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Pradeep Rajan, Head – Asia Freight at S&P Global Commodity Insights, predicts that container shipping globally will face challenges due to high interest rates and inflationary pressures in developed economies, leading to recessionary traits.

This will particularly impact the demand for fast-moving consumer goods and white goods, which are primarily shipped in containers.

Additionally, the supply of ships, especially in the dry bulk cargo segment, remains a challenge due to trade flow disruptions caused by the Russian-Ukraine war. Fleet growth is expected to be almost non-existent compared to previous years, with nearly 50,000 ships carrying 90% of global cargo.

The shipping industry is also facing the challenge of decarbonisation, as it aims to cut back carbon emissions to 40% by 2030 and 50% by 2050. While some companies like Maersk have ordered carbon-neutral ships using new fuels like e-methanol and bio-fuels, the production of these fuels needs to ramp up, leading to high investments. Decarbonisation could also result in higher freight costs and a two-tier ship hiring market.

For India, which has a small shipping fleet, the impact will be felt in the form of high freight rates for imported products and the push for exports. To push exports, end-users will need to hire ships that are more compliant towards decarbonisation norms, leading to substantially higher freight rates.

However, this also presents an opportunity for Indian owners to scale up their fleet with more carbon emission norm-compliant ships and get a premium when renting out these ships. India should encourage domestic investments in shipbuilding to scale up capacities, as existing docks in China, Japan, and Korea have been used up to build LNG terminals and container ships, leaving no slots to build tankers or dry bulk cargo vessels.