Rising oil prices and piracy are among the biggest threats to the global shipping industry, says the UAE Minister of Economy.
"The oil price fluctuation … in the short term is not positive and will impact the maritime trade," Sultan Al Mansouri told a delegation at the World Ports and Trade Summit in Abu Dhabi yesterday.
Oil prices increased about 14 per cent in the first quarter of this year, raising the cost of shipping goods around the world.
The rise is already taking its toll on important shipping centres across the world. Latest marine fuel sales in Singapore, for example, fell to a two-year low of 3.09 million tonnes in February.
Mr Al Mansouri's concerns were echoed by other speakers at the event. The industry was contemplating "extraordinary rises" in oil prices in the short term, said Jonathon Porritt, the founder director of the Forum for the Future, a non-profit organisation based in Britain that promotes sustainability.
To respond to the challenge, new container vessels are having to comply with the International Maritime Organization's Energy Efficiency Design Index, which was agreed on last July. By 2020 the measure will help to cut shipping costs by US$5 billion (Dh18.3bn) and reduce by 20 billion tonnes the amount of carbon dioxide released into the atmosphere.
"Sustainability is not just about protecting the environment, it is also building long-term prosperity for the industry," Mr Porritt said.
Piracy was another threat to the industry, said Mr Al Mansouri. Somali pirates cost global governments and shippers up to $6.9bn last year, according to One Earth Future Foundation, a non-profit advocacy group.
"The shipping industry in general has to address growing piracy threats," he added. "There are regional concerns, too, especially those relating to the potential closure of shipping routes."
Tensions over Iran's nuclear plans prompted Tehran last year to threaten to close the Strait of Hormuz, the shipping route through which about a fifth of the world's oil passes.
Excess carrying capacity is another challenge facing the global shipping industry.
Many ship owners are still taking delivery of vessels ordered during a buying spree between 2007 and 2008. Rates in the bulk sector for large vessels carrying iron ore and coal reached a peak of more than $230,000 a day in 2008. But the rate slid to more than $5,000 last month, below operating costs.
"There was a kind of gold rush up to 2008," said Tim Power, the director head of maritime advisers at Drewry, a UK-based shipping consultancy. "In a nutshell, China woke up and that led to a huge amount of investment in shipping, so much so that supply outstripped demand."
Both Standard & Poor's and Moody's have warned that oversupply is likely to contribute to the shipping industry remaining in a downturn this year.
Despite the challenges facing the sector, the UAE is pushing ahead with expanding its footprint as a global centre for exports and imports.
Of the 35 ports in the GCC, Port Rashid, Port Zayed and Khalifa Port in the UAE accounted for nearly 59 per cent of the trade volume in the region, said Mr Al Mansouri.
When the infrastructure of the first phase of the Khalifa Port is completed in the fourth quarter of the year, it will have an initial capacity to handle 2 million containers and 12 million tonnes of general capacity annually, he said. By 2030, Khalifa Port will have the capacity to handle 15 million containers and 35 million tonnes of general cargo, he said.
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