Shipping industry's seven-year slump may end this year

By Choi Sung-jin

Will the slump gripping the shipping industry for the past seven years come to an end in 2016? Industry experts, who have been hesitant to make optimistic forecasts, are cautiously saying “yes.”

Such rosy predictions were also prevalent at a workshop at the Korea Chamber of Commerce and Industry on Friday.

“As the global trade recovers, container cargo movements will also likely increase this year,” said Kim Wu-ho, a researcher at Korea Maritime Institute. “The increase of cargo volume along with the implementation of mega-free trade deals, such as TPP and RCEP, will also prove to be a boon for the industry.”

According to Clarksons, a British agency analyzing shipping and the shipbuilding industry, container cargo transport is expected to increase by 5.4 percent this year, compared with the 3.5-percent rise in the 2014-2015 period. It is the highest growth rate since 2010 when the volume surged 13.1 percent after it plunged 9.2 percent the previous year in the aftermath of the global financial crisis.

Industry executives are also expressing confidence. They say one of the two biggest negative factors, along with the global recession, has been “discounts in transport charges” caused by purchases of very large vessels by global shipping lines, but that may change gradually.

“Major shipyards remain idle now, which means there will not be much of a supply of new very large vessels for the time being,” said Lee Yun-jae, chairman of Heung A Shipping. “As the shipping demand has been rising slowly, the situation will considerably improve by year’s end.”

For Korean shippers to sail on the tail wind, however, they should remain competitive, Kim, the KMI researcher, said.

“The adverse factors of the supply glut (of very large carriers), the slump in demand for raw materials, and toughened environmental regulations still call for shipping companies to strengthen their cost competitiveness,” he said. “Korea’s national flag carriers (Hyundai and Hanjin) have failed to secure their profitability, which means they will have to make yet more cost-cutting efforts.”