The shipping industry plays a crucial role in the global economy. The vast majority of goods in our homes and the food we eat have been shipped to the UK. This makes the shipping industry a fundamental part of both the UK and the global economy.
Figures from the International Chamber of Shipping show that international shipping is responsible for approximately 90% of world trade. From the import and export of food, clothing, and everyday products, to foodstuffs, raw materials, and the oil and gas that power our homes, the shipping industry ensures that these goods arrive safely in their intended destination.
Since the global pandemic, shipping has been in demand and the industry has seen unprecedented rises in the cost of shipping containers driven by this demand. But, two years from the start of the pandemic, the cost of container shipping is starting to fall due to a drop in demand.
One of the most noticeable signs that the worldwide shipping industry is in decline is the changes in the Asia-North Europe Trade Lane. The Asia North Europe Trade Lane is one of the busiest in the world and a major global trade route. But, according to the Ningbo Containerized Freight Index (NCFI), demand has dropped off at this internationally-important trade lane.
Carriers now need to adjust their shipping rates and take a targeted approach to increase bookings. This tail-off in demand means that shipping carriers must offer discounts to fill their available export capacity. This recent move is in stark contrast to the unprecedented demand for shipping services that occurred during the pandemic.
Right now, many businesses have a surplus of stock, meaning that they do not need to ship goods in the same amount right now. This, coupled with the reduction in shipping costs, is a sign that the market is levelling off after its boom during the pandemic.
There is no escaping the fact that a decrease in demand for international shipping will impact the UK-based shipping sector.
The UK-based shipping sector significantly contributes to UK GDP, totalling approximately £7.7bn. But what does the future hold for the UK shipping industry? Supply issues and rising costs are two inescapable facts that the industry cannot avoid. The UK shipping industry also faces further pressure due to the challenges of navigating BREXIT.
As an island nation, it is crucial to remember that shipping will always be a vital industry for the UK. While demand may be slower now, once the sector has levelled out, demand for container haulage should remain steady. In addition, the introduction of green initiatives, such as UK Shore, shows that the government is continuing to invest in the future of the UK shipping sector.