News

10 Jul 2008

Two senior shipping executives agree that the slowdown of the United States (US) economy has had both positive and negative effects on the industry, locally and regionally. Corah Ann Robertson-Sylvester, chief executive officer of Seaboard Jamaica and David Ross, vice president of Seafreight Lines, said that countries that depend on US trade have already started to experience the effects of the slowdown. Robertson-Sylvester and Ross were speaking during a Shipping Association of Jamaica sponsored (SAJ) Lunch and Learn seminar at the Pelican in Montego Bay on June 26. The Lunch and Learn seminars are held monthly by the SAJ to inform its members about developments in the shipping industry and world trade.
Vessel availability
"One immediate effect is that of vessel availability and 'space chasing'. Because of increased exports from the US and decreased imports, there has been a shortage of containers which has led to what has become known as the 'space chase'," Robertson-Sylvester said.
"This has had negative effects, not only on prices, but shipping times as well, not to mention diversion of trade from US ports to other ports," she continued.
According to Ross, the buying power of the Caribbean basin is directly impacted by the slowdown in the US economy, but notes that it extends beyond direct shipping. "Without tourist purchases, the hotels, restaurants, taxis, and tour companies are all impacted, the result is pressure building in the marketplace. Recent food riots in Haiti highlight the dilemma," Ross said. He pointed out that islands that cater to European tourists may not see as much of a slowdown as those that cater primarily to North American tourists.
While countries such as Jamaica may feel the effect of the slowdown more, Ross said that Panama and oil-producing countries such as Venezuela and Trinidad will be immune to the effects of the slowdown. "Panama is booming due to the re-emergence of the free zone due to heavy Chinese investment," Ross pointed out. "Trinidad and Venezuela as oil producing nations, in fact, are seeing higher levels of disposable income."
Expansion of canal
Robertson-Sylvester concurred with Ross and referred to 'the expansion of the Panama Canal coupled with predictions of continuous steady growth in world trade despite recessionary signs in the US'.
"Panama Canal officials anticipate that shipping container volumes will grow by approximately one-fifth, despite the slowing economy in the US as Chinese trade surges," said Robertson-Sylvester.
However, it is not all gloom and doom for the industry as the Seaboard Jamaica CEO pointed out that external factors such as the insatiable demand from China and India for raw materials, particularly steel, will continue to drive the boom in global trade and cushion the effect of the US slowdown. Additionally, "consumer spending capacity in the European and emerging markets will see alternative markets being more readily available to absorb the effects of downturns in the US economy", Robertson-Sylvester said.
Both Robertson-Sylvester and Ross noted that shipping firms can benefit from the weakened US dollar. "Despite fewer imports into the US, shipping firms have benefited from the boost in exports," Robertson-Sylvester said.
"The short-term effect of the low US dollar is in fact a boom to US exports and a boom to shipping companies handling the export cargo," Ross said. "Most of this benefit in the increase in export is not impacting the bottom line of these companies however as the price of bunker fuel and vessels continue to rise."