The state of the world economy

Major international economic organizations such as OECD or IMF have predicted a decline in growth of the global economy in 2019. According to them, economy has already reached its peak and will decelerate in 2019. OECD forecasts growth of 3.3% and 3.4% in 2019 and 2020 , compared to 3.6% in 2018. The following table gives OECD’s projections in different regions of the world.

OEDC economic perspectives and forecast, March 2019

Deflated Gross  Interior Product, growth in %


Régions 2018 2019 2020
world 3,6 3,3 3,4
G20 3,8 3,5 3,7
Canada 1,8 1,5 2,0
United-States 2,9 2,6 2,2
Japan ,7 ,8 ,7
United-Kingdom 1,4 ,8 ,7
Zone euro 1,8 1,0 1,2
Germany 1,4 ,7 1,1
France 1,5 1,3 1,3
China 6,6 6,2 6,0
India 7,0 7,2 7,3

Source : March 6 2019, OEDC

Forecasts show that most countries economies will slow down, except for some specific areas. China and India will show growth of 6.2% and 7.2% respectively, but the situation has deteriorated in several other developing countries. Euro area will be particularly affected with 1.0% and 1.2% growth in 2019 and 2020, whereas the United States will show an increase of 2.6% and 2.2% for those same years. Less expansionary (interest rate hikes) and more restrictive fiscal and monetary policies have begun to have an effect on those countries. In addition, Brexit uncertainty will continue to impact the UK economy. Germany’s automotive industry, which supports a large part of its economy, has reduced production and will also have a major impact.

The state of international trade

As for GDP, International merchandise trade in OECD and BRIICS economies has also diminished in the second quarter of 2018, after eight consecutive quarters of growth. The following graph illustrates this situation.

Annual evolution of exports from OECD countries and BRIICS

US $ (billions)


Areas 2015 ‘2016 2017 2018 % (2018/2017)
OECD 9 493,79 9 389,80 10 306,97 11 156,76 8%
United States 1 503,10 1 451,02 1 546,27 1 664,09 8%
BRIICS 3 330,93 3 095,29 3 404,56 3 800,12 12%
China 2 297,24 2 141,78 2 275,92 2 515,70 11%

Source : banque de données OCDE

United States and China (to a lesser extent), the largest trading partners, have witnessed  downward trends from last quarter of 2018. China importance has become so important in the global economy that an even small weakening would lead to a diminution of trade growth around the world.

According to IMF, general deterioration of international merchandise trade is also due to depreciation of a number of currencies against the US dollar in the second quarter of 2018.

State of maritime sector

Seaborne trade stems from global growth and the level of international trade. The latest UNCTAD report (2018) indicates that global volume of seaborne shipping reached 10.7 billion tons worldwide in 2017, a 4% increase over 2016. This is a better year than the previous five years. All segments were up, including containers, with 6.4%, dry bulk with 5.1%, crude oil with 2.4%, and refined petroleum and natural gas with 3, 9%. 2017 was therefore a turning point toward a more normal situation. These are encouraging signs for many international carriers who have, since last recession of 2008, struggled with major structural problems. The first estimates of 2018 follow the same trend as 2017 due to several factors converging favorably.

However, as indicated by data above, maritime shipping could also decline the same way as international trade in 2019. OECD estimates that annual growth of container traffic in ports, which accounts for about 80% of international merchandise trade, fell below 3%, while it stood at nearly 6% in 2017.

The UNCTAD estimates tonnage growth at 4% for the year 2018 and forecasts an average annual growth of 3.8% until 2023. The container segment shows largest increase, i.e. 6.4% for 2018, followed by dry bulk with 5.2%, refined petroleum with 2.8% and natural gas and crude oil with 1.8%. These forecasts are shown in the table below. However, they do not take into account a possible slowdown in 2019, as indicated by OECD. The forecasts could therefore be much lower, especially in container segment.

Volume growth rate and forecast of sea transport

  2017 2018               (estimates) 2018-2023 (projections)
All types 4 % 4,0 3,8
Containers 6,4 6,4 6,0
Dry Bulk 5,1 5,2 4,9
Crude Oil 2,4 1,8 1,7
Refined Petroleum and natural gas 3,9 2,8 2,6

Source : table 1,11, Review of maritime transport, 2018, page 16

The marine transportation sector could remain out of step with world GDP in 2019. Maintaining overcapacity, lack of necessary adjustments in supply and demand is preventing taking full advantage of growth worldwide. Considerable efforts have been made to limit excess capacity in the industry, including accelerating ship demolition. Better balance of supply and demand should allow freight rates to stay high enough and above breakeven point. Actually, freight rates are still remaining relatively low, contributing to corporate debt and maintaining tight or negative margins in many cases. While several other industries have returned to profitability shortly after the last recession of 2008, shipping industry is still struggling after more than 11 years to restructure.

