INTRODUCTION

Connectivity is a key enabler of global trade, and shipping and maritime logistics are among its most important drivers. More than 80 percent of global trade volume is carried by ship, which means that disruption and higher costs have a direct impact on national economies and living standards, driving inflation, disrupting supply chains, and ultimately leading to shortages.

However, connectivity has been frayed in recent years by a range of global issues. The COVID-19 pandemic closed ports, caused endemic congestion, and shifted demand patterns significantly, forcing shipping companies to prioritise major ports and key trade routes, and often side-lining other markets. The disruption sharply exacerbated existing trends of

Executive Summary

The shipping sector faces significant external pressure following a period of instability and volatility in shipping rates and service levels. Rising demurrage and detention charges and port call cancellations are adding to the costs and challenges of providing an e cient service.

In response to these pressures, many shipping companies are looking to focus on their most profitable routes. The consolidation that has occurred in the industry over recent decades is exacerbating this trend, with the shipping giants prioritising the main trade channels and the comparatively few ports capable of receiving the largest vessels. As a result, customers using smaller ports are faced with the option of either paying above-market rates for freight or seeing shipping services curtailed.

For import-dependent nations, access to shipping routes is essential for economic growth. High shipping costs have a disproportionate impact on these markets. Resolving this imbalance ultimately requires international support for the development of resilient and sustainable maritime transport supply chains. However, there are immediate opportunities to resolve and address the connectivity needs of these other markets through the provision of targeted services.

Areas of focus identified in this whitepaper include: consolidation in the maritime sector, which has seen a divide develop between the top carriers and largest ports, and the other players in the market.

• Acknowledging structural issues: The ongoing consolidation of the shipping sector, combined with the increasing fragility of smaller providers due to market volatility, increases the potential for impacted connectivity. Increasing the number of routes, connections and services should be a priority for global trade.

Post-COVID, the industry shows no sign of regaining balance. Technical factors (such as the development of larger and larger carriers, limited investment in port infrastructure, and new regulatory requirements – as well as geopolitical challenges such as conflict and potential recession are combining to push smaller players further to the margins, degrading connectivity in the process.

What can the maritime industry do to close the gap and ensure that no-one is left behind? What solutions are available to help create a more connected world?

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Environmental responsibilities: The shipping sector is facing a new range of environmental regulations that will reduce emissions but increase costs, at least in the short- to medium-term. This again intensifies pressure for smaller operators.

A new model for shipping services: The pressures outlined in this report create opposing and at times contradictory challenges for the shipping sector. On the one hand, customers require the agility and local focus o ered by the niche providers, while also seeking the economies of scale, innovation-led and environmentally aware approaches of the shipping giants.

The whitepaper was initiated in parallel with the major expansion of AD Ports Group’s maritime services arm, SAFEEN Group, which was supported by a series of strategic acquisitions designed to increase the company’s reach and portfolio services. Part of the research aim was to assess potential market demand for the expanded group.

About Our Research

During the second half of 2022, we conducted telephone and video call interviews with a range of senior executives from shipping, port, and maritime services companies regarding current challenges in the sector, perceived gaps in service levels and views on the future direction of the industry.

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Boosting transshipment and feeder services: Transshipment and feeder services are increasingly important as a tool to foster connectivity and ensuring the free flow of products to developing markets.

• Digital disruption and opportunity: The rise of e-commerce has created new pressures for the shipping sector, through increased demand and shorter timelines. Deploying digital technology such as AI and machine learning will be critical if shipping companies are to adapt and build resilience.

The team cross-compared their commentary against industry sources, validating quotes and figures, in addition to integrating recent material from several international bodies, including the United Nations Conference on Trade and Development (UNCTAD) and the International Maritime Organisation (IMO).