There continuous freight rate declines in 2016 were not unexpected, but it was a surprise that they hit a historical new low. The entire liner shipping industry will inevitably bear quite substantial operational loss since the aftermath of 2009 financial tsunami. We’ve witnessed world-class carriers going into insolvency or seeking mergers, subsequently leading to reshuffling of mega-alliances. With the events of 2016, carriers may still face challenges this year.
What left us to scratch our heads are the more unpredictable factors that could impact the industry in 2017. A recent forecast by the World Trade Organization said trade growth in 2016 would be 1.7 percent, the first time in the last 15 years It would be below the IMF projection of 3.1 percent. The forecast for 2017 would range from 1.8 percent to 3.1 percent, which would still be lower than GDP at 3.4 percent based on the IMF world economic outlook issued Oct. 4, 2016. If that comes to reality, both overcapacity and low freight rates are likely to prevail. Will it be another chilly year for liner shipping industry? We shall find out.
Geopolitical issues after presidential elections in certain countries in the last year have also become concerns. Analysts worry that if there is no healthy recovery in the global economy, trade protectionism may rise and rally against globalization, thus further depressing trade growth, and harming an already wounded liner shipping industry, as moving cargo around will not be as easy as it used to be.
I personally think we need to observe the progress closely and with caution, though the probability of occurrence appears low at this stage.