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Volatile global trade regimes could be a boon for UAE: Global trade tensions, fueled by rising protectionism, are set to fuel the UAE’s push for more comprehensive trade agreements with trading partners. These agreements are more than ink on paper, they signify the UAE’s strategic push to cement its strategy and role as an indispensable and resilient trade and re-export hub amid global uncertainty, several sources told Arabian Gulf Business Insight last week. UAE’s hot CEPA season: The UAE has polished off talks on 27 CEPAs. Around eight of them are already in effect, including with Turkey, India, and Indonesia. The UAE also has 14 CEPAs inked and awaiting ratification — including with Vietnam, South Korea, Australia, the Central African Republic, and Chile, while others are still on the negotiation table.The drivers: Uncertain global trade environments are expected to incentivize countries to lock down freetrade agreements with the UAE to act as a “buffer against disruptions” and ensure stability, US-based Terner Consulting geopolitical analyst Steven Terner noted. With the UAE already functioning as a gateway of trade between several key markets, such agreements would “[allow] countries to route export to the UAE’s wide entire network” of freetrade partners, Gordon said.The UAE’s network of CEPAs offers access to markets with some 2.5 bn individuals, positioning the Gulf country a highly attractive destination for multinational companies to invest in the UAE as a global sales hub, London-based Albright Stonebridge Group associate partner Ben Gordon told the news outlet.The UAE’s active CEPAs added around AED 135 bn to non-oil trade, which increased 42% y-o-y in 2024. Emirati foreign trade also rose 14.6% y-o-y in 2024 — well above the global average of 2%, Emirati state news agency Wam reported, citing government data.UAE’s CEPA with India, Turkey are case in point: Non-oil trade between India and the UAE has surged 20% since the UAE-India trade agreement came into effect in 2022, Terner said. The UAE’s exports to India rose 75% by the end of 2024, he added. Since signing a CEPA with Turkey and Indonesia in 2023, Emirati trade with both countries has soared — with Turkey up 11% and Indonesia up 15%, Terner said.What’s next? The UAE is forecast to ink a CEPA with South America’s Mercosur bloc — featuring Argentina, Brazil, Paraguay, Uruguay, and Bolivia — by end-2025. The nation is also finalizing several local agreements with Egypt, Tunisia, Syria, Ukraine, the Eurasian Economic Union, the EU, and Malaysia .The question of China: The UAE is carrying out a balancing act in which “they maintain a close economic and diplomatic relationship with China but they don’t attract too much ire from President Trump,” AGBI reports, quoting Tulane University assistant professor Andrew Leber as saying. While China stands out as a major trading partner for the UAE, it is reasonable to assume that they will avoid forming a CEPA with them “for now,” he added.

E-truck demand to rise: The global demand for electric trucking seems poised for significant growth as the demand for plug-in hybrid, battery, and fuel cell electric trucks is forecast to rise to 70% of global sales in 2030 — up from 13% in 2022, according to the Road Transport report by the International Energy Agency (IEA). Global electric truck sales saw a 35% y-o-y increase in 2023, reaching around 54k units, according to a report by IEA.The West is falling behind: A streak of US and EU-based hydrogen and electric trucking startups have permanently plugged out in the past six months, with modest demand, steep hydrogen and battery costs, and lackluster infrastructure as the likely culprits. Meanwhile, China’s in the driver’s seat: China's zero-emissions truck market saw unprecedented growth in 2024, with nearly 80k units sold, Bloomberg reported earlier this year. The total — composed of heavy-duty battery-electric trucks and almost 4k hydrogen fuel cell units — more than doubled the deliveries from 2023 and represented over a 25-fold increase compared to output in 2021. Why is this the case? China's unrivaled growth in all types of electric commercial vehicles is fueled by government policy supporting its supply chains, resulting in EV batteries that cost just USD 90 per kWh, dramatically cheaper than the average of USD 190 per kWh incurred elsewhere in the world, a BloombergNEF survey found. This cost advantage is a key factor in China's rapid expansion in this sector, with lower-cost batteries raising the sector’s ability to compete economically with diesel-run trucks. The rising number of trucks using swappable batteries is also helping to maintain lower operating costs and slash the time needed for re-charging.BYD plays a central role: China’s leading EV maker BYD is building an independent position by securing a long-term supply of lithium—a crucial battery material—through ownership stakes in mines across six countries on three continents, the Financial Times reported last year. The company owns a subsidiary responsible for establishing EV production facilities, designing its EV software, as well as producing its own computer chips — allowing for tailored innovation and freedom from external chip manufacturers. UAE AND KSA ARE LEADING THE REGION- UAE and KSA ports emerge as e-trucking hotspot: Saudi Arabia’s King Abdulaziz Port in Dammam obtained 80 electric trucks from Chinese heavy equipment maker Sany late last year as part of some SAR 7 bn investment made by the Saudi Ports Authority (Mawani) and Saudi Global Ports (SGP). DP World also inked an agreement to deploy 100 electric trucks at Jebel Ali Port, with deployment expected at the time to begin by late 2024, aiming to support 1.6k container movements per day. UAE’s been ramping up production ventures…: Singapore-based EV maker SingAuto received preliminary approval last year to establish an EV manufacturing hub in Abu Dhabi to produce electric refrigeration trucks in a project backed by an investment of USD 45 mn from an undisclosed UAE investor. Another EV assembly plant with 5k production capacity — including 3k electric trucks — was announced in 2022 in a joint venture between US’ Admiral Mobility, UAE-based car rental company Avis, and China’s Geely Fairzon New Energy Commercial Vehicle Group.… and long-haul EV infrastructure: The UAE Ministry of Energy and Infrastructure inked an MoU in 2023 with Swedish electric and self-driving trucking startup Einride to deploy a 550 km freight mobility grid—dubbed Falcon Rise. The agreement was said to be aiming for a fast-tracked deployment of 2k EVs, 200 self-driving vehicles, and eight charging stations across the grid connecting Abu Dhabi, Dubai, and Sharjah—the first project of its kind in the region, Einride said at the time. The company signed an agreement with Abu Dhabi’s Integrated Transport Center (ITC) last year to establish a network deploying 1k all-electric heavy-duty trucks and 100 self-driving vehicles.

The US’ ongoing tariff onslaught could undermine Arab non-oil USD 22 bn exports to the US, according to a report (pdf) by the United Nations Economic and Social Commission for Western Asia (ESCWA) published on Saturday. The impact of the tariffs is expected to vary from one nation to another, but middle income countries with a bigger share of US-bound exports are set to be hit the hardest. Where US-MENA trade stood in 2024: The US has maintained a trade surplus with the region since 2015, reaching USD 20 bn in 2024. The trend was largely due to decreased US reliance on Arab oil products. Meanwhile, the region’s non-oil exports to the US have been trending up, rising from USD 14 bn in 2013 to USD 22 bn in 2024 — a threefold jump in the share of the region’s total exports. The breakdown: Based on its own calculations, ESCWA has sorted Arab nations into three categories according to the impact each is expected to see following the tariffs, assuming the levies announced on 2 April are fully implemented. Here is the breakdown:Jordan, Lebanon, Egypt, Bahrain, Tunisia, and Morocco will see a “significant” impact, as at least 5% of their total exports are US-bound. Jordan especially faces the most direct impact, with around 25% of its exports being US-bound;Oman, the UAE, Saudi Arabia, Algeria, and Qatar will see a “small” impact, with less than 5% of their total exports directly impacted by the tariffs. The UAE's re-export trade with the United States — worth around USD 10 bn — may be at risk due to elevated tariffs on the goods' initial origins;The remaining Arab nations are set to avoid any direct impact from the tariffs, given that they have zero or minimal non-oil US exports.Indirect headwinds: Exports from Arab economies may suffer cascading, indirect effects from tariff escalation, as the levies are set to dampen demand for goods everywhere, especially from longstanding importers of Arab goods like the EU and China. The EU takes in 72% of Tunisia's and 68% of Morocco's exports, as well as 17% of total Arab exports, while China imports 22% of the GCC countries' oil and chemicals, and 15% of all Arab exports.A mixed bag for macroeconomic indicators: The region will face direct trade losses with the US, macroeconomic spillovers, and long-term shifts in global value chains, the report finds. Total investments in the Arab region could drop 0.8% y-o-y in 2025, with the GCC area possibly seeing a 1.4% dip. The region’s overall exports are expected to see a marginal 0.01% decline in exports and a 0.2% reduction in imports. On the whole, the Arab world’s imports of US goods will drop by some 28%, but imports from China could see a y-o-y jump of 7% and those from the EU could rise 2%.As for specific countries: Egypt, Morocco, Jordan, and Tunisia will see a moderate drop in exports of 0.32% y-o-y in 2025, which ESCWA expects will prompt them to leverage their price-competitiveness in the US market and capitalize on offering goods that are affected less drastically by levies. ESCWA predicts that GCC exports will see a more limited impact — a 0.14% y-o-y rise in exports — especially if Saudi Arabia and the UAE lean heavily on competitiveness in transport and logistics.What to expect from the region? ESCWA expects Arab states to diversify their import sources, with heavier inflows predicted from the EU and China and reduced inflows from the US. ESCWA has pointed out that more pronounced trade between Arab states is possible, particularly among members of the Agadir trade partnership — Egypt, Tunisia, Morocco, and Jordan.

