Bond movies are great for pithy philosophy and the 1998 film The World Is Not Enough contains the following dialogue. Duplicitous heroine Elektra King: “I could have given you the world”. Bond: “The world is not enough”. Elektra King: “Foolish sentiment”. Bond: “Family motto”. Well, it’s glib, but businesses in the global marketplace today, especially shipowners, will see the point.
End Of An Era
Globalisation changed shipping, previously an imperial service industry, and over the last 60 years it has become a world industry. With a fleet of 58,000 cargo ships carrying every description of goods the world needs, it depends on its customer and the customer is “the world”. So maybe it’s worth stepping back and checking out what “the world” is actually up to today, because it’s busy changing.
Wealth Of Nations
Over the last 50 years, shipping’s world has been propelled forward by a succession of countries which launched their economies into global trade. It began with Europe in the 1950s and Japan in the 1960s, and developed with South Korea and the Tigers in the 1970s and 1980s (not a good decade for trade though). Then after a pause in the 1990s, China took over, creating a new development boom. All built on merchant shipping.
The history of these economic dynamos demonstrates that the super-booms they create have a limited life. It happened to Europe, Japan and Korea. Unstoppable headlong growth is replaced by sluggish cycles. Now this seems to be happening to China. Over the last 18 months, China’s seaborne imports seem to have levelled out. Shipping was rescued from a similar plateau at the start of this decade by China’s heroic infrastructure program. But not this time, it seems. “The darkest cloud is property” said a recent Economist magazine article about China’s economy. Since 2008 debt has almost doubled as a % of GDP, and growing out of trouble is not a realistic option.
Structural Shift For Shipping
No doubt China will find ways to rebalance its economy, but for shipping the big problem is that the resource intensive growth phase could be over. With spare capacity in both the shipping and shipbuilding markets, the industry desperately needs a new trade dynamo. But there are few candidates. Since 2008 China has generated around 50% of the growth in seaborne trade. Europe and the USA have declined and the growth of the other regions is dwarfed by China (see inset graph). Whatever may happen in the long term, in the short term there are no obvious candidates for China’s job.
Sluggish For Shipping?
So there you have it. China’s heroic position as a seaborne importer is changing and the import slowdown may be structural, not cyclical. That could leave shipping with a hole in its demand-side dynamics. India, South America, South-East Asia, and Africa all have a part to play, but are still waiting in the wings. So if forecasters promise you the world, just remember James Bond’s family motto: the world is not enough. Have a nice day.