The following table gives an overview of the total world fleet’s deadweight capacity for different types of vessels between 2014 and 2018. The average annual growth rate of the entire fleet was 3.3%, which roughly corresponds to prediction of volume demand for the next few years. Growth is similar between 2017 and 2018.

Evolution of merchant fleet capacity in the world according to types of ships

(thousands of tons)


  2014 2015 2016 2017 2018


Average growth rate



Growth rate


All fleet 1 688 886 1 747 417 1 805 543 1 862 241 1 924 002 3,3 % 3,3%
Oil tankers 481 579 490 847 506 132 535 864 561 079 3,9 % 4,7%
Bulk carriers 730 296 762 322 779 565 795 839 818 613 2,9 % 2,9%
Container ships 216 199 228 230 244 436 245 762 252 825 4,0 2,9%
General 74 989 74 538 75 121 74 961 74 459 0 % -0,7%
Other 185 825 191 480 200 288 209 815 217 028 4,0 % 3,4%

Source : UNCTAD data base


This table indicates that by the end of 2018 supply capacity would tend to meet demand forecasts, which is an improvement. However, there are important differences between vessels types. Tanker capacity has increased more rapidly last year with 4,7 % growth compared to 3.9% for the past few years. The table shows also supply consolidation efforts when comparing last year’s growth of 2.9% to average year’s growth of 4% of all precedent years.

Marine Outlook for 2019

Maritime indexes are volatile. Baltic Dry Index started 2019 in freefall. Reasons are diverse, but slowdown in the economy and uncertainty in the markets would be the main causes. Note that these indexes have two particularities: on the one hand, they are used as precursors to predict the world’s major trends of the economy because they indicate state of demand for international maritime trade; on the other hand, they are also extremely volatile, so that short-term analyses make it more difficult to make prediction.

Drastic fall of Baltic Dry is worrisome because it happened just before recession 2008. Cyclical evolution of the economy indicates a recession almost every 8 years. Nobody can predict when next one will come, but shipping industry has to finish its restructuring before it happens, making sure that financial indicators are good enough to face possible slowdowns. However, the level of Baltic Index observed since the beginning of the year is not comparable with that observed just before the recession 2008.

The following graphs demonstrate this and show evolution of Baltic Dry and Harpex Indexes (containers) since the last recession. These have fluctuated widely in recent years but have never reached 2008 levels. Baltic was at 11,400 points on April 1, 2008, while it stood at 1,741 points in July 2,018. to 647.27 points on February 27, 2,019. Harpex index does not indicate better perspectives.  After 2008, it fell strongly in 2015 and has never reached the average last ten years. This suggests that restructuring efforts are still needed.

              Source : Data base,


Component of Baltic Dry Index BDI

Indexes Types of ships Capacity tons % of world fleet % of dry bulk Weight in the BDI
BCI Capsize 100 000 + 10 % 62 % 25
BPI Panamax 60 000-80 000 19 % 20 % 25
BSI Supramax 45 000-59 000 37 % 18 % 25
BHSI Handysize 15 000-35 000 34 % 25

Source : Baltic Dry Index, Wikipedia




An industry in transition

For various raisons, 2018 was a difficult year for shipowners.  From end of May 2017 to end of May 2018, the price of brent barrel rose from US $ 55 to US $ 77, a situation that would have drastically increased bunkering costs, thus jeopardizing the present or future profitability of carriers. Fluctuation in fuel prices is having an increasingly significant effect on the profitability of industry due to international geopolitics. The industry will also have to deal with the “Sulfur Cap 2020”, a standard adopted by the International Maritime Organization (IMO) in 2016, which stated that, by January, 1st 2020, sulfur oxide emission limits of 0,5 % will be imposed on ocean vessels while at 3.5% today.

This initiates a major transition. Technological alternatives are numerous but involve significant costs that have to be assumed by shipowners. This is a direct application of the ‘user pays” principle, where maritime transport accounts for 14% of global sulfur oxide releases. Heavy fuel oil mostly used in maritime transport contains up to 10,000 times more sulfur oxide than the automobile industry. Sulfur generates sulfuric acid witch in contact with water is primarily responsible for acid rain.

LNG (Liquefied Natural Gas), less polluting and more economical is a source of propulsion increasingly used in the industry. This energy source has become the common standard according to recent developments. As an example, in November 2017, CMA CGM ordered construction of nine giant LNG-powered container ships.

This transition towards new sources of energy should also have an impact on less volatile prices being subject to less political imperatives. and be beneficial to the industry by stabilizing the cost of energy. fuel.

Louis Bellemare

New Maritime World

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