Despite major global disruptions including escalating trade wars, pandemic aftershocks, and regional conflicts, global trade volumes have remained resilient, according to a recent DHL trade report (pdf). However, recently expanded trade sanctions may expedite global policy changes, so what’s on the horizon in the year to come as trade dynamics shift swiftly? The current lay of the land: The global outlook remains significantly resilient in the face of global disruptions on the back of e-commerce expansion, new tech, and increased regional trade. New emerging markets — particularly in Asia and the Middle East — are playing an imperative role in global trade dynamics, but the risk of economic fragmentation due to geopolitical rivalries could potentially have a long-term impact on trade stability and overall global trade expansion. The big guns: US President Donald Trump’s recent trade policies have been marked by an unprecedented wave of tariffs — slapping levies on steel, aluminum, alcohol, and lumber — in a tit-for-tat dynamic with countries like China, Japan, Canada, Mexico, and the EU. The timing, details, and extent of global impact of these tariffs and policy changes remains to be unseen as some are still subject to negotiation between the US and its trade partners. The infamous Chinese loophole: While direct US imports from China are declining, the overall reliance on Chinese-manufacture goods remains largely significant. Trump ended a tariff loophole used by Chinese firms back in February which saw Chinese firms shipping goods in bulk into Mexico and breaking them into small packages to enter the US in a bid to circumvent duties that are normally applied to larger shipments. Chinese companies — including Temu and Shein — shipped USD 46 bn worth of small packages to the US, with China reporting nearly USD 23 bn worth of these exports last yearStepping into the vacuum: The UAE, Vietnam and Ireland have emerged as top countries in global trade growth — excelling in both speed and scale between 2019-2024. The UAE came in fifth place, accounting for nearly 1.7% of global trade in 2024, with an average compound trade volume growth of 6.9% throughout the period. Vietnam ranked sixth place on the scale dimension and 22 on speed, while Ireland came in at number 13 on scale and 17 for its speed. India, Vietnam, Indonesia, and the Philippines are also forecast to lead in trade growth from 2024 to 2029.E-commerce is stimulating growth: E-commerce is rapidly reshaping global trade — with tech advancements driving the expansion of trade services. Cross-border e-commerce sales have grown by nearly 53% over a six-year period to 2.9 tn in 2022, according to the DHL report.The growth of cross-border e-commerce is expected to continue, with forecasts predicting annual growth rates of 15-25% over the next five-10 years.

The UAE and KSA snatched a spot in the top-five rankings of the Emerging Markets Logistics Index this year, according to Kuwaiti logistics giant Agility’s annual index report (pdf). Emerging Markets Logistics Index (pdf). The UAE — the highest-ranked country in the Middle East and North Africa region — sustained its spot as the third most attractive market for the second year in a row. Saudi Arabia came in fourth after rising two places in the ranking. China and India maintained their position in the top two spots in the ranking, while Myanmar and Venezuela are the lowest-ranked countries.How it’s measured: The index surveys 830 executives from the logistics industry to assess the performance of 50 emerging markets based on four indicators: Domestic logistics potential, international logistics potential, business fundamentals, and digital readiness.A closer look: The UAE and Saudi Arabia came in the top 10 emerging markets across all the indices. Qatar also ranked among the top 10 in all indicators except the international potential indicator. Regionally, in terms of Business Fundamentals, Jordan came in fourth, Qatar fifth, Bahrain sixth, and Oman eighth.UAE recorded strong fundamentals across the board: The country ranked first globally for best business fundamentals and came in second – behind China – in the digital readiness category.UAE + KSA leading the way in economic diversification: 28.8% of the respondents said the UAE observed the highest level of progress in diversifying over the past decade, while about 26% said the KSA had seen the most progress. The UAE’s non-oil economy accounted for 80% of the nation’s GDP in 2024, whereas KSA saw its non-oil activity rise 4.6% y-o-y the same year, Reuters reports. Supply chain growth: Public-private partnerships play an important role in the UAE’s infrastructure development initiatives, finds the report, with over 155 transport projects valued at AED 25 bn in Abu Dhabi alone.UAE is developing its digital infrastructure, by investing in late-stage start-ups in Abu Dhabi and cutting e-commerce operational costs — including storage, customs, and transportation costs — by 20%. That said, the UAE will have to balance its relationships with the US and China over the use of advanced technologies in the year ahead, Agility says.And KSA is targeting logistics and warehousing: The Kingdom plans to develop 59 logistics centers across the nation, which are slated to boost access to key transportation and sea freight facilities, says Agility. This includes plans that are underway for a new link between Saudi and Bahrain, dubbed the King Hamad Causeway, and a USD 266 mn Logistics Park in Dammam.ICYMI- Saudi’s PIF is planning to boost its investments in local logistics and transport outfits by 60% by the end of this year.Optimism is high for the GCC: The region “stands out as a beacon of stability” amid geopolitical turmoil in the region, Agility says. The myriad of events this year — the fall of the Assad regime in Syria, the ongoing disruption to traffic in the Red Sea, and Israel’s attacks on Gaza and Lebanon — have provided “economic headwinds” yet have not obstructed the region’s development trajectory. Economic growth is projected to rise in the short to medium term, with the World Bank economists forecasting a 4.2% growth in FY 2025/26, says the report. Despite the GCC optimism, the majority of respondents — around 54% — forecast a global recession to hit in 2025, up by 4% from last year’s report and driven by global headwinds including "uncertainties, geopolitical tensions and upheaval in major economies.”

Predictive analytics is revolutionizing supply chain management: In today’s rapidly evolving business landscape, predictive analytics is transforming supply chain management by enabling companies to forecast future trends, behaviors, and disruptions, Aramex explains in a report.PREDICTIVE ANALYTICS-What are predictive analytics? Predictive analytics is an advanced analytical approach that utilizes data and statistical models to predict future events, behaviors, or trends by analyzing both historical and real-time data. By leveraging this analysis, supply chain managers can take proactive actions informed by past patterns and trends. This forward-thinking strategy helps businesses anticipate disruptions, seize chances, strengthen resilience, foster growth, and improve customer satisfaction.DHL is in: The multinational logistics company is using the tool in Germany, adopting a digital tracking tool available for “senders and receivers” to predict what is likely to happen with future deliveries. The tech could also support inventory optimization: Predictive analytics offers the tools needed to align supply and demand using data-driven insights that enhance operational efficiency and customer satisfaction. By leveraging these tools, businesses can anticipate market shifts, reduce risks, and boost profitability, transforming inventory management into a key competitive advantage.DEMAND FORECASTING-Demand forecasting: Demand forecasting helps businesses predict customer needs, enabling efficient resource allocation. By analyzing past data and market trends, companies can accurately estimate future demand for their products or services, ensuring ideal inventory levels, better planning, and financial management. This allows them to respond proactively to market changes and maintain a competitive edge through effective forecasting techniques.Amazon embraces predictive analytics’ demand forecasting potential: Amazon's recommendation engine also uses machine learning algorithms that analyze customer data, like browsing behavior, purchase history, and product ratings, to provide a personalized shopping experience through product recommendations. By analyzing historical sales data and external factors like seasonality and market trends, Amazon forecasts product demand by predictive analytics. This allows the company to adjust inventory levels, optimize supply chain operations, streamline product replenishment, and reduce stockouts or overstock situations.RISK MANAGEMENT + COST REDUCTION-Risk assessment: Risk management is a crucial process that involves identifying, evaluating, and mitigating risks to a company's capital and revenue. Predictive analytics, which examines potential threats using collected data, enables a proactive approach to protect against financial instability, legal risks, and strategic missteps and prepares for unexpected events such as natural disasters.Cost reduction: High logistics costs are one of the key signs of inefficiencies within a supply chain. By utilizing insights from predictive analytics, companies can lower operational costs and achieve significant savings.Predictive analytics can also play a role in climate risk management: Relying on advanced weather modeling and predictive analytics could help organizations understand how climate change will impact their supply chains. Shipping companies can leverage tech to anticipate risks and make proactive decisions to minimize disruptions and delays. CHALLENGES AND CONSIDERATIONS-Data quality + accuracy: The effectiveness of the entire analytics approach depends on data that is accurate, comprehensive, reliable, and suitable for its intended purpose. This guarantees that decisions derived from this data are reliable and well-founded.Implementation + integration: Implementation requires ensuring data quality, privacy, and security, while integration involves addressing the talent gap and connecting with existing systems. Businesses can only fully benefit from predictive analytics by successfully navigating these aspects.Ethical considerations: Protecting individual privacy necessitates strict compliance with legal frameworks and ethical standards, particularly when dealing with sensitive data. As these frameworks and guidelines continuously evolve, businesses must remain informed and adapt their data-handling practices accordingly.

