Beijing - Slow global growth and China’s shift to a service economy pose a serious threat to the industry Shipping companies all over the world are scrambling to stay afloat as the consequences of years of overoptimism catch up with them. Many new vessels that were ordered when business was good are only now coming online, and sit empty as trade continues to slow. Companies in the industry went on a spending spree more than a decade ago, ordering larger ships based on the assumption of increasing global trade in consumer goods and raw materials - in large part from China but also from developed and developing economies that were enjoying boom times. Shipbuilders, port operators and container lines were all eager to profit from China’s insatiable demand for everything from iron ore to designer shoes.
From 2004 to 2008, exports of cars, machines, construction materials, handbags and food skyrocketed, lifting charter rates along with them. Global trade grew about 6 percent per year. But within two years of the collapse of Lehman Brothers and the onset of the global financial crisis, the trend had taken a sharp turn downward. Today, the global economy remains sluggish and the economic slowdown in China means that the country is still the largest, though a more moderate, contributor to global growth. Shipowners that bought vessels during the heyday of global trade now have too much space to fill. “How can it be worse?” says Luo Meifeng, director of the IMC-Frank Tsao Maritime Library and Research& Development Centre at Hong Kong Polytechnic University. “The whole world economy is bad. Trade is pretty low. Every country is trying to improve through the virtual economy rather than increase production. Nobody wants to buy,” says Luo, who is also an associate professor with HKPU’s department of logistics and maritime studies. “The whole world is not in a good situation. It’s like the 1930s - nothing new is pushing us forward.” That may sound pessimistic, but it may also be true.