Shipping plays a major role in the world’s industries, facilitating the transport of large volumes of raw and processed materials. Clarksons Research takes a look.
However, the maritime sector forms a much more important part of the global supply chain for some commodities and industries than others. Comparing world seaborne trade in a range of cargoes to global production helps to make this abundantly clear.
Looking at a range of cargo types (see graph), less than 50% of global production of each was shipped by sea in 2015, with a significant share of output consumed domestically.
However, seaborne transport still accounts for a sizeable proportion of many of these cargoes, and a wide range of factors influence the level of dependence on shipping of each.
One obvious driver is the location of production and consumption. Crude oil is the commodity most reliant on shipping, with some 46% of crude output last year exported by sea, with oil output concentrated in a relatively small number of countries.
Similarly, around 41% of global iron ore production was shipped last year, with limited domestic demand in key producers Australia and Brazil. Absolute and relative regional productivity also has an influence.
Just 15% of coal output was shipped in 2015, with half of the 6.5bt of coal produced globally last year output in China, nearly all of which was consumed domestically. Still, China was the second largest coal importer in 2015, with regional coal price arbitrages driving trade.
Another key factor is the availability and efficiency of other transport modes. Twice as much natural gas is exported via pipeline than in a liquefied state by sea, with just 9% of natural gas output in 2015 shipped as LNG.
Meanwhile, the level of processing of materials also has an impact. Oil and steel products are less reliant on shipping than crude oil and iron ore, with refineries and steel mills often built to service domestic demand.
However, the growth of ‘refining hubs’ has raised the share of refinery throughput shipped by almost 10 percentage points since 2000. This kind of trend is an important driver of shipping demand. The share of output of the featured commodities shipped rose from an estimated 22% in 2000 to 26% in 2015, generating c.720mt of extra trade.
This equates to an additional 1% p.a. of trade growth, boosting trade expansion to a CAGR of 3.7% in 2000-15. Trade in some cargoes is more sensitive to shifts in the share of output shipped than others, but across the featured cargoes, a further change of 0.5% in the share of output shipped could create another 130mt of trade, 2% of current seaborne volumes.
So, while trade in even the cargo most reliant on shipping accounts for less than half of global output, the world economy today is still dependent on the seaborne transport of 11bt of all cargo types.
Overall growth in production and the distance to consumers are also clearly important demand drivers for shipping, but for the world’s industries there’s no denying the main part that shipping still plays in the supply of raw materials.