Global foreign direct investment (FDI) in special economic zones (SEZs) surged in 2023 on the back of restrictive trade policies and supply chain disruptions, according to a recent FDI Intelligence report. Some 5% of all global FDI projects were funneled into freezones last year — up from 3.7% in 2022 — with MENA accounting for over half of the total FDI investments in SZEs globally, according to the report.(** Tap or click the headline above to read this story with all of the links to our background and outside sources.)Why SEZs? SEZs are designated areas offering specific advantages for businesses, offering a variety of advantages that may differ in governance, types and scope of incentives, targeted industries, and available services. The varying scope of SEZs complicates efforts to accurately assess the level of business activity within these zones. “It’s difficult to track them and to know which zones have actually entered operations and are successful,” OECD policy analyst Maria Camila Moreno told FDI Intelligence. Adrianople Group estimates that there are some 4.9k active special economic zones in over 90 countries worldwide, while the WFZO calculates some 7k, the report notes.Special economic zones offer “predictability in terms of a stable business environment,” mitigating supply chain fluctuations, SZE-focused consultancy firm NxtZones CEO Douglas van den Berghe told the firm. Investing in SEZ or FTZs “somewhat insulates companies from new customs, tariffs or [policy changes] that might come up,” real estate advisor CBRE Americas senior managing director Seth Martindale told FDI Intelligence.Around 85% of 516 global enterprise leaders predict that an increase in geopolitical tension will influence investment choices, a Kearney study found at the start of this year. Concerns are rising about the impact that growing geopolitical tensions in Asia and conflicts in the Middle East and Europe will have on global supply chains. On the rise…: The number of corporate filings and event transcripts discussing either “freezones” or related terms, including “freetrade zones” or “special economic zones,” reached an all-time high in 3Q 2023, the report says, citing data from AlphaSense. … and growing: “Freezones will be very important in the next 10 years,” World Freezones Organization (WFZO) board adviser Martin Ibarra told FDI Intelligence. “There is a reconfiguration of global chains to regional chains. Freezones give the perfect environment of ready infrastructure, buildings and duties exemptions [for investing companies adjusting their global footprints].”MENA saw FDI flows go into 506 of its SZEs in 2023, attracting more FDI projects than any other region and accounting for over half of the total FDI investments in SZEs globally, according to the report. 1H saw growth across the region, with investments in Oman’s special economic zones, freezones, and industrial cities rising by 20% y-o-y to OMR 20.1 bn in the first half of this year. The Dubai Integrated Economic Zones Authority (DIEZ) also recorded a 18% y-o-y boost in net income and a 12% increase in revenues in 1H 2024. Lots to come from Egypt: Egypt’s cabinet revealed big plans for the country’s ports back in July — looking to set up 31 new dry ports and logistics zones during the coming three years. Egypt’s General Authority for Investment and Freezones (GAFI) announced plans this month to set up four new freezones and have two others go live next year. The new zones will be located in Greater Cairo and New Alamein and will cover various sectors. The in-the-works zones are in addition to the six areas already listed in GAFI’s plan for next year. Industrial land developer Polaris Parks also committed EGP 10.5 bn (c. USD 217 mn) last month to develop two major industrial parks in Egypt’s New Administrative Capital and New October City.And Saudi Arabia: The Saudi Port Authority (Mawani) and Al Jeri Logistics Services inked two contracts worth SAR 160 mn in August to develop two logistics zones for storing and handling containers at Jeddah Islamic Port and King AbdulAziz Port in Dammam. The kingdom launched four new SEZs in April last year — Riyadh, Jazan, Ras al Khair, and King Abdullah Economic City — to reinforce its position as a global investment hub.Governments are eyeing SEZs to boost their regional foothold: King Salman International Airport Development Company (KSIADC) inked an MoU this month with Chinese firm Ewpartners to explore the development of an e-commerce and logistics special economic zone within King Salman International Airport. The UAE-India CEPA Council inked two agreements with the Ras Al Khaimah Economic Zones Authority and the Abu Dhabi Chamber of Commerce and Industry last month to expand connectivity and cooperation between business communities in the two countries.Renewables are a big boost: Renewable energy investments in SEZs amounted to some USD 18.6 bn in 2023, making it the largest recipient sector globally. However, this marked a decline from the record USD 61.6 bn in renewable energy FDI commitments recorded in freezones in 2022, largely due to fewer large, speculative agreements being signed for green hydrogen production in FTZs.

The Liner Shipping Connectivity Index paints a mixed picture for the region in 3Q as Red Sea ports continue to feel the impacts of ongoing conflict, according to recent data from the United Nations Conference on Trade and Development’s Liner Shipping Connectivity Index. The index tracks countries’ connectivity to the global containerized shipping network by collating data on the number of direct connections, weekly calls, companies providing services, services available, total deployed carrying capacity, and the size of largest ships received, according to UNCTAD’s methodology.ICYMI- We looked into how Liner Shipping Connectivity declined in regional countries reliant on Red Sea trade in 2Q 2024, with drops seen in the UAE, KSA, and Israel in August.The UAE recorded the biggest gain, albeit still rising at a sluggish pace, growing by some eight points q-o-q to settle at 304.2 points in 3Q. It also gained one point in the rankings to 15th in this year’s third quarter, after falling a point in the last.Saudi Arabia saw connectivity marginally rise this month, gaining some five points q-o-q to 236.9 points in 3Q 2024, after taking the hardest hit last quarter and falling 17 points. The Kingdom maintained its spot in the ranking at 24.Israel was the hardest hit: The country’s shipping connectivity fell by some 10 points q-o-q to 79.3 points in 3Q 2024, as regional tensions escalated and Yemen’s Houthis continued to target Israel-linked or Israel-bound shipping in the Red Sea. It has also seen an overall steep drop of over 70 points from 150 points the same time last year. As a result, Israel’s rankings on the index slipped three places in the rankings to 61 globally in 3Q. Israel’s key ports, including the Mediterranean’s Haifa and the Red Sea port of Eilat continue to be targeted by Iranian proxies.REMEMBER- Maritime security firms raised the risk level for ships calling at Israeli ports in September, as terminals face the possibility of missile attacks from Lebanon’s Hezbollah and Yemen’s Houthis. British maritime security company Ambrey assessed the risk to vessels calling at Israeli ports to be “elevated,” and top ship industry associations have urged ship operators to “limit information access” at Israeli ports.Jordan’s connectivity slipped, shedding some eight points q-o-q to 56.3 points in 3Q, with operations at Aqaba port, the country’s only maritime gateway, severely impacted by Red Sea disruptions and escalating regional tensions. The country also fell 12 points in the rankings to settle at 83, its second lowest place in the history of the index.Egypt’s connectivity dropped after gaining almost 10 points in the last quarter, dipping by some six points q-o-q to sit at 238 points in 3Q from 244 points in Q2. Egypt held its spot in the country rankings, however, settling at 23 worldwide in terms of its liner shipping connectivity. The decision by major carriers to reroute across the Cape of Good Hope saw Suez Canal transits fall this year, leaving Egypt in a worse state financially. Suez Canal revenues have seen a 50-60% drop — equivalent to USD 6 bn — over the past 7-8 months. Back in July, Egyptian Prime Minister Moustafa Madbouly said Suez Canal revenues had dropped to around USD 300 mn a month, down 64.7% from USD 850 mn previously.

Achieving net zero is possible in the aviation industry by 2050, the International Air Transport Association (IATA) says in its updated policy and finance net zero roadmaps for the global aviation sector, according to reports (here) and (here). The updated roadmaps indicate that decarbonization by 2050 is possible through collaboration from stakeholders and policymakers as well as clear policy and financial frameworks in line with the needs of air transportation.(** Tap or click the headline above to read this story with all of the links to our background and outside sources.)But let’s back it up a bit: The IATA disclosed a series of “step-by-step” roadmaps back in July 2023 for the industry to achieve net zero carbon emissions by 2050, with recommendations covering tech, energy, infrastructure, operations, finance, and policy. The shift toward sustainability in the air transportation industry is part of the Paris Agreement.A call to action: “I must emphasize that the roadmaps are not just for airlines. Governments, suppliers, and financiers cannot be spectators in aviation’s decarbonization journey. They have skin in the game. The roadmaps are a call to action for all aviation's stakeholders to deliver the tools needed to make this fundamental transformation of aviation a success with policies and products fit for a net-zero world,” IATA Director General Willie Walsh said.SOUND SMART- What is a policy roadmap? A policy roadmap is a strategic framework that outlines goals and recommendations for implementing specific policies in a specific area to complete strategies, according to a report (pdf). The roadmap provides a baseline for policy development and helps identify gaps in existing policies.The roadmap: Although the recommendations recognize that there isn’t a one-size-fits-all solution for policy sequencing, they state that all countries should engage in the future global Sustainable Aviation Fuel (SAF) market. The policy roadmap outlined immediate (until end 2025), mid-term (2026-2030), and long-term (2031-2050) objectives that lay out the order in which to target the goals and objectives. Some takeaways: The roadmap highlighted the urgent need for immediate action to integrate the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) Eligible Emissions Units (EEUs) — a mechanism that aims to reduce emissions from international aviation above a standard reference level. The policies also stressed the importance of prioritizing SAF in the product mix at refineries. The introduction of new tech — especially in research and development — is deemed necessary.Gov’t action is needed: Collaboration between governments, the aviation industry, and other sectors is important for streamlining investments and removing barriers to adopting new tech, SAF, and infrastructure. The report states that the creation of a global SAF accounting framework is necessary to ensure transparency and accountability. How far along are we? Malaysian airline AirAsia inked an MoU with Airbus to explore the production and expand the use of SAF in the Association of Southeast Asian Nations (ASEAN) region. The UAE’s renewables giant Masdar and French oil major TotalEnergies signed an agreement back in August to explore the feasibility of using captured CO2 to produce sustainable aviation fuel (SAF) and green methanol. The UAE has been looking to position itself as a regional hub for SAF with aims to produce 700 mn liters of SAF annually by 2030.We’re on the way: SAF production in 2024 is set to hit 1.9 mn liters, representing 0.53% of the aviation sector’s fuel requirement and on track for tripling target. “SAF will provide about 65% of the mitigation needed for airlines to achieve net zero carbon emissions by 2050. So the expected tripling of SAF production in 2024 from 2023 is encouraging. We still have a long way to go, but the direction of exponential increases is starting to come into focus,” IATA Director General Willie Walsh said.As for the money aspect: In order to be net zero by 2050, the annual capital expenditure (capex) needed to build new facilities over the 30-year period is about USD 128 bn per year. The road to this can be facilitated if governments redirect their subsidies away from fossil fuels and toward renewable energy production, one of which is SAF. Time is of the essence: The cost of procuring SAF, hydrogen, and other key levels is valued at USD 1.4 bn in 2025, but the transition could go as high as USD 744 bn in 2050 — indicating the need for speed and scale in bringing solutions to market in a bid to achieve the net zero CO2 emissions. There’s hope: “To realize the opportunities, we need all minds to unite in this mission, and all policymakers, multilateral organizations, investors, solution providers, and the air transport industry to work together. Such transformative collaboration can pool resources and target meaningful action for greater impact. This is what is needed to deliver a sustainable air transport industry by 2050,” IATA’s Senior Vice President Marie Owens Thomsen said.

