Maritime Supply Chains Urgently Need Investment!

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Credit: Mika Baumeister/Unsplash

According to UNCTAD’s Review of Maritime Transport 2022, increased infrastructure and sustainability spending is needed for maritime transport and logistics in order to withstand impending storms, as reported by UNCTAD.

Increased investment

UNCTAD in its flagship “Review of Maritime Transport 2022” has called for increased investment in maritime supply chains.

Ports, shipping fleets and hinterland connections need to be better prepared for future global crises, climate change and the transition to low-carbon energy.

The supply chain crisis of the last two years has shown that a mismatch between demand and supply of maritime logistics capacity leads to surges in freight rates, congestion, and critical interruptions to global value chains.

“We need to learn from the current supply chain crisis and prepare better for future challenges and transitions.

And we must not delay the decarbonization of shipping,” she added.

Investment is needed in maritime transport systems to strengthen global supply chains

Logistics supply constraints combined with a surge in demand for consumer goods and e-commerce pushed container spot freight rates to five times their pre-pandemic levels in 2021, reaching a historical peak in early 2022 and sharply increasing consumer prices.

Dry bulk freight rates increased due to the war in Ukraine and related economic measures, as well as the prolonged COVID-19 pandemic and supply chain disruptions.

A UNCTAD simulation projects that higher grain prices and dry bulk freight rates can lead to a 1.2% increase in consumer food prices, with higher increases in the middle- and low-income countries.

“Interrupted supply chains led to lay-offs and food insecurity.”

UNCTAD calls on countries to carefully assess potential changes in shipping demand, and develop and upgrade port infrastructure and hinterland connections while involving the private sector.

Many supply chain disruptions can also be eased through trade facilitation, notably through digitalization, which cuts waiting and clearance times in ports and speeds up documentary processes through e-documents and electronic payments.

More investment required to cut carbon footprint of maritime transport

The report shows that between 2020 and 2021 total carbon emissions from the world maritime fleet increased by 4.7%, with most of the increases coming from container ships, dry bulk and general cargo vessels.

The report also raises concern over the increasing average age of ships.

Investments in new ships that reduce greenhouse gas emissions will be hampered by surging borrowing costs, a darkened economic outlook and regulatory uncertainties.

UNCTAD calls for more investment in technical and operational improvements to cut the carbon footprint of maritime transport.

UNCTAD urges the international community to ensure countries that are most negatively affected by climate change – and have contributed the least to its causes – are not negatively affected by climate mitigation efforts in maritime transport.

Measures to protect competition needed in the face of market consolidation

The report says the container shipping sector has been transformed by horizontal consolidation through mergers and acquisitions.

Between 1996 and 2022, the top 20 carriers increased their share of container-carrying capacity from 48% to 91%.

And over the past five years, the four largest carriers increased their market shares to control more than half of the global capacity.

Market consolidation results in reduced competition constrained supply and can lead to market power abuse and higher rates and prices for consumers.

The size of the largest ship in each country almost tripled, thus ships grew faster than the volumes of cargo to fill them.

UNCTAD calls on competition and port authorities to work together to respond to industry consolidation with measures to protect competition. The report urges stronger international cooperation on cross-border, anti-competitive practices in maritime transport, based on the UN Set of Competition Rules and Principles.

Global maritime trade expected to slow

The paper claims that in 2021, with a projected rise of 3.2% and total shipments of 11 billion tonnes, the world’s maritime trade greatly recovered. The 3.8% decline in 2020 has been improved by 7 percentage points, bringing the current decline to.

Regional maritime transport figures

According to UNCTAD, the increase of global maritime trade would slow to 1.4% in 2022. And during the years 2023 to 2027, it is anticipated to grow at an average annual rate of 2.1%, which is less quickly than the 3.3% average for the previous three decades.

The report and its online annexes offer a comprehensive collection of maritime trade statistics and a study of structural and cyclical changes impacting ports, ships, and seaborne trade.

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Source: UNCTAD

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