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Friday, 13 March 2009

Report presents doomsday scenario for shipping

Tony Gray - Thursday 12 March 2009

AN apocalyptic vision of a future in which dysfunctional shipping markets trigger an outbreak of protectionism in trade and the creation of national fleets is outlined in a review of the current crisis by Consultants on Maritime Transport, an independent partnership.

The analysis provides one of the gloomiest assessments of the potential course of the shipping crisis to be placed in the public domain.

They argue that present shipping crisis has “arrived faster and stronger” than any before and is likely to last longer than even the infamous depression of the 1970s.

“We believe its effect on the other global markets will be considerable,” the review states.

“Indeed, we suggest that the present seizing up of shipping markets might trigger a chain of events that will kill free market economics world-wide for a generation.”

The report says it is inevitable that many shipyards operating in free market economies such as Japan or South Korea will fail due to a combination of cancellations and shipowners not meeting progress payments. However, the authors believe China, which has as taken enormous trouble to guarantee long-term sources of raw materials and plan its expansion of steel production and shipbuilding capacity, is likely to take a different approach.

“In the face of the same factors of cancellation and non-payment, China is likely
to continue building vessels on schedule through 2009-2012, but now for its own account.
“As its national fleet grows, it will give preference to its own vessels against tonnage chartered from the free market.”

As a result, they believe it is quite possible China will control, directly or indirectly, more than a third of the world’s dry cargo fleet by 2012.

China could then use its muscle to dominate free markets to the nation’s own advantage which, in turn, could provoke a response by the US, the European Union, Russia and India.
The review fears that an atmosphere of “defensive protectionism” could lead to moves to re-establish national fleets.

“If the shipping markets are unable to function freely over a sustained period
then it is but a short step to say that markets will have to work less perfectly on a regulated basis,” it warns.

“We could see the re-introduction of barter and countertrade, bilateral and multi-lateral agreements sponsored by government agencies who, wherever possible, will insist on vessels of their own flag or vessels they can control and regulate.

“Is it possible we are on the brink of the abandonment of free market economics for world trade regulated by political muscle and national domination?”

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