The Middle East’s port performance has dropped on the World Bank and S&P Global’s Container Port Performance Index (CPPI), according to a recent report (pdf) which assesses the operational performance of container ports worldwide. Qatar’s Hamad Port, which dropped three places y-o-y to settle at the 11th spot and Egypt’s Port Said fell six places claiming 16th.The UAE saw major drops in performance: Abu Dhabi’s Khalifa Port saw a major drop to 29th place from its previous ranking in third place. Jebel Ali came in 49th place, dropping 11 places from last year, while Sharjah recorded a slight rise by four places to sit at 123th place.Saudi ports dipped in this year’s rankings: KSA’s King Abdullah Port — which held first place on the 2021 index (pdf) — sharply declined to settle at 30th place, falling from 17th place in 2022. Jeddah also experienced a significant drop to 58th place from 29th place in 2022. Similarly, Dammam slipped four spots from last year, to settle at 35th place.There were exceptions: Oman’s Salalah Port remained at the top of the list, securing the second overall spot — unchanged from 2021. Similarly, Morocco’s Tangier-Mediterranean also retained its spot in fourth place on the ranking.GCC countries underperformed overall: Kuwait’s Shuwaikh Port dropped from 73rd place to 208th, while Shuaiba ranked in 161st, down from 121st. Oman’s Sohar Port also recorded a dip to 66th place, down from 49th. On a positive note, Bahrain’s Khalifa Bin Salman Port jumped up by 30 places, nabbing 43th place.The Levantine ports told a mixed tale: Jordan’s Aqaba Port fell to 87th place, dropping from 59th the year prior and from its position in the 30s in 2021. Over in Lebanon, Beirut Port leaped up to 68th place, after ranking near the bottom 10 at 320 last year. Tripoli Port’s ranking increased to 102nd place from 219th.Egypt’s Mediterranean-linked ports creeped up in the rankings: Egypt’s Sokhna Port jumped up to 122, up from 269 the year prior. Alexandria Port increased to 172, up from 268. Yemen’s Port of Aden came in at 237, up from 262.Israel was hit hard: Haifa port saw its rankings plummet to 119th place from 56th. Israel’s key ports, including the Mediterranean’s Haifa and the Red Sea port of Eilat, continue to be targeted by Iranian proxies, with several incidents reported in June alone.Bridging operational gaps: Average global port call times increased in 2023 to 40.5 hours, a slight rise from 36.8 hours the year prior. Some 3.71 hours, 11.7%, were spent as idle time at berths before and after cargo operations. To streamline operations, ports will need to focus on implementing more efficient planning, preparation, and communication techniques to reduce the almost four hours spent in stalled time, the report recommends.Port congestion is on the rise in 2024: The number of ships crossing through the Suez Canal has dropped by 66%, with attacks by the Houthis in the Red Sea forcing ships to divert their vessels around Africa since late last year. “These disruptions have led to service reconfigurations and volume shifts, straining infrastructure and resulting in port congestion, delays, and shortages in capacity and equipment,” Maersk said this month, adding that a “timeline for easing these disruptions and returning to normal remains uncertain.”And we can expect more challenges to come: Congestion at Jebel Ali Port rose sharply in 2Q 2024, as the port looked to support vessels being rerouted around the Cape of Good Hope. An increase in vessel arrivals has resulted in inter-terminal lags and weakened operational efficiency, with high yard density at various terminals straining port facilities. So, delay times spiked in May, hitting three to four days, with vessels' arrival-to-berthing wait time reaching up to seven days. As such, “the congestion at Jebel Ali also necessitated the rerouting and omission of varying terminals,” Business Development Manager of Finmar Group Ahmed Mouselhy told Enterprise.Exploring alternative routes: To maneuver through the disruptions, major shipping lines have been “forced to load and distribute their eastbound Gulf, ISC, and Far East Volume — specifically out of Sokhna — onto feeder operations like XPress to ensure continuity of operations,” Mousehly added.

The global container shipping industry registered an 87.7% y-o-y surge in net income to USD 10.2 bn in 2Q 2024, with projections for another climb in 3Q 2024, according to a report (pdf) by shipping expert John McCown (LinkedIn). The upward trend is a reversal of a series of downward earnings for six quarters from the last earnings peak of USD 64.1 bn in 2Q 2022, so what is causing the rise?(** Tap or click the headline above to read this story with all of the links to our background and outside sources.)The big catalyst: Red Sea disruptions have resulted in the diversion of most Asia-to-Europe container vessels to the longer route around Africa. This key lane represents some 25% of global container miles and a one-third increase in typical voyage distance, resulting in an 8% contraction in worldwide capacity. There are ripple effects: The Red Sea crisis has negatively affected the earnings of several Asian firms in 1H 2024, particularly those who rely on exports, Bloomberg reported last week. “We believe rates will return to below breakeven once supply chains normalize, due to the structural challenges facing the industry,” Bloomberg Intelligence analysts said, highlighting that the supply and demand gap will likely weigh on the outlook for container rates and liner earnings. Transportation companies are benefiting from the higher freight rates, with most seeing a boost in net income for the quarter. Denmark’s Maersk and Chinese shipping firm Cosco Shipping Holdings saw a boost in net income, almost doubling from 1Q 2024 and surpassing the USD 8.88 bn from 2Q 2023.Shifting fortunes: Orient Overseas International ’s transpacific trade route saw improved performance from higher freight rates. Port operator China Merchant Port Holdings saw an increase in transhipment cargoes in its Sri Lanka ports, while Adani Ports recorded a rise in overall volumes. Who benefited the most? Carriers that are more concentrated in the key east-west trade lanes of Asia-Europe and Asia-North America showed the most robust improvement in the quarter. In numbers: Worldwide container volumes rose 6.1% y-o-y in 2Q 2024, a slight pullback from the 8.3% y-o-y increase in 1Q, data from Container Trade Statistics showed. The worldwide loaded TEU volume — which accounted for 46.4 mn — in 2Q was up 7.5% y-o-y, the highest worldwide volume quarter ever and 0.5% the previous record of 2Q21 rates. US demand soared high, loading 8.5 mn TEUs in 2Q at an 11.4% y-o-y increase and a 4.6% increase from 1Q 2024. Here’s what to expect: “Based on where I anticipate the CTS global pricing index to come in for 3Q 2024, my current estimate in the industry will earn USD 14.7 bn in 3Q 2024 on revenue of USD 78.4 bn … At those levels, the 3Q 2024 will represent a y-o-y increase of 26.9% in revenue, 425% in net income,” McCown writes in the report, adding that “the fourth quarter would fall somewhere between the second and third quarters.”

Air traffic demand is expected to outpace economic growth till 2043 as the manufacturing sector works through supply chain and production constraints, a recent Boeing Commercial Market Outlook report reveals. Demand for new airplane deliveries is projected to hit 44k by 2043.(** Tap or click the headline above to read this story with all of the links to our background and outside sources.)Air cargo consistently outperformed alternative modes of transport and is slated to grow by two-thirds by 2043, supporting the 4.1% annual growth in air cargo traffic. Over 1k freighter jets are slated for new delivery over the next 20 years.MENA order books are packed: The region is getting more widebody aircraft, accounting for 44% of the total 8k global new widebody orders. The region is forecasted to see a 4.7% rise in air traffic over the next 20 years, according to the report (pdf), and is increasing its fleet with 3.1k new orders.The aircraft services sector is expected to jump up in value to USD 4.4 tn, propelled by maintenance and modification options that improve efficiency. Regional air services are expected to rise by 4.6%, according to the report (pdf), and account for some USD 390 bn in market value by 2043.Leading the way: Emirates’ cargo arm Emirates SkyCargo placed a USD 1 bn order for five Boeing 777 freighters in July, slated for delivery between 2025 and 2026. Qatar Airways inked an agreement with Boeing in the same month to add 20 777-9 carriers to its order book, on top of its existing order of 40 Boeing 777-9s.Africa’s commercial aircraft fleet will double by 2043, as population growth spurs an increase in air travel by 6.4%, Boeing says in its report. Some 82% of the nearly 1.2k new jet deliveries to African airlines by 2043 will be for growth, the highest ratio of any region globally. This includes 15 freighter jets. The new aircraft are slated to “serve many routes in the continent’s largest aviation markets, including Europe, the Middle East and within Africa,” said regional commercial marketing managing director Shahab Matin.China’s aviation market to boom: Boeing expects China’s commercial jet fleet to more than double in the next 20 years to 9,740 planes to meet growing passenger and air cargo demand. Around 60% of China’s new deliveries will be directed towards fleet expansion, while the rest will replace older jets. Boeing also said that China will need 8,830 new planes through 2043 to meet demand, an increase from its previous forecast of 8,560 commercial aircraft in 2042.

UAE’s DP World is among seven major firms who managed over 40% of global port throughput in 2023, joining the ranks with Singapore’s PSA International, China Merchants Ports, China’s Cosco Shipping, Maersk subsidiary APM Terminals, Hong Kong’s Hutchison Ports, and MSC Group, according to data from Drewry’s Global Container Terminal Operators Annual Review and Forecast report. The breakdown: Drewry’s Global GTOs Annual Review and Forecast measures the financial and operational performance from 21 global terminal operators. Across all 21 GTOs, equity-adjusted throughput grew 2.3% y-o-y, a good deal above the 0.3% y-o-y boost in global port handling, the report says. The capital expenditure (capex) for terminal operators rose by 9% y-o-y to USD 5.5 bn in 2023.A closer look: Regional giant DP World saw its equity adjusted throughput drop by 4.7% y-o-y to 44.3 mn TEUs in 2023. The terminal operator retained a whopping 5.1% share of world container port throughput, ranking fifth globally.Who fared best? PSA International’s equity adjusted throughput rose 4.6% y-o-y, hitting 62.6 mn TEU. MSC witnessed the most dramatic throughput improvement, spiking 10.3% y-o-y to 42.3 mn TEUs, driven by its acquisition of Bollore Africa Logistics back in December 2022.Expansion plans: Five major GTOs have plugged some USD 500 mn into capacity expansion projects and equipment modernization, with DP World and PSA each investing over USD 1 bn in capex.Global container terminal revenues grew by 0.2% q-o-q in 4Q 2023, according to Drewry’s Global Container Terminal Revenue Index. Revenues increased by a further 7.3% y-o-y in 1Q 2024, driven by increased storage income due to congestion caused by the Red Sea disruptions to global shipping.Operational bottleneck: “While several of the smaller GTOs have clearly stated their intention to expand their portfolios, there are very limited opportunities to close the 30 mn TEU gap that exists between this leading pack and the rest of the table,” Drewry senior analyst Eleanor Hadland was quoted as saying by Hellenic Shipping News.Climbing the operational ladder: The UAE’s AD Ports Group and the German Hapag-Lloyd are forecasted to better their rankings on the indicator this year. India’s Adani nabbed thirteenth place, settling as the highest-placed of the newer entries. It produced a throughput of 6.5 mn TEU and its position is forecasted to grow next year buoyed by the Indian market’s international expansion efforts, says the report.REMEMBER- UAE-based East Africa Gateway (EAGL), a subsidiary Adani Ports and Special Economic Zone (APSEZ), inked a share purchase agreement in June to acquire 95% of Tanzania International Container Terminal Services (Ticts) for USD 39.5 mn from Hutchison Port Holdings and Harbors Investments.

