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Global Economic & Trade Outlook: Economic Cycles and Maritime Shipping

Global Economic & Trade Outlook: Economic Cycles and Maritime Shipping. Jean-Paul Rodrigue Associate Professor, Dept. of Global Studies & Geography, Hofstra University, New York, USA. The Crisis is over … if you Believe in the Following…. That the crisis was a random blip (“ hoocoodanode ”?)

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Global Economic & Trade Outlook: Economic Cycles and Maritime Shipping

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  1. Global Economic & Trade Outlook:Economic Cycles and Maritime Shipping Jean-Paul Rodrigue Associate Professor, Dept. of Global Studies & Geography, Hofstra University, New York, USA

  2. The Crisis is over … if you Believe in the Following… • That the crisis was a random blip (“hoocoodanode”?) • That debt is wealth (we are now VERY wealthy) • That deficits do not matter (no risk of confiscation) • That economists understand economics (no comment…) • That central banks and governments know what they are doing (blowing bubbles…) • That no significant commercial and sovereign default are in the pipeline (no more moral hazard) • That the excess capacity in shipping has been cleared (there is huge latent demand…)

  3. The First Crisis of Globalization: Reaping the Consequences of Misallocations CAUSES Monetary system (fractional reserve banking, fiat currencies) Credit Storm Transactions and investments. Difficulty of clearing international trade transactions. Undue drop in freight volumes. SYMPTOMS Debt, asset inflation Macroeconomic Storm CONSEQUENCES Misallocations (bubbles) Decline in aggregate demand. Clearing excess capacity. Production Consumption Distribution

  4. Business Cycles: The Trend that Time Forgot Credit-Driven Boom Higher prices in spite of a low demand! Peak Credit-Driven Bust Trough Depression Expansion Recession Expansion

  5. Blowing Bubbles and Compounding Distortions: From Technology to Commodities Commodities / Trade Bubble Tech / Stock Bubble Housing Bubble

  6. Globalization 2000-2008: A Bubble?

  7. Changes in the Value World’s Merchandise Trade, Production and GDP, 1950-2009 (in %)

  8. A Paradigm Shift in Neomercantilism?

  9. A Paradigm Shift in the World’s Largest Trade Relation?

  10. Keeping Doing the Same Thing? Baltic Dry Index, Monthly Value, 2000-2010 -92%

  11. Paradigm Shift or “V” Shaped Recession?

  12. Monthly Container Traffic at the Port of Los Angeles, 1995-2010

  13. Factors behind the Interest of Equity Firms in Transport Terminals

  14. Port and Maritime Industry Finance: Who is Leveraging Whom? Investors Financial Markets Brokers Corporations Money Markets Commercial Banks Shipping Companies Private Investors Capital Markets Mortgage Banks Port Operators Investments Managers Equity Markets Merchant Banks • Insurance Companies • Pension Funds • Banks • Trust Funds • Finance Houses Private Placement Finance Houses Earnings Leasing Companies

  15. Reviewing Assumptions: The Impacts of “Financialization” Segments of the maritime and terminal operation industries have been subjugated by very smart people lacking wisdom. The financial sector has recently provided ample evidence about the amount of damage very smart people can do when hubris, obfuscation and fraud replace common sense and realistic perspectives.

  16. Dumb Money at Work? EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization

  17. The Double Squeeze on Ports and Maritime Shipping Maritime Shipping “Cruel” Overcapacity New terminals coming online New ships coming online (+ cancellations) • Contestability for gateways • Contestability for hubs Rebalancing Supply Demand Port Operations Lower profitability Less pressures on terminal resources Less financial appeal

  18. World Container Traffic and Throughput, 1980-2008. Reaching Peak Growth?

  19. Fallacies of Forecasting: 2020 Throughput Forecast, Selected Large Ports, Linear and CAG Scenario From under estimating to over estimating trends Linearity prevalent in growth trends (1998-2007) • Compound annual growth common in forecasts • Non-contestability assumption

  20. Terminal Operators; Well Positioned or Overextended?

  21. Liner Shipping Connectivity Index and Container Port Throughput

  22. Container Terminal Portfolio of the four Main Global Terminal Operators, 2009

  23. Container Terminal Portfolio of Other Global Terminal Operators, 2009

  24. The Caribbean System: The Transshipment Triangle and the Panama Canal Funnel Lower aggregate demand. The “curse” of economies of scale. Response from West Coast ports. Response from railways (East vs. West). New gateways (Canada: CN, Mexico: KCS). Costs (fuel prices and Panama Canal toll rates). Competition from Suez and the Mediterranean. Regionalization of production.

  25. Diffusion Cycles in Containerization: Towards Maturity Niche markets Maturity Massive diffusion Network complexities Peak Growth Network development Productivity multipliers Acceleration New (niche) services Productivity gains Adoption

  26. Containerization Growth Factors: Which Opportunities are Left? A B C D

  27. Keeping Track of the Big Picture: Emerging Global Maritime Freight Transport System

  28. The “Calm” after the Storm: A Paradigm Shift for Maritime Container Trade and Ports

  29. The “Calm” after the Storm: A Paradigm Shift for Maritime Container Trade and Ports

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