BIMCO has announced that the Chinese slowdown, and its impact on the shipping industry, is just a sign of what is to come in the future.
According to the National Bureau of Statistics in China, the economy grew by seven percent year-on-year; the weakest overall growth in six years.
BIMCO states that the headline data confirms the economic outlook for China, which will continue to slow as it is going through a transition from being reliant on exports, manufacturing and construction to one that runs on domestic consumer demand.
Chief Shipping Analyst at BIMCO, Peter Sand, says: “The transition of the Chinese economy is affecting the shipping industry a lot. During the past decades of strong economic development, Chinese foreign trade have been growing tremendously. Dry bulk in particular has benefitted and crude oil tankers too on the imports side. While container shipping on intra-Asian routes and westbound trades has benefitted from massive exports of manufactured goods.
“What we have seen in shipping in recent years and is going to experience more in future is the knock- on effect from China becoming a relatively more closed economy, driven forward by domestic demand rather the foreign demand like i.e. the US. In short this translates into a lower level of shipping demand going forward than what we got accustomed to during the past decades”
“BIMCO often mentions that the future holds a “New Normal” of shipping demand, one where slightly less trade in generated from global economic growth – as compared to previously, as the composition of the global GDP is changing. What we see from China today is evidence on just that.”
The IMF (International Monetary Fund) has kept is forecast for global growth unchanged from its January estimate at 3.5 percent for 2015, while upward adjusting the 2014 estimate to 3.4 percent (3.3 percent).
BIMCO says that the “New Normal” is also evident from the GDP growth rates in recent years, where advanced economies in particular have suffered from low growth in the aftermath of the financial and economic crisis that broke out in 2008.
For 2015 the advanced economies is staging a comeback, as IMF forecast 2.4 percent in 2015 against 1.8 percent in 2014, whereas the emerging markets and developing economies are set to grow by 4.3 percent against 4.6 percent last year.
“There are no major surprises in IMF’s forecast. Uneven growth and a lower future potential output level is all known stuff. Amongst the minor surprises the US is downward revised on the back of a higher valued dollar and lower oil production than previously expected.”
“India is also worth mentioning amongst the minor surprises as IMF projects 7.5 percent growth in both 2015 and 2016. This means India surpass China’s expected growth of 6.8 percent and 6.3 percent for the same years. However, as the Chinese economy is five times bigger than India, the shipping industry remains most reliant on the developments in China”, adds Sand.