Financial crisis impacts sea trade: Unctad

New York, Nov 5 (PTI) International seaborne trade, which
surged to record levels last year, is the latest victim of the
ongoing financial crisis, impacting adversely countries that
depend on commodities trade, a United Nations report says.

The U.N. Review of Maritime Transport said seaborne trade
surpassed eight billion tonnes last year and reached a peak at
the start of this year.

But the report, issued by the U.N. Conference on Trade
and Development (U.N.C.T.A.D.), highlights that the Baltic Dry
Index (B.D.I.) -– an indicator that predicts future economic
activity by measuring global supply and demand for the
commodities shipped aboard dry bulk carriers -– declined by
over 90 percent between May 2008 and this month.

Such a decline indicates that the unfolding financial
crisis has gripped international trade, with negative
implications particularly for developing countries trading in
commodities.

While a drop in freight rates would be an immediate
effect of a falling B.D.I., which would be beneficial for
exporters or importers of food and commodities, a declining
index is also accompanied by reduced demand for shipping
services, heightening the effects of the financial crisis and
global demand for goods.

The report reveals that this year, the total world
merchant fleet had expanded by 7.2 percent to reach 1.12
billion deadweight tonnes. Likewise, the order books for new
vessels in 2008 were at their highest level ever, with over
10,000 ships, marking a 28 per cent increase on the current
merchant fleet.

As of mid-2008, however, evidence of cancellations for
new ships emerged, a move which could have a major impact on
the ship-building industries of countries such as China, South
Korea and Vietnam.

Shipping operators faced with considerable losses may
also decide to scrap older tonnage, which has potential
implications for steel prices as well as for jobs in major
ship-breaking nations including Bangladesh and Pakistan, it
said.

Such intensified ship-scrapping activities pose further
challenges for safety, health and environmental conditions in
these developing regions.

In the meantime, the declining B.D.I. has also led
international port terminal operators to announce the
suspension of some major port expansion plans owing to the
foreseen decline in demand for shipping services. PTI DS