The Liner Shipping Connectivity Index paints a mixed picture in 2Q as Red Sea ports continue to feel the impacts of tensions in the region, according to recent data from the United Nations Conference on Trade and Development’s Liner Shipping Connectivity Index. The index tracks countries’ connectivity to the global containerized shipping network by collating data on the number of direct connections, weekly calls, companies providing services, services available, total deployed carrying capacity, and the size of largest ships received, according to UNCTAD’s methodology.ICYMI- We looked into how Liner Shipping Connectivity declined in regional countries reliant on Red Sea trade in 1Q 2024, with significant drops seen in Egypt, Israel, KSA, and Jordan in April.(Tap or click the headline above to read this story with all of the links to our background as well as external sources.)Israel was among the hardest hit: The country’s shipping connectivity fell by some two points q-o-q to 89.44 points in 2Q 2024 as Yemen’s Houthis targeted Israel-linked or Israel-bound shipping. It has also seen an overall steep drop of over 44 points from 133.7 points the same time last year. Israel’s key ports, including the Mediterranean’s Haifa and the Red Sea port of Eilat, continue to be targeted by Iranian proxies, with several incidents reported in June alone. As a result, Israel’s ranking on the index dropped one place in the rankings to 58 globally in 2Q.Saudi Arabia saw connectivity drop furthest this month, shedding 17 points q-o-q to 231.7 points in 1Q 2024. It also shed almost 40 points y-o-y. The Kingdom also fell one spot in rankings to 24 in this past quarter, yet regardless, maintains a strong global position. The UAE dropped by nearly 12 points q-o-q to 296.5 in 2Q, after maintaining a steady incline despite disruptions starting in 4Q 2023, while the index held steady at 307.9. The UAE lost one point in the rankings to 16 in this year’s second quarter, though it maintains the region’s best overall score.Congestion at Jebel Ali Port rose sharply this past quarter, as the port looked to support vessels being rerouted around the Cape of Good Hope, according to a statement from freight forwarding firm Trans-China Logistics. An increase in vessel arrivals has resulted in inter-terminal lags and weakened operational efficiency, with high yard density at various terminals straining port facilities. So, delay times spiked in May, hitting three to four days, with vessels' arrival-to-berthing wait time reaching up to seven days.Jordan showed improvement after it was hit hard last quarter, with operations at Aqaba port — the country’s only maritime gateway — severely affected by Red Sea disruptions. Jordan’s LSCI rose over 12 points q-o-q to 64.7 in 2Q 2024. The country leaped up in the rankings gaining six places and moving up to 71 globally this quarter, from a low point of 85 globally last quarter. Improvements could be attributed to strategies set up by Jordan in 1Q, namely a task force, to handle the sudden drop in volumes at Aqaba.Background: The task force urged Aqaba Container Terminal to provide incentives for marine routes that continued to serve Aqaba Port in late January, while also proposing waiving storage fees for shipping providers and owners of empty containers prepared for export. Jordan is dependent on cargo traffic flowing through Bab Al-Mandab to Aqaba port, with some 30% of imports and 20% of exports requiring direct passage through the strait, according to an International Monetary Fund report.Egypt also fared better this month, showing signs of improvement as the country’s shipping connectivity rose by almost 10 points q-o-q to 244.6 points in 2Q from 235.9 points in 1Q. Egypt gained a spot in the rankings, moving up to 23 worldwide in terms of its liner shipping connectivity. However, the decision by major carriers to reroute across the Cape of Good Hope saw Suez Canal transits fall, leaving Egypt the worst off financially. Suez Canal revenues fell 64.3% y-o-y in May to USD 337.8 mn, compared to USD 648 mn a year prior. With vessels transiting the canal down to around 1,111 during the month, dropping from 2,396 a year prior.

Regional economies are looking to use innovative tech to maintain resilience amid supply chain disruptions, according to a recent annual report (pdf) by DP World supported by Economist Impact. Although traditionally used as a supplementary tool, technology like AI and blockchain is now being used to reconfigure supply chains and MENA firms can stand to benefit from the emerging tech in the logistics sector.Behind the numbers: The report’s research surveyed 3.5k senior executives globally across a range of industries to gather information on trade and supply chain practices in addition to forecasts on the year ahead. Regions included North America, Europe, Asia Pacific, the Middle East, Africa, and South America.(Tap or click the headline above to read this story with all of the links to our background as well as external sources.)The World Trade Organization (WTO) expects MENA's exports to grow some 3.8% in 2024, but geopolitical challenges are hindering trade in the region. The war on Gaza has worsened supply-chain disruptions in the Red Sea — a key shipping route for Saudi and UAE trade with Europe. Consequently, there has been upward pressure on shipping rates due to maritime route diversions. How can new tech work around supply chain disruptions? In addition to supply chain reconfiguration and expansions into new markets, robotics and automation have been proven to enhance supply chain management by reducing long-haul expenses, boosting work productivity, and reducing errors. MENA economies can benefit from integrating block chain technology to improve transparency, as they can better track goods and detect fraud.AI by the numbers: 39.6% of business leaders worldwide indicated that they had integrated AI in optimizing customer experience in 2023, 34.8% adopted the tech in forecasting demand, and another 34.6% in advancing inventory levels, according to the report. 34.5% used the tech in identifying potential supply-chain disruptions. The scale of the developments indicates that AI has a profound impact on the operational efficiency of business and supply chains.What about blockchain? Blockchain has also been used to enhance accessibility and efficiency of supply-chain management. Almost 58.9% of businesses deployed blockchain technologies in 2024, and 27.5% planned on using it, according to the report. Blockchain helps detect fraud and errors, streamline operational processes, and reduce costs. Tech in KSA and UAE: Almost 35% of companies are adopting automation and robotics for boosted efficiency, 31% are planning to use AR/VR for troubleshooting and repairs, 26% are opting for 3D printing customization and decentralized production, DP World says. A boon for productivity: Emirati food supplier Aramtec deployed a warehouse automation system by UAE-based digital solutions provider Zebra to meet growing customers needs and changes in its supply chain. The move to automated systems — deployed at Aramtec’s distribution centers — aimed to increase its worker productivity by 14%. Tech in Egypt: About 33% of firms in Egypt plan to integrate advanced automation for logistics efficiency with 28% seeking to adopt blockchain for traceability and 23% looking to use 5G to increase connectivity, speed, and reliability, DP World says. “At the Port of Ain Sokhna, our technology has improved truck turnaround times by 35% and vessel productivity by 16%. We’ve also introduced multi-channel payment solutions and customer self-service applications for real-time data access, enhancing cargo control and visibility,” DP World for North Africa & the Indian Subcontinent CEO Rizwan Soomar told Egyptian news outlet Al Alam Al Youm in an interview last March.

Middle East markets need to diversify trade and grow resilience amid potential losses of nearly 10% on exports for Red Sea ports if disruptions persist into 2025, a recent IMF report has found. Countries with ports on the Red Sea could lose around 1% of GDP on average if disruptions persist till the end of this year, mainly affecting countries like Egypt, Jordan, Saudi Arabia, Sudan, and Yemen.A quick look at where we stand: Suez Canal trade dropped by 50% y-o-y in the first two months of 2024 and further afield, Panama Canal trade dipped 32% during the same period, according to a separate report. The Suez Canal accounts for around 15% of global trade transits, while the Panama Canal accounts for about 5%. At the same time, reroutes around the Cape of Good Hope boosted trade volumes along that route 74% y-o-y.Trouble is rippling across our regional ports: Red Sea attacks have caused cargo volumes at Red Sea ports to plummet, including Jordan’s Aqaba Port and KSA’s Jeddah Port. EU and Middle Eastern ports witnessed a 5.3% decline in port calls in the first two months of 2024, due to longer journeys on the back of rerouted trade, the report finds.What can be done? Trade could be boosted by up to 17% on average in the medium term by loosening regulatory constraints, upgrading trade infrastructure and cutting down on trade barriers, according to data from the report. Applying such targeted policy reforms could also grow economic output by around 3%. Jordan is already taking steps: In a recent application of such a policy, Jordan’s cabinet extended exemptions on custom duties and sales tax on maritime freight till 30 June, last week. The exemptions — which were issued on 21 January — come in a bid to control rising prices of basic commodities on the back of Red Sea disruptions.Mitigating aftershocks: Jordan set up a task force to handle the sudden drop in volumes at Aqaba following the start of Red Sea disruptions. The body urged Aqaba Container Terminal to provide incentives for marine routes that continue to serve Aqaba Port in late January, while also suggesting waiving storage fees for shipping providers and owners of empty containers prepared for export. Diversification is the word of the year: Regional countries are also looking into developing alternating shipping routes. KSA has reshuffled trade from Jeddah on the Red Sea to Dammam on the Persian Gulf. The move looks to maintain the flow of trade and avoid long reroutes, overland Saudi cargo routes are gaining momentum, with a 27% hike in overland trucking rates in March. A spike in spot rates is also making trucking between Dammam and Jeddah more competitive, and renewing hopes for a long-awaiting “Landbridge” project which would see Dammam and Jeddah linked by rail. On a wider scope, there’s still work to be done: Fostering adaptable supply chain management, expanding suppliers, and evaluating air freight capacity alternatives would strengthen regional resilience to trade disruptions, the report finds. The region has also benefited from changes to trade patterns in other contexts, with G7 sanctions on Russian crude shifting EU energy exports towards the region, to match the spike in demand for non-Russian energy products, the IMF report finds. Kuwait, Oman, Qatar and Algeria almost doubled their energy exports to the EU between 2022 to 2023.

