The maritime industry and the Global economy.
The maritime industry and the Global economy.
The maritime industry is one of the ultimate prime sectors that contribute to the global economy. The industry is involved in the shipping of goods between countries, continents, and coastal cities. The industry has grown rapidly, especially after the emergence of globalization. At the same time, most people and organizations have increasingly preferred mass transit of goods using ships rather than alternative means such as air transport. By 2017, as Jolly (6) explained, around 90 percent of the transportation of goods between countries and continents involved ships. A remarkable aspect of the maritime industry is that it has strong links to the global economy. As such, the industry is highly influenced by changes in the worldwide economy. Thus, the changes expected to occur in the worldwide economy will have direct and noteworthy effect on the maritime industry. In addition to affecting the performance of the maritime sector, the changes in the global economy will affect operations in the industry. In this regard, this paper explores how the changes in the global economy in the future are likely to affect the maritime sector, including the operational practice in the ocean-going container vessel sector The maritime industry and the Global economy.
The Projected Impact of the Global Economy Evolution on the Maritime Industry
One of the projected trends in the global economy is the continued rapid growth of emerging economies. Countries that have had fast growth rates during the recent years and with the potential to keep with the trend shortly are China, India, and Brazil (OECD 24). If the trend continues in those countries, they will eventually gain significant economic power. Traditionally, economic dominance has been associated with countries like Japan, the US, and European nations. The emerging economies such as China, Brazil, and India have a high potential to gain economic dominance. As OECD (24) explains, China is expected to contribute to 20 percent of the world GDP by 2030. However, it is essential to acknowledge the possibility of limiting factors that can affect the ability to meet the projected figures. For instance, the US, a significant competitor for economic power with China, is likely to establish protectionist policies that might limit the trade with the latter. Despite this, China is expected to continue with the growth trend. At the same time, economic integration and trade liberalization are expected to increase (OECD 25). Ultimately, this will lead to an increase in the capacity of goods shipped globally. In turn, an increment in the volume of products shipped will lead to significant growth of the ocean economy. Thus, the expected improvement in economic growth will lead to the positive growth of the maritime sector The maritime industry and the Global economy.
The maritime industry is expected to increase the transportation of several products, owing to changes in the global economy. One of the products is crude oil. During recent years, the US has been ranked as one of the largest importers of crude oil (Jolly 8). However, most companies in the US are focusing on replacing energy from crude oil with renewable energy. Despite this, the importation of crude oil is expected to increase in the emerging economies, such as China and India. In 2015, the projection by OECD indicated thatChina’s importation of crude oil is likely to surpass that of North America by 2030 (OECD 25). The amount of crude oil that will be imported by 2030 is expected to be triple the amount it was introducing in 2011. As Deloitte projects, there will be enough crude production oil to meet the increase in its demand. The Middle East will still be the primary producer of crude oil by 2030 (Deloitte 31). Thus, the overall increase in transit for crude oil will increase income in the maritime industry. The second product is natural gas. The consumption of natural gas is expected to increase in both developed economies such as the US and emerging economies such as China. China is expected to record the highest growth in the consumption of natural gas by 2030, while the US will be the leading consumer (Deloitte 31). The increase in the use of natural gas will also advance to an increament in the volume of transit to the countries that do not produce it. Thus, this will have a usefuleffect on the achievement of the oceanic economy The maritime industry and the Global economy.
An increase in the consumption of coal is also expected to have an impact on the maritime industry. In particular, China and India are projected to have a significant increase in their consumption of coal by 2030. According to OEAD (26), the use of coal by India is likely to double its consumption in 2010. However, coal may not have a significant impact on the maritime industry, given that the countries that are expected to have the most substantial increase in its consumption, such as India and China, also produce it. An increase in the trade for Iron is expected to have a significant positive effect on the oceanic economy. Iron is widely used for making construction materials, utensils, and other items. China has recorded the most considerable increase in the consumption of iron over the last two decades, and its trend is expected to continue. Also, India is expected to have high growth in the use of iron by 2030 (Mangan 14). The major producers of Iron are Australia and Brazil. China’s importation of Iron from Australia is projected to increase. In turn, this will lead to an increase in revenue and profits gained by firms in the maritime industry.
