Development without democracy is poverty
To quote the great late President of South Africa Nelson Mandela, “To men freedom in their own land is the pinnacle of all their ambitions.” Development has many definitions; sure it does not however include development of roads, flyovers, ports and airports at inflated costs. When the debt servicing expenditure of a nation is greater than its revenue it is not rocket science to comprehend that something is radically wrong in the system.
What is saddening is when some choose to support this model for selfish, partisan gains. Besides, when the leadership of a nation does not understand the difference between accountancy and economics and choose to appoint an accountant to head the banking regulator can that nation attract investor confidence? Square pegs in round holes, courts destruction in organisations.
Development of a nation includes transparency, accountability, human rights and gainful employment to name a few. When a nation permits its authority to construct a new port with only three bore holes and incur a cost overrun of approximately $ 100 million, it is certainly not development. To create productive jobs, developing nations have to attract manufacturing based investments. Manufacturing based investments will propel exports which in turn will benefitports and shipping.
As referred to in ‘The Economist’ on demand economy with ‘workers on tap’ which is freelancing will pose challenges to companies and politicians. In the USA 53 million workers already work as freelancers. Karl Marx divided the world into those who owned the means of production – the idle rich and people who work for them. Now it can be divided between people who have money but no time and people who have time but no money. All these developments will pose challenges to exports in developing nations.
Ships without crew
Cars can, planes can, gantry cranes can, so why can’t ships sail unmanned? Rolls-Royce Blue Ocean thinks that an autonomous (container) ship is the next step in reducing the all important slot cost (and accidents at sea). It proposes to take all crew off the vessel, then to be controlled remotely from shore through a kind of virtual bridge with a 360 degree view and steered, if required at all by a wall-captain through a joy-stick. It is estimated that removing all human related infrastructure (crew quarters, heating, airco, water purification, stores, etc.) would save minimum 5% of deadweight and 15% on fuel.
In addition, savings on crew costs including training, wages and travel. Human error causes most maritime accidents, there is potential to make ocean shipping much safer and again cheaper than it is today, according to the developers, maintaining that the technology is at a level to make this happen. Would it? DNV-GL currently is testing a 3-metre model of a 1,300 dwt, 61 metres length over all, 14.5 metre beam, 100 TEU, battery powered autonomous short-sea box-ship to be. Here too, tackling the safety record is a major goal.
Despite oil drop manufacturing fails to increase
The decline in oil prices has so far failed to lift manufacturing activity in key Asian economies, according to the latest analysis from HSBC. Brent crude oil prices have now reached a five year low of below $ 50 per barrel, down from $ 115 per barrel in June, due to weak demand and over supply, in part due to the surge in shale gas production in the US, where energy prices have fallen even further than in global markets. But while the drop in input prices would normally be expected to jolt manufacturing in life as input prices contract, the latest Purchasing Manager Index data from HSBC suggests this is not the case.
Although there are a few bright spots such as India, Japan and Vietnam which all recorded headline PMIs in the 52-54 range in December – readings of more than 50 indicate expansion – as well as gains on November figures, on the whole, the sector is still losing momentum. New export order levels are also slipping with Taiwan down to 49.8 in December from 51.4 in November and Korea also below the 50 market at 49.2 last month.
“HSBC’s China PMI (in December) dipped back below the waterline and new orders contracted over the past month,” said Frederic Neumann, HSBC Co-head of Asian Economics Research in a note. That takes a bite out of regional demand. Worryingly, Indonesia continues to slide, possibly reflecting the squeeze in the commodity sector that is weighing on the economy more broadly. Korea and Taiwan, Asia’s industrial bellwethers, are barely holding their ground, the first ticking up a bit, the second down.
He continued: A sharp deceleration of export order growth in Japan, Indonesia, Vietnam and Taiwan and continued contraction in Korea, suggest that the outlook for trade remains subdued. Meanwhile job growth in Asia, except in Japan is still anaemic. Few manufacturers appear to believe that a strong rebound is around the corner.
19,244 TEU vessels still the biggest
On the very same day that, on her maiden trip, the 19,100 TEU ‘CSCL Globe’ made her first stop in Europe at Felixstowe, she lost her crown as the world’s biggest box vessel to the slightly shorter, but still 19,244 TEU ‘MSC Oscar’. This leviathan was then delivered by Daewoo Ship building and Marine Engineering (DMSE)’s Okpo facility at Busan. After a bunker call at Vostochny, she will join 2M’s AES/Albatross service on 25 January, alongside five of Maersk Line’s somewhat smaller (18,300 TEU) Tripple-E ships.
Adding to its 15 unit strong order book of around 19,000 TEU ships (of which one just delivered), all chartered vie non-operating owners, MSC has signed for another three 19,200 TEU vessels between IdanOfer’s Quantum Pacific Group and New York Listed Scorpio. They will be built by Samsung Heavy Industries and chartered to the Swiss carrier (MSC) for a period of 15 years.
Carriers under pressure
CMA CGM has secured a syndicated loan of $ 880 million. It will in part be used to refinance its $ 5.07 billion debt, of which 698.5 million will expire in 2015. If it would help our colleague carriers, we would be pleased to abstain from part of our margins, Maersk Line’s CEO said to the Financial Times. However, saving costs is a lifestyle, not a diet, he added, emphasising to be worried about the lack of discipline of other operators, such as those in the hand of deep pocketed owners, spoiling rates and worsening overcapacity.
MSC is feeling the pressure, (apparently, from imminent 2M partner Maersk Line) by making it into the top most reliable carriers in terms of October schedule integrity, according to a SeaIntel assessment. So far, the Swiss (MSC), with their very own scheduling interpretation, usually ended in the lower regions although a gradual improvement could be noticed over the last few months. Prior to the 2M launch, the two partners would have agreed to a mutually acceptable reliability level.
Meanwhile, Bank of America Merrill Lynch does not foresee the container shipping market improving in any meaningful way until the continually expanding capacity of containerships comes to a stop. This still may not be any time soon: with the 19,000 TEU CSCL Globe now on the water, the 20,000 TEU barrier is approaching and if reports are to be believed, vessels larger than this are on a number of drawing boards. It is not the liner majors who are necessarily to blame here either. Those smaller operators participating within the apparent safety of alliances and then relying upon their partners to fill their ships are making a difficult situation worse.
(The writer a Maritime Economist is a Chartered Fellow (Logistics Transport), Chartered Shipbroker (UK), Chartered Marketer (UK) and a University of Oxford Business Alumni. He is also a Fellow of NORAD/JICA and Harvard Business School (EEP).)