UNCTAD predicts global economic growth in 2024 to stand at 2.6%, a notch lower than the previous year’s 2.7%, with further growth deceleration expected this year, according to a recent Trade and Development report (pdf). Building on better than expected results in 2023, there are high hopes interest rate cuts will stimulate growth, but new challenges including trade disruptions, climate change, and ballooning debt to finance private consumption threaten further slowdowns in global economic growth, the report says. Maritime shipping — the “backbone of international merchandise trade” — was dealt a double blow since last year, UNCTAD says. Houthi attacks in the Red Sea have seen major carriers reroute shipments via the Cape of Good Hope, lengthening journeys by between 12 and 20 days. At the same time, a severe drought in Panama has limited transits at the Panama Canal, and hiked up tolls by up to eight times. Disruptions at these two key global trade chokepoints have severely affected seaborne trade, which accounts for some 80% of goods traded, with freight rates rising even in regions unaffected by the disruptions on the back of ripple effects. Historic shifts: Global merchandise trade contracted about 1% in 2023, representing the first time in at least four decades when global trade and economic growth moved in opposite directions, the report says, citing new data that is as yet unconfirmed. Growth in merchant trade is expected to remain subdued in 2024, but it should see a turnaround from contraction to growth.Commodity prices remain above pre-pandemic levels despite declines in 2023, the report says. Energy and metal prices are about 40% higher than their pre-pandemic averages, while food commodities are 35% higher. The boost in commodity prices has had mixed effects, benefiting the trade positions of net exporters while also undermining developing countries that import such goods, particularly least developed countries. The outlook is uncertain: Commodity prices are expected to continue to fall in 2024, but at a slower rate. Crude oil prices are expected to decline due to falling demand, with positive price pressure due to OPEC+ production cuts offset by booming production in North America, the report adds. However, the trend could see a reversal with energy prices increasing if the security situation in the Middle East deteriorates further or yields more disruptions to energy trade routes. How our region is shaping up: “Lackluster performance” in Egypt contributed to Africa falling behind on Sustainable Development Goals, with growth in Africa forecasted at 3% in 2024 — up from 2.9% in 2023, the report said. Falling oil prices and production cuts saw KSA’s oil sector contract 8% last year, offsetting 6% growth in the country’s non-oil sector, and resulting in a 0.9% contraction in the country’s GDP in 2023. Despite the outlook remaining grim for KSA’s oil sector, growth in the non-oil sector is expected to drive 2.7% GDP growth in the Kingdom this year. Growth in Turkey’s GDP decelerated to 4.5% in 2023, with severe monetary tightening measures aimed at curbing inflation and stabilizing the TRY forecasted to see the country’s GDP growth slowing further to 3.5% in 2024, the report also said. World merchandise trade is expected to rebound to 2.6% growth in 2024 and 3.3% growth in 2025, following a 1.2% drop in 2023, according to the World Trade Organization’s (WTO) Global Trade Outlook and Statistics April report (pdf). High energy prices and inflation in 2023 saw imports fall in North America and Europe, however imports surged in the Middle East and the Commonwealth of Independent States (CIS). Despite indications that trade will improve this year, geopolitical tensions, disruptions at the Suez Canal and the Panama Canal, and another wave of inflation risk derailing a recovery in trade, the report also said. Speaking of the Suez Canal: Contrary to initial reports which foresaw significant economic losses due to Red Sea disruptions and the resultant fall in Suez Canal transits, more recent assessments show that impacts are less severe than initially anticipated, the report said. Several factors were cited as mitigating factors, including continued use of the Suez Canal by some vessels, relatively minor delays due to reroutes around the Cape of Good Hope, a drawdown in maritime freight rates after an initial spike at the beginning of the crisis, robust inventories that smoothed supply chain shocks, stable energy markets, and higher shipping capacity when compared to pandemic levels. Middle East exports are expected to grow 3.5% and 2.2% in 2024 and 2025, after falling 1.6% in 2023, the WTO said. Contrary to most world regions, Middle East imports gained 9.8% in 2023. Imports in North America and Europe fell 2% and 4.7% during the same period. Middle Eastern exports are projected to grow 1.2% and 2.1% in 2024 and 2025, the report also said.

Liner Shipping Connectivity declined in regional countries reliant on Red Sea trade with significant drops seen in Egypt, Israel, KSA, and Jordan, according to data from the most recent update of the United Nations Conference on Trade and Development ’s (UNCTAD) Liner Shipping Connectivity Index (LSCI). The index tracks countries’ connectivity to the global containerized shipping network by collating data on direct connections, weekly calls, companies providing services, services available, total deployed carrying capacity, and the size of largest ships received, according to UNCTAD’s methodology. The notable drops in regional connectivity performance between Q4 2024 and the present correlates with Houthi-related Red Sea attacks, which began in the previous year’s final quarter and saw most of the world’s major carriers reroute shipments away from the Red Sea. Israel was also among the hardest hit regionally: The country’s shipping connectivity plummeted 43.78 points q-o-q to 91.31 points in Q1 2024, with Yemen’s Houthis particularly targeting Israel-linked or Israel-bound shipping. Israel’s chief Mediterranean ports at Ashdod and Haifa have also been targeted by Iranian proxies in recent months. As a result, Israel’s ranking on the index dropped 19 places, to 57 in Q1, from 38 in Q4. Jordan was also hard hit, with operations at Aqaba port — the country’s only maritime gateway — severely affected by Red Sea disruptions. Jordan’s LSCI shed some 20 points q-o-q to 52.13 in Q1 2024, with the same period seeing the country drop 19 spots in rankings to 85. The country set up a task force, which includes the Jordan and Amman Chambers of Commerce, the Jordanian Navigation Syndicate, and the Jordanian Logistics Association, to handle the sudden drop in volumes at Aqaba. The task force urged Aqaba Container Terminal to provide incentives for marine routes that continue to serve Aqaba Port in late January, while also proposing waiving storage fees for shipping providers and owners of empty containers prepared for export.Saudi Arabia also saw poorer connectivity since disruptions started, shedding 43.26 points q-o-q to 248 points in Q1 2024. The Kingdom also fell 5 spots in rankings to 23 globally in this year’s first quarter. Egypt did better in terms of connectivity than other countries on the Red Sea, but was the worst off financially as Red Sea disruptions slashed Suez Canal receipts. Egypt fell only two spots in rankings between Q4 2023 and Q1 2024, settling at 22 worldwide in terms of its liner shipping connectivity. However, the decision by major carriers to reroute across the Cape of Good Hope saw Suez Canal transits fall by some 40%. If disruptions persist throughout this year, the country could lose USD 3.5 bn in FX revenues in 2024, equivalent to about 10% of net international reserves and half of its import bill.The UAE seems to have seen some modest benefits from Red Sea disruptions, with the country gaining one spot in rankings to 56 globally since disruptions started in Q4 2024, while its index held steady at 307.9. UAE ports on the Persian Gulf and the Arabian Sea are displaced from the Red Sea and were thus unaffected in terms of the GCC’s substantial containerized trade with Asia. Moreover, the UAE’s bunkering hub at Fujairah saw record sales in March, on the back of a boost in demand attributed to reroutes.

MENA ranked third in terms of overall connectedness in trade, capital, people, and information in 2022, out of a total of seven world regions, and up from 2021’s fourth place, according to DHL and NYU Stern’s Global Connectedness Index 2024 (pdf). The report ranks countries in terms of their international trade, capital, information, and people flows.The breakdown on how MENA performed: The region came second following Europe in terms of depth of flows, and third in terms of breaths, following North America and Europe. In terms of the four pillars of trade, capital, information, and people flows, MENA came second in trade, on the back of the region’s high profile in energy trade and close commercial ties to Europe, fourth in capital and information flows, and third in people flows, the report said. GCC states buoyed the region’s rankings: While the report does not spell out what put MENA at its ranking, it does attribute a diverse range of economies to the region, with oil-rich GCC states robust connectedness to the rest of the world in terms of trade, investment, and people flows, buoying the region’s ranking. Meanwhile, North African states are also well-connected to Europe due to geographical proximity, the report also said, with both these dynamics contributing to MENA placing second in trade after Europe. The UAE was the region’s strongest performer, coming in eighth place globally in terms of overall connectedness, and up three places from its 2017 ranking. The oil-rich state also featured as seventh place in terms of countries with largest international flows relative to domestic activity and saw greater increases in terms of connectedness than any other country since 2001. Bahrain, Lebanon, and Jordan saw the best improvements regionally in overall scores, with Bahrain’s boost attributed to increases in merchandise exports and inbound M&As, the report said. Bahrain saw the largest increase globally in its overall connectedness score, boosting 3 points, and gaining seven ranks in global rankings since 2017. Lebanon saw a 2.5 increase in its overall score, and gained three spots in rankings, as the country’s merchandise imports and outbound M&As recovered following a collapse in the previous year. Jordan saw its score gain 1.9 points when compared to 2021. Peace + security are key determinants of regional countries' global connectedness: Libya saw the best improvement worldwide in the past five years, with its overall score boosting 6.3 points and the country gaining an extraordinary 55 places in rankings, as improvements to security saw international flows recover, the report said. Conversely, turmoil in Yemen saw the country shed 5.4 points when compared to 2021, and place next to last globally in 2022’ rankings, the report noted. Countries with a “basic level of security”, such as UAE and Qatar, were able to attain sustained increases in connectedness by deploying strategies to boost logistics, freezones, and capital flows. Qatar saw a four place boost in overall ranking when compared to 2017.Other MENA countries that increased in rankings: Tunisia and Morocco saw some of the largest leaps in ranking, climbing 16 and 11 places since 2017 to settle at 50 and 52 worldwide. Algeria also gained 10 places, placing it at 120, while Iraq also gained 8 places to rank at 101. Despite gaining 1 rank, Yemen ranked at 181, next-to-last globally after Guinea-Bissau, the report explained. Which MENA countries were worse off? Iran dropped 18 places to settle at 135, as sanctions continued to limit the country’s access to global trade and capital flows. Egypt dipped 7 ranks to 103, while Israel also fell two spots to 61, and Oman notched down one spot to 68. KSA declined three ranks to 49, while Kuwait also fell 13 places to 58. Despite seeing a gain to its overall score, Jordan fell six places to rank at 70. Contrary to common narratives, globalization is still going strong: Despite many predicting that geopolitical and policy changes would see a rolling back in international flows, trade, capital, information, and people flows have proved resilient, the report said. International flows grew faster than those within countries between 2021 and 2022, with global connectedness reaching an all-time high in 2022 and projected to remain roughly the same in 2023. The report also rebuts the trope that globalization is giving way to regionalization and trade within geopolitically-aligned blocs: Despite diminishing trade ties between China and the US, the two global economic giants continue to remain “significantly connected,” according to a press release coupled with the report, with data as a whole not pointing to trade fragmenting along geopolitical lines. Trade is also not being regionalized, on the contrary, most trade is unfolding “over stable or even longer distances, with a declining share happening inside major geographic regions,” the statement added.Who topped the global leaderboard? Singapore came out on top in terms of overall connectedness, followed by the Netherlands, and Ireland.

