The shipping industry is faced with the adverse situation of a slowdown in trade growth following concerns over oversupply of vessels. As ships ordered during the boom period are being delivered, there are predictions that freight rates will show weakness, and if the uncertainty of trade policies deepens, demand may also decline.
According to the shipping industry on the 18th, the International Monetary Fund (IMF) recently revised its forecast for this year's trade growth rate down to 3.2%, a decrease of 0.2 percentage points from the initial estimate. Last year's trade growth rate was 3.4%. The estimated trade growth rate for developed countries, including the United States, Germany, France, Italy, Spain, Japan, the United Kingdom, and Canada, is 2.1%, down 0.5 percentage points from the initial estimate. The trade growth rate for developing countries, including China, India, Russia, Brazil, Mexico, and Nigeria, is 5%, an increase of 0.3 percentage points from the initial estimate. The IMF noted, 'The uncertainty of trade policies has dampened investment sentiment,' and believes that uncertainty will gradually dissipate by next year. The trade growth rate for next year is expected to be 3.3%.
The shipping industry believes that the decline in trade growth rates in developed countries will have a greater impact. This is because the growth of routes from Asia to North America and Europe last year accounted for a significant portion of market growth. According to shipping research firm Alphaliner, the average weekly capacity deployed on routes from Asia to Europe last year was 469,683 TEU (one TEU is one 20-foot container), which is a 7.8% increase compared to the previous year. The capacity deployed on routes from Asia to North America also increased by 3.7% compared to the prior year, averaging 546,751 TEU per week.
Trade growth rates impact the performance of shipping companies. In 2023, as the trade growth rate fell to 0.7%, shipping companies recorded poor performance. At that time, HMM's operating profit was 584.8 billion won, a 94% decrease from the previous year, and sales also dropped 55% to 840.1 billion won. Sinokor Merchant Marine also saw its sales and operating profit during the same period decline by 37% and 81%, respectively, to 304.0 billion won and 34.45 billion won. SM Line recorded an operating loss.
This year, concerns over oversupply also exist as ships ordered by shipping companies that benefited during the coronavirus disease (COVID-19) period are beginning to be delivered. The Korea Maritime Institute (KMI) estimates that global shipping capacity will increase by 3.2% this year.