Global economic growth buoys maritime trade

The prospects of maritime trade are promising buoyed by expected growth in the global economy, a report has said.

The United Nations Conference on Trade and Development (UNCTAD) in its Review of Maritime Transport 2018 said the global sea trade will continue to rise in the short and medium term.

“Global Gross Domestic Product (GDP) is expected to grow by more than 3.0 percent over the 2018–2023 period, and merchandise trade volumes are set to rise by 4.4 percent in 2018 and four percent in 2019,” the report says.

According to the UNCTAD projections, world seaborne trade will expand at a compound annual growth of 3.8 per cent during that period, based on calculated elasticities and the latest figures of GDP growth forecast by the International Monetary Fund for 2018–2023.

“It is expected that containerised and dry bulk commodities trades will record the fastest growth. Tanker trade volumes should increase, although at a slightly slower pace than other cargo types.

Locally, the Kenya Ports Authority (KPA) says it had by December 5 surpassed its cargo throughput target of 1.2 million twenty foot equivalent units (Teus) at the Port of Mombasa.

Speaking in an interview with Shipping, KPA managing director Daniel Manduku said the prospects at the port are also high, reflecting the global trends.

Dr Manduku said after recording a good business growth at the port, KPA now eyes the Great Lakes region countries market.

“As of December 5, KPA had hit its annual target in terms of container and conventional cargo volumes. Although we have received fewer ships than the previous years, we are receiving bigger vessels at the moment and we have hit now 1.2 million Teus,” said Dr Manduku.

“The size does not matter now, it is about the volume. We have already hit our annually volume on the container target. From KPA, we look at performance in terms of Teus, dead weight tonne (dwt) and in terms of Key Performance Indicators(KPI) which show that we have actual exceeded our target,” said Dr Manduku.

The MD said at the end of the year, KPA expects to surpass its target by a minimum of between eight and ten percent outlining even more focus to other areas in trade.

“Because of our much focused marketing strategies we are putting in the Great lakes region —we now want to focus on Rwanda, Burundi and Congo, — we feel that these volumes will even go higher next year,” said the MD.

“We are targeting the Eastern Congo, Rwanda and Burundi. In fact, we are mounting a big marketing mission to Rwanda, Burundi and Eastern Congo by January 2019.”

However a section of traders say there are a number of obstacles standing in the way of smooth operations at the Mombasa port.

The Car Importers of Kenya (CIAK), chairman Peter Otieno said traders have been adversity affected by several measures that were implemented by the government.

“The business is good only for shipping lines who smile all the way to banks thanks to demurrages because of the confusion that was brought by the government from January,” he said.

Mr Otieno said importers were denied the opportunity to nominate cargo into their preferred Container Freight Stations (CFS) because of the use of SGR.

“Due to this, it resulted in a lot of container demurrage charges, money which goes direct to shipping lines. So shipping lines earned $66 billion in terms of container demurrages,” said Mr Otieno.

He said even as big ships have been making Mombasa a port of call, the cargo is not coming in as it used to yet KPA has bigger berths now that can accommodate bigger ships.

“When ships are coming in no matter how few they are but they are carrying more containers, then we are supposed to record a lot of importation, much better than before,” he said.

Mr Otieno said KPA’s role is to load and offload cargo but have no control on where the cargo is to go unless the cargo is not nominated.

“Secondly, the Kenya Revenue Authority (KRA)’s mandate is to collect taxes irrespective of where the container is going to. They are not supposed to direct where that cargo should be cleared from,” Mr Otieno said.

The Inter-Governmental Standing Committee on Shipping (ISCOS) acting secretary General Kassim Mpaata is however optimistic, saying business in its member states is good and the future looks promising.

Iscos, is a regional organisation formed in 1967 by Kenya, Tanzania, Uganda and Zambia to take care of their common shipping, maritime and logistics Interests.

“Cargo flowing to the region has been on the increase for the last three years. We have registered increased cargo in Dar-es-Salaam and Mombasa ports,” he said.

“This is one of the reasons why the member states of the region have invested in developing of the ports capacity.”

Mr Mpaata said currently there is more business being carried by its member states, with much of the cargo being imported from the Far East.

“China and the Middle East countries import a lot from the East Africa and the Great Lakes region,” he said.

The UNCTAD report says dry bulk commodities are projected to experience a compound annual growth rate of 4.9 per cent between 2018 and 2023, while containerised shipments are expected to rise by 6 per cent, supported by positive economic trends, imports of metal ores to China and steady growth on the non-mainlane trade routes.

“Further, crude oil trade is forecast to grow by 1.7 per cent between 2018 and 2023, and combined petroleum products and gas volumes, by 2.6 per cent,” says part of the report.

The report notes that the positive outlook for seaborne trade could be sustained by the trade liberalisation gains that may be generated by various trade policy instruments, providing they are successfully concluded and implemented. These include the Comprehensive and Progressive Agreement for Trans-Pacific Partnership; the agreement between the European Union and Japan for an economic partnership; the trade and investment agreements between the European Union and Singapore; the Regional Comprehensive Economic Partnership; and the agreement establishing the African Continental Free Trade Area. The latter agreement, according to UNCTAD, could increase the value of intra-African trade by 33 per cent.

Although UNCTAD projections are pointing to continued growth in world seaborne trade, which hinges on continued expansion in GDP, the organisation says upside and downside risks to the outlook are manifold and include rising trade tensions on the downside and digitalisation on the upside.

“Further, new factors such as digitalisation, e-commerce and the Belt and Road Initiative are increasingly unfolding. Depending on their extent and the pace at which they evolve, they may alter the face of global shipping and redefine seaborne trade flows and patterns.

In this context, it is increasingly acknowledged that the value of shipping can no longer be determined by scale alone. The ability of the sector to leverage relevant technological advances to improve processes and operations, cut costs and generate value for the industry and customers, as well as the broader economy and society, is becoming increasingly important,” said part of the report.