China crisis

Malcolm Latarche
Malcolm Latarche
ShipInsight

14 October 2016


This year is certainly shaping up to be one in which many chickens are coming home to roost but it is surprising that after almost a year since the editorial comment in the Winter edition of ShipInsight, other than the UK having voted to leave the EU, very little seems to have changed. Once again we are in the run-up to an important IMO meeting and once more we have lobby groups pushing for shipping to have its own CO2 reduction targets despite the fact that these already exist in the form of the EEDI regulations. Under those rules, each successive generation of newbuildings will need to produce less CO2 per tonne/mile that the previous. The influence of China’s economy is also still a major issue. Having seen of Hanjin, the lack of profitability in the trading environment is beginning to affect other lines with some experts saying that asset values of ships need to be written down massively. Today also saw some new figures on Chinese trade with the Wall Street Journal reporting official Chinese sources saying that September’s 10% year-over-year drop marks the sixth consecutive monthly decline and follows a 2.8% fall in August. The drop was also markedly worse than a median forecast of a 3.2% decline from 16 economists polled by The Wall Street Journal. Imports fell 1.9% in September from a year earlier, reversing a 1.5% increase in August. The import data was also weaker than expected. The falloff in imports and exports resulted in China’s trade surplus narrowing to a less-than-anticipated $41.99 billion in September from $52.05 billion in August. China’s overseas shipments, once an important generator of growth, have declined in 14 of the past 15 months, a drag on the broader economy, economists said. Some said they expected Beijing to further depreciate the yuan in coming months to make exports more affordable. Some of those quoted in the WSJ report echoed the often heard refrain that people in the US and the EU aren’t buying as much as they used to. The figures quoted are trade values and may or may not reflect actual quantities which are more important to ships, but the over reliance on China is becoming ever more evident as a major cause of problems for shipping. The other is the fact that decisions taken at the IMO are increasingly political and driven by a vociferous lobby that appears to ignore the fact that living standards everywhere are falling due to the ever increasing burden of unnecessary and ill thought through regulation.