Shipping & Logistics

Why old ships find home in poor countries

Seaborne trade volumes are expected to maintain an upward trajectory in the next five years. FILE PHOTO | NMG
Seaborne trade volumes are expected to maintain an upward trajectory in the next five years. FILE PHOTO | NMG 

When the Tuvalu-flagged MV Theresa Arctic ran aground in the Kilifi waters on June 20, the Kenya Ports Authority (KPA) saw an opportunity to showcase expertise of its marine navigators to the world.

With the help of a 14,400-horsepower tug boat from Oman, (Kenyan tug boats are up to 400O horse powers), the KPA engineers and pilots soon got to work.

And with global maritime attention focused on them, it took the mariners 22 days to refloat the ship and deliver 46,000 tonnes of crude vegetable oil on board and deliver it to Mombasa.

That was not the first time a ship got stuck on Kenyan shores. Sector players usually blame the foreign navigators for ignoring bad weather or miscalculating the position of coral reefs and sand bars for such misfortunes.

A report released by the United Nations Conference on Trade and Development (Unctad) appear to allude to age of vessels as an overlooked factor.

The UNCTAD’s Review of Maritime Transport 2017 Report indicates that the bulk of ships flagged in developing countries are on average 10 years older than those in developed economies. The report notes that 42.8 per cent of merchant fleet in developing countries are aged over 20 years.

“Ships flagged in the developing economies are on average 10 years older than those flagged in developed economies, and among the different vessel types, general cargo ships are the oldest (more than 25 years), and dry bulk carriers are the youngest (less than nine years),” said the report.

Tuvalu, a collection of nine islands in the Pacific Ocean, is classified by the United States as one of the Least Developed States, just a rung below Kenya which falls in the category of Developing Countries.

The MV Theresa Artic, built in 1988, was registered in Tuvalu allowing it to fly its flag.

Kenya, like most developing states, does not own merchant fleets but registers foreign vessels, allowing them to fly its national flag and observe the international conventions to which Nairobi is a party.

The Unctad report notes that, generally, more than 70 per cent of the global commercial fleet is registered under a flag that is different from the country of ownership.

The system of open registries provides opportunities for developing countries, notably Small Island developing States to own vessels and be part of seaborne trade.

Panama continues to be the leading flag of registration, Liberia ranks second in terms of tonnage and the Marshall Islands ranks second in terms of value.

In terms of cargo-carrying capacity, Greece takes the lead (309 million dwt) followed by Japan, China, Germany and Singapore. These five countries control almost half of the world’s tonnage.

When the commercial value of fleet is considered, the United States fleet leads with $96 billion, followed by Japan, Greece, China and Norway.

The Unctad report projects that seaborne trade volumes will reach 10.6 billion tonnes this year aided by firming up in demand in the dry bulk trade sector.

The projected growth reflects an increase of 2.8 per cent from the 10.3 billion tones total volumes handled in 2016.

Seaborne trade accounts for 80 per cent of world merchandise trade by volume and more than 70 per cent of its value.

“The major bulk commodities are projected to expand by 5.4 per cent in 2017. Containerized trade is projected to grow by 4.5 per cent, owing mainly to growing intra-Asian trade volumes and improved flows on the East–West mainlanes,” read the report.

Growth in seaborne trade volumes is expected to maintain an upward trajectory in the next five years to 2022, expanding at a compound annual growth rate of 3.2 per cent. The Unctad, however, warns that the positive growth will majorly be pegged on policy considerations, infrastructure developments, technology and e-commerce.

Among policy measures taken by global leaders is the Addis Ababa Action Agenda of 2015 and the 2030 Agenda for Sustainable Development, both efforts aimed at limiting trade-restrictive measures.

On the other hand, the One Belt, One Road initiative, a brainchild of China leader Xi Jinpin, focuses mainly on infrastructure development, construction materials, railway and highway.

Unctad reckons e-commerce patterns that favour shipping as the main mode of transport could also be promoted to achieve the projected growth in seaborne trade.

“Intervention measures may include helping relevant e-commerce stakeholders embrace technology, implementing trade facilitation solutions and customs reforms and developing common standards and practices,” it says.