Freight rates unlikely to ‘surge’ – UN

Investment in the world’s merchant fleet is likely to ensure that freight rates remain under pressure, predicts the United Nations Conference on Trade and Development (Unctad) 2010 Trade and Development Report. Prices of maritime freight plummeted by the end of 2008, when the Baltic Exchange Dry Index fell by 90% from its record high in May of that year, says the report. By mid-2009 there was a partial recovery, with freight rates at around 40% of their 2008 peak (Unctad, 2010). The world merchant fleet capacity grew by 6.7% in 2008, and by another 7% in 2009. “Given the scheduled ship deliveries, that capacity will grow further during 2010. As a result, it is unlikely that the recovery of trade in goods will lead to a new surge in freight tariffs in the short run,” says the Unctad report. It also sees a shift in trading patterns as the United States motor industry moves into the fast lane. “The strong improvement in the United States trade balance for motor vehicles and other transport equipment would be mirrored by a sizeable deterioration in the trade balance for these products in Argentina, Brazil, Mexico, Germany, Japan, the Republic of Korea, and Singapore (though most of these effects for Singapore are likely to be due to transshipment, as witnessed by the strong deterioration in Singapore’s trade balance for commercial services and trade and transport),” says the report. World trade, which had plunged by more than 13% in volume and by as much as 23% in value in the first half of 2009, started to recover in mid-2009. The recovery was much faster in developing than in developed countries. By April 2010, the volume of trade of emerging-market economies had reached its previous peak of April 2008, according to the report. After a contraction of almost 2% in 2009, global real gross domestic product (GDP) is expected to grow by about 3.5% in 2010, with a re-acceleration of output growth in most regions. Exceptions are the European Union (EU) and some transition economies, where recovery is proving to be much slower. The projected growth rate for Africa in 2010 as a whole is about 5%, and closer to 6% for sub- Saharan Africa, excluding South Africa, where growth is seen at around 3%. In South-East Asia GDP is expected to rise by 7%, and in East and South Asia most countries are on track to return to their precrisis growth rates. In several countries of Central and Eastern Europe and the Commonwealth of Independent States (CIS), recovery is likely to be slower owing to high unemployment, wage cuts and constraints on government spending.