Shipping Industry Corrects for Economic Downturn

The volume of shipping traffic through Irish ports declined by as much as 20 percent in the second half of 2008, according to the latest edition of the Irish Maritime Transport Economist, which was unveiled at an industry briefing in Dublin today (April 1st) by the Irish Maritime Development Office (IMDO).

According to the IMDO figures, 2008 began with a moderate slowdown in traffic volumes in the first half of the year, before market conditions deteriorated abruptly over the third and fourth quarters with declines in traffic volumes of both freight and passenger traffic. The most notable correction in the data was the shift change in import volumes, which had previously been running at a growth ratio of 2:1 compared to export volumes. In addition, the key containerised segment of Lo/Lo (load on/load off) and Ro/Ro (Roll on/Roll off) declined by 10 and 5 percent respectively, while the volume of bulk commodities fell by 5 percent.

The sharp adjustment in traffic volume is consistent with Central Statistics Office (CSO) data on the economy published last week. This reversal in import trade volumes, particularly from Asia, is attributed to the impact of the recessionary environment worldwide, fuelled by weaker domestic consumer confidence. The IMDO estimate that laden imports fell by more than 13 per cent for the full year compared to an average growth of 7 per cent since 2003.

IMDO Director, Mr Glenn Murphy commented that “This year’s publication clearly illustrates the sharp correction that occurred in the real economy last year and the corresponding impact it had on the reversal in shipping volumes throughput at our ports. The outlook for 2009 is equally as challenging and will force many shipping operators to take further corrective measures to adjust shipping volumes to deal with weaker industrial and consumer demand this year.”

The IMDO analysis notes that the continued reduction in the residential construction sector also contributed to a fall of 30 per cent in volumes of breakbulk commodities, such as timber and steel, with the impact of lower volume demand most acute at Ireland’s smaller regional ports. Having had growth of 10 per cent over the first quarter, passenger volumes at peak periods of the year also declined, resulting in an overall decline of 6 per cent in both passenger and car traffic numbers. The slowdown in the UK economy, combined with a weaker sterling exchange rate were noted as key factors in reduced passenger demand.

On a global scale, IMDO figures show that the impact of weaker economic demand in the latter part of 2008, particularly for raw aggregate building materials from China, had combined with a surge in the supply of new vessels entering many markets last year. Two principal factors: decreasing worldwide demand combined with increasing shipping capacity contributed to billions of dollars being wiped off charter, sale and purchase values last year.

“After a five year period of sustained growth, the wider global shipping sector went from record average earnings at the beginning of 2008 to a market collapse by the end of quarter four,” said Glenn Murphy. “The market’s leading index - the Baltic Dry Index (BDI) - lost almost 92 per cent of its value from July to November.”

Publication of this year’s edition of the Irish Maritime Transport Economist is sponsored by Matheson Ormsby Prentice.

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The 2009 Irish Maritime Transport Economist – Volume 6 is available here