Global trade patterns are undergoing reconfiguration with two potential pathways on the horizon, according to McKinsey Global Institute’s Geopolitics and the Geometry of Global Trade report (pdf). One route sees global economies concentrating on trade with geopolitically aligned partners while another sees trade diversifying. The report looks at these dynamics via four measures: trade intensity, geographic distance, import concentration, and geopolitical distance.The two scenarios: One pathway sees trade fragmenting as economies shift to engaging with partners within a geopolitically-aligned bloc, boosting trade concentration and limiting risk from geopolitical disruptions, but presenting a drawback in terms diminishing globalization and economic growth. The other route sees diversification in trading partners, shoring up resilience to some shocks, but presenting the drawback of dependencies between geopolitically disparate partners. Pros-and-cons for each pathway can also vary considerably between economies, McKinsley says. A fragmentation route “deglobalizes” trade and limits transactions within geopolitical blocs, the report said. While having the upshot of reduced interdependence between opposed geopolitical camps, this scenario also increases supply concentration and reduces supply chains’ resilience to non-geopolitical disruptions such as natural disasters. Trade fragmentation also limits global economic growth. Such an outcome would be a continuation of decoupling seen today in the declining shares of China-US trade, and Russia-EU trade, the report added. The diversification pathway ensures that no economy is overly reliant on another for products, McKinsley explained. This outcome would see global supply chains more resilient to a wider range of shocks, while still retaining exposure to geopolitical shocks, the report says. Trade diversification may also relieve “acute points of interdependence” for critical goods and products that can only be sourced from a small set of suppliers, such as rare earth metals, but requires coordination and links between geopolitically distant trade partners. This scenario is inline with the concurrent boost in greenfield investments seen across a wide range of developing economies, the report explained. A trade fragmentation outcome would be starkly different from the trade patterns seen today, which more broadly resemble diversification. A trade diversification outcome “would remain quite similar to today, with shifts occurring across specific value chains,” the report said.Multinational Companies (MNC) affect changing trade patterns: Upwards of two-thirds of global exports are attributable to MNCs, McKinsley said. Decisions MNCs take with respect to their supply chains, operations, and markets guide paths towards trade fragmentation or diversification. A fragmented outcome will see MNCs matching their sourcing and production within a narrow set of suppliers and end-markets, with diversification permitting MNCs greater flexibility with respect to their supply chain decisions.MNCs can be prepared for trade pattern shifts: Businesses need to develop better insights by developing more visibility into their supply chains and tracking indicators for shifts in geopolitics, trade, regulation, and labor markets that can cause an impact, McKinsley says. Contingency plans for handling shocks can include shifting supply chains, production sites, and end-markets. MNCs must also develop “core capability” in terms of assessing geopolitical risks and cultivate cooperations with a broad network of diverse stakeholders, the report added.

The unprecedented shipping disruptions in the Red Sea, Black Sea, and Panama Canal have raised risks to global trade, according to a UNCTAD report (pdf) released last week. Continued disruptions could potentially reshape global maritime networks and reconfigure world trade, endangering the free movement of goods and interwoven supply chains, the report says.Where do we stand? The Suez Canal has seen a massive drop in transits over the last two months, as vessels reroute to around the Cape of Good Hope to avoid Houthi attacks. Some 586 container vessels were rerouted in the first half of February, with container tonnage falling by 82% and transits by 42% since the canal’s peak, the report notes. Cape of Good transits are spiking: Vessel tonnage passing around the Cape of Good Hope increased by some 60%, according to the report. Asia-Europe and Asia-North Africa trade routes have no ideal alternative, while the Suez Canal competes with the Panama Canal for Asia-East Coast of North America routes.Additional costs worldwide: The rerouting of ships has caused operational shifts and increases in distances, requiring more vessels and increased ton-mile demand, the report notes. Freight rates have increased significantly on routes that cross the Suez Canal with ripple effects being felt even in far-away Asia-US West Coast routes. US West Coast rates increased by some 130% since November 2023, despite the route not going through the canal.Africa is feeling the pinch: The impact on Suez Canal’s revenues could lead to negative spillover effects for countries such as Ethiopia and Sudan, the report notes. Egypt has lost some USD 508 mn in its Suez Canal revenues due to the ongoing disruptions, with receipts falling to 47% y-o-y to USD 428 mn in January. Several East African countries are highly dependent on the Suez Canal for their trade: Sudan sends 34% of its trade through the canal, Djibouti sends some 31% of its trade through the canal, and Kenya and Tanzania send 15%.Slow steaming is being parked: The disruption is also reversing the environmental gains of “slow steaming,” which saw the shipping industry adopt reduced speeds to curb costs and emissions over the past decade. The rerouting of vessels is leading them to increase their speeds in a bid to cover the longer distances, the report said, explaining that a container ship increasing speed by 1% would increase fuel consumption by some 2.2%, according to the report. The longer distances around the Cape of Good Hope could lead to a 70% increase in greenhouse gas emissions for a round trip between Northern Europe and Singapore, according to the report.While the disruption level has not yet met the same threshold of the pandemic or the global logistical crunch of 2021-2022, UNCTAD is still monitoring the evolving situation of the Red Sea crisis, according to the report.Developing countries will need to monitor key developments to assess implications for transport, and trade, according to the report. Shipping schedules, service reliability, security measures for ships and ports, delays in shipments and delivery timelines, increased freight rates, shipping connectivity, ins. premiums, and the overall geography of trade should be considered, the report notes.

Regional economies are doubling down on diversification, supply chain resilience, and expanding trade ties with new markets in 2024, according to Economist Impact’s Trade in Transition 2024 Middle East Regional Insight report (pdf). Executives from the Middle East are optimistic for the year ahead, citing improvements to trade. The report surveyed the region’s industry leaders on their trade and supply chain strategies, as well as their sentiments. The Middle East is expected to see 2.3% growth in 2024, as gains from a favorable global commodities market boost firms’ output and boost demand. The region’s exports are also expected to grow some 3.8% in 2024, coming third after Asia-Pacific and Africa, with some 42% of firms surveyed citing growing demand as driving an increase in exports. Imports are also expected to grow 4.6% this year, as firms intake more inputs to meet growing demand, with 41.7% of firms citing higher outputs as the chief driver for their imports. Boosted output due to technology upgrades and higher efficiency due to digitized supply chains were cited by respondents as secondary drivers for imports, the report said.Diversification on the agenda: Windfall gains from hydrocarbon exports set to diversify the region’snon-oil economy. The GCC is leveraging these returns to develop new export-oriented businesses in the technology, logistics, tourism, and renewable energy sectors. The UAE saw a 14.4% y-o-y increase in non-oil trade in 1H 2023, with KSA also working to attract FDI to develop its non-oil economy, the report said. As the region’s firms diversify their outputs, they are also looking to expand to new markets, with 33% of respondents citing operations in new markets as being the chief driver for their exports in 2024, the report explained. Strengthening supply chains: 43% of firms surveyed have indicated that they are diversifying their supply chains and working with more suppliers across the world in a bid to “hedge against disruptions and enable faster times to market,” the report said. Middle Eastern firms are also boosting inventories to safeguard against shocks, with 45% of executives implementing one to three month buffers in their supply chains, the highest among all regions. Middle Eastern firms are also leveraging an “agnostic geopolitical stance” to develop trade ties that are unhindered by trade blocs, with regional businesses engaging with China, India, North America, and other regions. Regional giants UAE and KSA are also pushing for more trade accords with a wide range of countries, the report said. Firms were highly supportive of government efforts to open trade, with 63.1% citing multilateral reductions to trade barriers and regional trade agreements as supporting their supply chain strategies.Which regions are expected to be the Middle East’s largest trade partners this year? 43.7% of firms indicated that they expect the GCC market to contribute most to their export revenues in 2024, followed by China (31.1%), with the Middle East (excluding the GCC) and India tying at 28.2%. 37.9% of respondents expect to source the largest proportion of their imports from China, followed by India (32%) and Europe (25.2%), the report explained.

