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November 30, 2023

UNCTAD predicts a slower maritime trade growth

By Priti Naik

Citing drag from the Covid-19 pandemic, the United Nations Conference on Trade and Development (UNCTAD) forecasted that the maritime trade growth will be slow. The UN agency stated that the growth will decelerate to 2.4% between 2022 and 2026 to 2.9% over the past two decades.

In its Review of Maritime Transport 2021, UNCTAD noted that the maritime trade has far-reaching effect even after the maritime trade was able to weather the Covid-19 storm. The Covid-19 pandemic’s impact on maritime trade volumes in 2020 was less severe than initially expected but its knock-on effects will be far-reaching and could transform maritime transport. Moreover, the report also stated that the maritime trade contracted by 3.8% in 2020, which was regarded as an initial shock and rebounded later in the year projecting an increase by 4.3% in 2021.

The report also states that the medium-term outlook for maritime trade remains positive but subject to mounting risks and uncertainties. UNCTAD said the pandemic “exposed and magnified challenges that already existed in the maritime transport industry” particularly labour shortages and infrastructure needs. “It raises concern over the continuing pandemic-induced crisis around crew changes, with lockdowns, border closures and lack of international flights leaving hundreds of thousands of seafarers stranded at sea, unable to be replaced or repatriated,” the agency added.

 UNCTAD also called for an ‘urgent attention’ from flag, port and labour-supplying states to end the crew change crisis. This is therefore insisting that all the states should be parties to relevant international legal instruments, including the Maritime Labour Convention of 2006. The agency also urged government, industry and international organizations to facilitate crew changes as it told them to “ensure that seafarers are designated as key workers and vaccinated as a matter of priority.”

Moreover, the supply-side constraints in container shipping are also rocking maritime transport and trade. While orders for new ships declined by 16% in 2020, continuing a downward trend of previous years, in 2021 shipping companies responded to the capacity limitations with a surge of new orders.

UNCTAD’s report also predicted that global import price levels will increase on average by 11% as a result of the freight rate increases. But the small island developing states that primarily depend on maritime transport for their imports could face increases of up to 24%. UNCTAD noted that if container freight rates remain at their current high levels, global consumer prices are projected to be 1.5% higher in 2023 than they otherwise would have been. However, the rise is expected to be 7.5% in small island developing states and 2.2% in least developed countries.

The UN agency also noted that the pandemic has accelerated “megatrends” that could transform maritime transport in the longer term. This includes digitalization and automation, which UNCTAD said “should deliver efficiency and cost savings.”

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