RAWALPINDI, Nov 7: While the boom in shipping is creating new jobs in shipbuilding countries of Asia, employment is lost in countries of the sub-continent, including Pakistan with high ship scrapping activity.

The latest review of Maritime Transport released by the United Nations Conference on Trade and Development (Unctad) says shipping operators faced with considerable losses may also decide to scrap older tonnage, which has potential implications for steel prices as well as for jobs in major ship-breaking nations.

Such intensified ship-scrapping activities pose further challenges for safety, health and environmental conditions in the countries of the sub-continent. The trend in the demolition and recycling of ships is correlated with the trend in the delivery of ships; while 2007 saw record highs in new buildings, it also saw record lows in demolitions.

In total, demolitions were equivalent to only 0.4 per cent of the existing world fleet. Tanker tonnage continues to assume the highest share among the vessel types demolished in 2007, with 2 million deadweight ton (DWT), corresponding to half the year’s total.

The category of other vessel types increased its share to almost half, reaching 1.9 million DWT in 2006, while hardly any dry bulk carriers were demolished in 2007, and a reflection of the high demand for older tonnage of this type of vessel, which is used to carry the main dry commodities, including grains.

The average age of demolished ships in 2007 was highest for general cargo vessels (34.9 years), followed by tankers (31.4 years), containerships (29.6 years) and dry bulk carriers (29.1 years). For all vessel types, the average age at demolition has increased significantly since the beginning of the decade, albeit with some fluctuations.

In general, scrapping activity is negatively correlated to developments in freight rates, as high freight rates reduce the economic interest of owners to sell their vessels to scrap yards.

The Unctad report shows that international seaborne trade surged to record levels last year but has since declined because of the financial crisis, jeopardising the health of many developing countries, especially those that depend on commodities.

The review of the maritime transport finds that seaborne trade surpassed 8 billion tons last year and reached a peak at the start of this year.

But the report highlights that the Baltic Dry Index (BDI) – an indicator that predicts future economic activity by measuring global supply and demand for the commodities shipped aboard dry bulk carriers – declined by over 90 per cent between May 2008 and early in October.

Such a decline indicates that the unfolding financial crisis has spread to international trade, with negative implications particularly for commodity-reliant developing countries.

While a drop in fright rates would be an immediate effect of a falling BDI – which would be beneficial for exporters or importers of food and commodities – a declining index is also accompanied by reduced demand for shipping services, increasing the effects of the financial crisis and global demand for goods.

The report reveals that by 2008 the total world merchant fleet had expanded by 7.2 per cent to reach 1.12 billion DWT. Likewise, the order booked for new vessels in 2008 was at its highest level ever, with over 10,000 ships, marking a 28 per cent increase on the current merchant fleet.

In the meantime, the declining BDI has also led international port terminal operators to announce the suspension of some major port expansion plans owing to the foreseen decline in demand for shipping services.

With more than 80 per cent of international trade in goods carried by sea, and an even higher percentage of developing-country trade carried by ships, the review of maritime transport, an annual publication prepared by Unctad, is an important source of information on this vital sector.

The challenge for developing economies remains how to achieve or maintain revenue collection and provide security procedures whilst financing change and reducing bottlenecks. Ports are facing increasing demands for a quick turnaround of vessels from customers with ever increasing size of ships.

Improving turnaround time by increasing port performance is, however, no easy task, for the main bottleneck is in crane handling. Ports have not made any significant breakthroughs in container handling, even with the arrival of tandem lift and triple lift cranes.

Noting that port developments around the world continue at an uneven pace, the report welcomed that in Pakistan, plans were announced to dredge the Port Qasim to 10.5 metres, while HPH was to build a new container terminal in Karachi.