18 months.

“The industry is further imperiled by record low freight rates. The Shanghai Containerized Freight Index – a measure that reflects the movement of freight rates across the export market – dropped to a record-low since it was first introduced in 1998,” it added.

“The industry must undergo significant changes to address its underlying problems, otherwise the scale of Hanjin’s bankruptcy may be the first of many more to come in the industry,” the report said.