Disruptions along the Red Sea and Panama Canal global trade chokepoints are exerting pressure on global supply chains, hiking spot shipping rates and ins. costs, driving inflation, and weighing down macroeconomic outlook, according to a report (pdf) by Swiss ins. Group Swiss Re. Economic headwinds are set to get worse if the disruptions continue into peak shipping season in 2H 2024, the report said.Spot shipping rates have doubled and quadrupled: Rerouted journeys around the Cape of Good Hope have added some 20 to 30 days and 11k to 15k km to round trips between Asia and Europe, delaying shipments and hiking shipping costs, according to the report. Spot shipping rates between Northeast Asia and Western Europe surged some 440% between October 2023 — before attacks on shipping started — and January 2024, the report said citing Drewry World Container Index (WCI) data. Further afield, drought in the Panama Canal has cut daily transit slots by a third to 24 and doubled spot rates for shipments between Asia and the US East Coast, the report said citing IMF Portwatch. How have the disruptions affected the ins. market? Marine ins. has continued to cover Red Sea transits, but on a case-by-case basis and with higher rates to account for the upped risk, the report notes. Accumulation risks due to port congestions and greater exposure on the back of longer journeys are two factors that will affect ins. decision making. Despite exporters absorbing most of the disruption-driven delays and cost hikes so far, ins. losses may surge if disruptions continue and firms may also have to contend with stickier claims inflation if core goods inflation bumps up due to the disruptions.Inflation is also looming: Disruptions to supply chains are putting pressure on goods prices, as high volume trade routes see turmoil, according to the report. Manufacturer PMIs in Europe and the US have started to reflect longer supplier delivery times and an uptick in input costs, with the automotive and retail sectors particularly affected. Food and energy prices are also susceptible to the disruptions. The longer the disruptions last, the more likely it is that goods inflation will trickle down to the rest of the economy, the report explained.

Maritime trade expected to see moderate recovery in 2023: Maritime trade volume is expected to grow 2.4% in 2023, after inching down 0.4% in 2022, according to the United Nations Conference on Trade and Development (UNCTAD) Review of Maritime Transport (pdf). UNCTAD also predicts persistent but moderate growth in maritime trade until 2028, highlighting the sector’s resilience.Containerized trade bounced back this year: Containerized trade, measured in metric tons, saw a 3.7% drop in 2022 but is expected to increase by 1.2% during 2023, before ramping up to 3% growth between 2024 and 2028. This does however fall short of the 7% long-term growth observed over the previous three decades. But it’s not all smooth sailing: Heightened trade policies, geopolitical tensions, and changes in globalization patterns continue to weigh on maritime trade. On the supply side, container shipping must also contend with overcapacity, requiring carriers to manage capacity via idling, demolitions, and other means. Requirements for the industry to decarbonize and meet regulatory requirements while maintaining growth represents the most serious challenge for the sector going forward, UNCTAD says.Dry bulk and tanker shipments in 2023 continue to be severely impacted by the war in Ukraine: Oil cargo distances hit a long-term high in 2023, as Europe looked to alternatives for Russian energy and Russia rerouted its shipments to markets further afield. Grain shipments traveled further in 2023 than any year on record, despite a brief respite due to the Black Sea grain initiative. Many grain importing countries have had to look to other suppliers, such as the US or Brazil, thereby lengthening haul distances.REMEMBER-Russia backed out of the UN-brokered Black Sea grain initiative mid-year, further hampering Ukraine’s ability to supply global markets with grain. Growing intra-Asian trade is holding back global containerized trade distances:Containerized trade distances have been falling since 2020 but saw a slight uptick in 2023. This can be attributed to a rise in intra-Asian trade, which is carried over shorter haul distances, and has seen a boost in recent years as China continues to lead as a global manufacturing hub. Regional ports saw better connectivity in 4Q 2023: Saudi Arabia saw its largest-ever leap in UNCTAD’s Liner Shipping Connectivity Index (LSCI) for the quarter, jumping 10.8% y-o-y to 79.01 points. Egypt’s connectivity improved 9.4% y-o-y to 74.91 and Qatar saw a moderate 3.5% y-o-y uptick to 41.05. The UAE continues to lead the region in terms of connectivity, with its associated LSCI hitting 80.71, 6.25% higher than the same period last year. Outside of the region, China continues to lead the index globally at 180.36, followed by South Korea (118.83) and Singapore (115.89). The year saw most regions recover in terms of pre-pandemic connectivity.Global merchant fleets are aging, despite an increase in newbuilds: 2022 saw global cargo capacity grow at an annual rate of 3.2%, hitting 2.27 bn dead weight tons (dwt). Container fleet capacity grew 3.9% during the period, while oil tanker fleets grew by 3.4% and bulk carriers by 2.8%. Despite the uptick in shipbuilding and deliveries — predominantly in China, South Korea, and Japan — commercial ships had an average age of 22.2 years at the start of 2023, 2 years older than the average a decade ago.Dry bulk freight rates have been particularly volatile: Shifting demand, congestion at ports, geopolitical troubles, erratic weather, and economic challenges yielded high volatility in dry bulk freight markets in 2022 and 2023. The Baltic Dry Index — a global benchmark for dry bulk rates — peaked in May 2022 before dropping to pre-pandemic levels by the close of the year and continuing to decline into early 2023. A surge in demand — led by post-pandemic industrial growth in China — saw the index rebound in 2Q 2023.Ship turnaround times have improved, but digitization and better regulation are key to further gains: Ship turnaround times improved in most regions in the second half of 2022 as pandemic-related disruptions became less impactful. South Korea leads globally in terms of ship turnaround times due to high levels of automation at its ports. Increased digitization and technology, and “well-oiled” regulatory procedures are vital to realizing gains in port efficiency, the report says.Seaborne trade is taking steps to determine how to decarbonize: International shipping contributes some 3% of global greenhouse gas (GHG) emissions, making efforts to decarbonize the sector a priority for policymakers. A key milestone was achieved mid-year when the International Maritime Organization’s (IMO) Marine Environment Protection Committee adopted a revised GHG reduction strategy that represents the clearest roadmap to date. But the international shipping industry faces some tough choices either way: Meeting the targets outlined in the IMO’s new GHG reduction strategy entails high costs for industry players as they determine the best way to transition to low emission fuels. In particular, carriers and shipowners need to modernize their fleets to run on low carbon fuels whilst still being uncertain as to which alternative fuel represents the best pathway. What’s worse is that ships have long lifespans, meaning that many vessels in the global merchant fleet will be too old to retrofit with new engines but too fresh to scrap.

Global shipping growth is expected to remain sluggish in 2024 due to geopolitical developments, protectionism, and supply chain reconsiderations, Dutch financial institution ING said in a report. However, the MENA region’s trade is poised to surpass the global average in 2023 and 2024, the report adds. That doesn’t mean there’s a lack of demand: Major diversions in shipping routes driven by Russian sanctions are pushing demand up for shipping, especially for liquid bulk, which includes oil and gas. Russia’s oil and gas are still being traded in markets but to different buyers. More Russian sanctions have been coming into effect in 2023, potentially increasing seaborne shipping distances by more than 3% y-o-y. This is likely to carry on through 2024 with no indications of a policy shift.REMEMBER- Western countries have been ramping up G7 price cap sanctions, with the US imposing sanctions on UAE-based Lumber Marine and Turkey-based Ice Pearl Navigation in the first instance of such penalties back in October. The UK followed the US’s footsteps with new sanctions on UAE-based shipping firms including Sovcomflot and three other Dubai-based firms. There could be more diversions with the war in Gaza + the Panama Canal drought: Bulk grain shippers transporting cargoes from the US Gulf Coast to Asia have been sailing longer routes due to the drought paying increased freight costs to avoid vessel congestion, and record-high transit fees in the Panama Canal, which has been facing a drought for months. Israel's war on Gaza is also impacting shipments going through the Red Sea, with several shipping firms diverting their ships from the Red Sea following a string of attacks from Yemen’s Houthis.The longer shipping routes are mostly affecting tanker shipping, particularly for Russian oil heading towards China and India where it is sold at reduced rates. The G7 nations are ditching Russian oil and are opting for US and Saudi crude and Indian diesel. This will drive global oil product shipping up by double digits in 2023, while tonnage demand will grow by 4% y-o-y.Container trade is seeing mild contractions in 2023, but is on track for 3% y-o-y growth in 2024, according to another ING report. The growth is expected to be driven by the normalization of consumption, destocking, improved global trade conditions and recovery from sanctions imposed on Russia are all set to drive a 3% y-o-y rise.Heavy fuel oil (HFO) prices dropped by almost 30% y-o-y in 1H 2023 despite inflationary pressures, helping container shipping companies’ costs. Low sulfur compliant fuels like very low sulfur fuel oils (VLSFO) and marine gas oil saw even larger drops, narrowing fuel spreads. The oil market does, however, remain volatile to inflationary pressures with a constant risk of increased prices. Demand for LNG shipping, on the other hand, has been strong this year, with ING expecting it to rise more than 4% in 2023, according to the report, The rise in demand is coming on the back of more floating LNG terminals popping up in regions like Africa, the US and Qatar, to ramp up production to replace Russian gas.Grain trade has been holding up well: After the disruptions in 2022 that came with the Russia-Ukraine war, port disruptions have been easing, with grain trade on the rise 4% y-o-y this year, the report said. Without any further significant interruptions, a a similar increase is expected next year, it explained.The number of new tankers in 2023 hit its lowest point since 1996, especially very large crude carriers, on the back of increased concerns among investors due to the tankers’ long lifespan, as well as the risks related to shifting to cleaner energy, the report said. Orders The tanker market’s main elements remain strong: The drop in order books, existing fleet inefficiencies and continued high demand for oil is positioning the market to continue growing financially. Orders for new product tankers picked up a bit during the year, but the rise in demand for shipping goods across longer distances has raised utilization rates and market pressure, the report said. Rates are also poised to stay high: The cost of utilizing tankers to transport goods stood at some USD 40k a day in July since the Russia-Ukraine war, double the average of the past 10 years. The tight market conditions are expected to keep tanker rates at elevated levels. The oil market does, however, remain turbulent and oil prices could fluctuate in the future.