» EUROPEAN SHIPPING IN A GLOBAL MARKET ECONOMIC AND TRADE DEVELOPMENTS STAGNATION DOMINATES The expected slowdown in the growth of world economic activity proved even stronger than projected by most observers at the beginning of 2001. Global output increased only marginally and world trade even showed a 1 % decrease, in sharp contrast to the records of the preceding year (+11 %). The OECD quarterly year-to-year changes emphasise the severity of the downturn with stagnation of investment expenditure in the OECD countries and almost simultaneous slowdown in the three major economies from the third quarter of 2000 onwards. Notwithstanding the average stagnation of the global economy in 2001, some regions and countries reported a healthy trade and output expansion. Transition economies showed increases in regional trade and China maintained its steady rise of economic expansion and external trade, despite the weakness of its principal export markets. Global GDP expanded by slightly more than 1% in 2001, with the same figure for the OECD member countries. This follows a near 4% rise in 2000. WORLD SHIPPING DEVELOPMENTS Overall seaborne trade remained stagnant in 2001 at 5435 million tonnes after a 5.1% growth in 2000. In tonne-miles the recorded 22,682 million even represent a decrease by 1.2%. The year 2001 and beginning 2002 were disappointing for shipping with freight rates and charter rates generally coming down to depressed levels. Shipments of crude oil decreased by 5.5% in tonne-miles to 7725 billion. Dry bulk shipments were stable with the five main dry commodities showing a growth in tonne-miles to 6697 million. The increased coal carryings from 523 to 560 mt and strong high-grade iron ore imports by China stood out and offered some compensation. Also the container market, with some 72 million TEU transported, did not escape the rates slump, due to a mismatch of high deliveries of (large) new buildings and a general slow-down in demand growth. 2001 data show that net tanker tonnage decreased by 0.2%, the dry bulk fleet increased by 4.7%. The order book for bulk carriers for 2002 deliveries stands 21% lower than for 2001. The LNG carrier fleet increased by 0.9% to 131 vessels, with 56 vessels for delivery in 2002. The world container vessel fleet capacity increased from 4.81 to 5.40 million TEU, scheduled deliveries for all sizes in 2002 and in 2003 amount to 13% and 10.3% respectively of the existing fleet. OUTLOOK - UNCERTAINTY PREVAILS Early indications in 2002 showed amelioration in business confidence and pointed to an improvement that should lead to a gradual recovery of investment and consumption in the course of the year. However, more recent developments, including disappointing corporate results, the problems on financial reporting practices in the US and the pressure on the US $, do not stimulate the business climate, or consumer confidence. The expectation of a small 1% average global growth in GDP at the same level of 2001 with further improvement only during 2003 would seem justified. In the bulk shipping market transport of crude oil and iron ore are expected to remain flat in 2002 with modest increases in 2003. Grain shipments are more difficult to predict, but are estimated to show up to 4% increases in 2002 and 2003. Overall demand for dry bulk is estimated to show increases in tonne-miles of 2% in 2002 and 3% in 2003. Containerised transport is showing a continuing growth in volume. Throughput in North European ports alone is predicted to have expanded some 60% by 2010. The outlook on rate levels is, taking into account the developments during the last year, not very encouraging. EU/EEA SHIPPING INCREASED STRENGTH The EEA registered trading fleet (EU plus Norway and Iceland) as at 1 April 2001 amounted to some 6975 vessels with a total of 95mgt, a tonnage increase of 3.25% over the previous year. This represents some 17.4% of the world fleet. The overall importance of European shipping is, however, better reflected by the EEA shipowners’ controlled fleet under both EEA and third country flags representing 41% of the world fleet in gt, i.e. an 1% increase compared to the previous year. The European flag fleet is well represented in the full range of different vessel types, notably in container vessels representing 23% of the world fleet and of ro-ro passenger and ro-ro cargo vessels respectively 56% and 41%. The ongoing renewal of the European fleet is reflected in the average age of the total fleet, which on 1 April 2002 stood at 11,9 years as compared with 12,3 years in 2001 and 13,5 years for the world average. More than 190.000 seafarers are currently employed on EEA flag vessels, some 70% of EU nationality. In addition, many thousands of EEA seafarers are employed on vessels operated by EEA shipowners under third country flags. Employment in the wider maritime sector, including shipowners’ offices, agencies, shipyards, equipment manufacturers, ports and terminals etc, is estimated to be substantially more than 2 million people. The importance of shipping to the EU is evident, considering that 90 % of the external trade in volume and over 42 % in tonne-miles of the trade between Member States is carried by sea. In addition, European shipping plays a key role in cross trades. The shipping sector contributes greatly to the national product of individual Member States and enhances the strategic position of the EU internationally. The necessity for a structural competitive environment for EU shipping is more valid than ever. The large majority of Member States have now applied structural measures to create a level playing field for their national shipping industries versus global competition. Tonnage tax systems exist in Denmark, Germany, Greece, the Netherlands, Norway, Spain, and the UK. Belgium and Ireland have recently notified such a system with the Commission services. Finland, Italy, Sweden, France, Portugal and Luxembourg apply a very important part of the measures allowed by the 1997 Guidelines and are involved in discussions to enhance them. The first result of the application of the measures, rather recent in most of the countries, is positive. The decline of the sector as experienced in the last decennia has been halted and a gradual increase can be noted. It is therefore essential that a durable regime i.e. a confirmation of the 1997 Guidelines for a longer period, is decided upon soonest.