Global economic recession affects shipping industry

H.D.H SENEWIRATNE

The next few years would be decisive for the entire shipping industry, as all shipping lines would face a financial down turn due to the oversupply of vessels and high bunker costs and the recession in the Euro zone and USA. This would pressure margins in most shipping segments in the country, Chairman , Ceylon Association of Ships’ Agents (CASA), Ralph Anandappa said.

“The outlook for the next 12 to 18 months for the shipping industry would be negative. Some of the agencies expect the aggregate earnings before interest, tax, depreciation and amortization of the global shipping industry to decline by 5-10% in 2012, “Anandappa said. He said that the economic recession in Euro zone and USA, over supply of vessels and high bunkering costs put shipping lines in to difficult situations. Therefore, Sri Lanka should find ways and means to improve trade between regions, especially in India and China, who are emerging markets in the world, to minimize its snowball effect, Anandappa said.

He said that with the adding capacity with the construction of new ports and terminals, the Sri Lanka Ports Authority should take very progressive steps reflecting and renewing terminal equipment, improving infrastructure and introducing IT enabled solutions in the port to make it more efficient. Anandappa said that Sri Lanka, therefore, was in a very strong position to capitalize on our comparative advantage to world class ports and terminal services, offering shipping lines with steps taken to introduce an electronic environment for data interchange by Sri Lanka Customs and the SLPA.

Since trade and shipping work was hand in glow, what Sri Lanka should do was to develop strong trader relationships with emerging markets, including India, Pakistan and other Asian countries, he said. Anandaappa said research studies had revealed that Sri Lanka’s trade index would perform increasingly better than the world’s average over the next 15 years.

“Over the next 5 years, trade with developing countries is expected to increase offsetting the fall in demand from developed trading partners, especially in the Euro zone and USA,” he said.

With the focus shifting to Asia to fuel the growth of global trade, it is quite clear that Sri Lanka would continue to expand its role as a regional shipping centre, while strengthening her role as a valued trading partner, he said.