The growth of maritime trade will be expressed in an increase in the number of containers that will be shipped within a given period. As projected by To and Lee (6), the growth will trigger the building of more substantial ships. By 2018, plus 20 000 TEU were the largest carriers (Haralambides). By 2030, it is expected that the number of such ships will increase significantly in response to the increased volume of containers shipped. Also, there are expectations that larger ships may be invented. In addition, economic growth is expected to trigger an increase in the number of specialized vessels that carry products that may not be conveniently be transported in containers (Haralambides). For instance, an increase in the transportation of iron ore will lead to the establishment of more ships specializing in carrying the ore.
How Changes in Global Economy might influence operational Practice in the Ocean-Going Container Vessel Sector
In addition to improving the oceanic economy, the improvement of the global economy will have an influence on the operations conducted by organizations in the maritime industry. In the ocean-going container vessel sector, one of the effects will be a requirement for improved management to facilitate proper utilization of the ports. An increase in the number of containers implies that there might be congestion, especially on the ports that do not have adequate space. To utilize the limited capacity for containers on the ports, the carriers will need to have sufficient coordination with the port management (Haralambides). For instance, the improved coordination may involve asking some of the carriers to delay the departure to allow ample time to create space for their containers.To facilitate coordination, there will be a need for efficient and effective connection and communication among vessels and between them and the ports. The use of the latest channels of communication, such as video conferencing and VSAT technology, among the vessels and between them and the port management is going to increase. By 2019, there were around 14,000 vessels that were using VSAT technology (International Shipping News). By 2026, the number expected increase to at least 37,000 vessels. Thus, the growth of the economy will lead to an improvement in the communication and connections among different players in the maritime industry.
Second, expected growth in the global economy will significantly affect the trade routes that will most companies engaging in shipping cargo will focus on. Most of the companies will increase the number of trips to and from countries with emerging economies, such as China, India, and Brazil. According to Deloitte (32), there are expectations that global trade routes will significantly change, with a focus on the Asian continent. In addition, there is a likelihood of entry of new carriers in the industry, which is likely to be linked to the countries with highly growing economies. Further, as Mishra explains, the increase in the number of vessels will make port authorities active participants in the supply chain, rather than just landlords (Danish Ship Financing and Rain-Making 21). The port authorities will have increased collaboration with the owners of vessels and people onboard. In some cases, for instance, the port authorities will be required to make infrastructural developments to enhance the ability to accommodate the increased number of Ultra Large Container Vessels and containers. The infrastructural developments will mainly involve the expansion and modernization of facilities. The 22,000-TEU, which were at the design stage in 2019, cannot be accommodated by most ports (Haralambides). Such ships need more massive cranes, stronger quays, more extensive docks, and more depth than can be found on most ports The maritime industry and the Global economy.
Further, an increase in the number of large vessels is likely to reduce the cost of carrying containers. The large vessels will always aim to maximize the use of their capacities. A more significant space will enable them to reduce the charges for sending one container (Department for Transport). Another expected impact of economic growth is the improved efficiency of operations of the firms operating in the maritime industry that will be triggered by increased competition. Increased competition will be caused by the establishment of additional players in the maritime sector and the creation of more large vessels. To survive the competition, the companies involved are likely to increase their investments in digital technology and automation. For instance, more companies in the industry will start using logistics software. The digitalization of documentation will also increase, hence reducing the convoluted processes and operations (Brown, Patrick, and Incecik 15). Thus, the changes in the economy will also influence the adoption of new technologies in the ocean-going container vessel sector.
According to a report by the United Nations Conference on Trade and Development(UNCTAD), the growth of the global economy will eventually trigger increased alliances between vessel carriers. The associations will mainly be triggered by the need to enhance the ability to overcome the competition that will emerge in the industry. Also, the firms will do so to hedge against the losses that might be caused by a decline in demand for the services(Meidanis). For instance, a firm with large vessels might need to merge with a carrier with small vessels. When there is less demand, companies will use small vessels.
Overall, the maritime industry is aticipated to experience significant growth in the future. The increase in the global economy will facilitate the trend. The growth in the global economy is expected to be reflected mainly by emerging economies. Among the significant products whose shipping rate is expected to increase are crude oil, natural gas, Iron, and coal. Eventually, the number of containers shipped within specific periods will increase. The changes will ultimately have significant impacts on operations in the ocean-going container vessels sector. As explained in the paper, there will be an increase in the utilization of ports and efficiency in the operations of the carriers. The competition will increase, hence prompting the firms in the sector to adopt the newest technologies to enhance efficiency. Alliances among the carriers are expected to increase. Also, the connections and communications among the carriers and between them and the ports authorities will improve The maritime industry and the Global economy.
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