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

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global economic trade outlook economic cycles and maritime shipping

Global Economic & Trade Outlook:Economic Cycles and Maritime Shipping

Jean-Paul Rodrigue

Associate Professor, Dept. of Global Studies & Geography, Hofstra University, New York, USA

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

CAUSES

Monetary system (fractional reserve banking, fiat currencies)

Credit Storm

Transactions and investments.

Difficulty of clearing international trade transactions.

Undue drop in freight volumes.

SYMPTOMS

Debt, asset inflation

Macroeconomic Storm

CONSEQUENCES

Misallocations (bubbles)

Decline in aggregate demand.

Clearing excess capacity.

Production

Consumption

Distribution

business cycles the trend that time forgot
Business Cycles: The Trend that Time Forgot

Credit-Driven Boom

Higher prices in spite of a low demand!

Peak

Credit-Driven Bust

Trough

Depression

Expansion

Recession

Expansion

blowing bubbles and compounding distortions from technology to commodities
Blowing Bubbles and Compounding Distortions: From Technology to Commodities

Commodities / Trade Bubble

Tech / Stock Bubble

Housing Bubble

port and maritime industry finance who is leveraging whom
Port and Maritime Industry Finance: Who is Leveraging Whom?

Investors

Financial Markets

Brokers

Corporations

Money Markets

Commercial Banks

Shipping Companies

Private Investors

Capital Markets

Mortgage Banks

Port Operators

Investments Managers

Equity Markets

Merchant Banks

  • Insurance Companies
  • Pension Funds
  • Banks
  • Trust Funds
  • Finance Houses

Private Placement

Finance Houses

Earnings

Leasing Companies

reviewing assumptions the impacts of financialization
Reviewing Assumptions: The Impacts of “Financialization”

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

dumb money at work
Dumb Money at Work?

EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization

the double squeeze on ports and maritime shipping
The Double Squeeze on Ports and Maritime Shipping

Maritime Shipping

“Cruel” Overcapacity

New terminals coming online

New ships coming online (+ cancellations)

  • Contestability for gateways
  • Contestability for hubs

Rebalancing

Supply

Demand

Port Operations

Lower profitability

Less pressures on terminal resources

Less financial appeal

fallacies of forecasting 2020 throughput forecast selected large ports linear and cag scenario
Fallacies of Forecasting: 2020 Throughput Forecast, Selected Large Ports, Linear and CAG Scenario

From under estimating to over estimating trends

Linearity prevalent in growth trends (1998-2007)

  • Compound annual growth common in forecasts
  • Non-contestability assumption
the caribbean system the transshipment triangle and the panama canal funnel
The Caribbean System: The Transshipment Triangle and the Panama Canal Funnel

Lower aggregate demand.

The “curse” of economies of scale.

Response from West Coast ports.

Response from railways (East vs. West).

New gateways (Canada: CN, Mexico: KCS).

Costs (fuel prices and Panama Canal toll rates).

Competition from Suez and the Mediterranean.

Regionalization of production.

diffusion cycles in containerization towards maturity
Diffusion Cycles in Containerization: Towards Maturity

Niche markets

Maturity

Massive diffusion

Network complexities

Peak Growth

Network development

Productivity multipliers

Acceleration

New (niche) services

Productivity gains

Adoption

the calm after the storm a paradigm shift for maritime container trade and ports
The “Calm” after the Storm: A Paradigm Shift for Maritime Container Trade and Ports
the calm after the storm a paradigm shift for maritime container trade and ports1
The “Calm” after the Storm: A Paradigm Shift for Maritime Container Trade and Ports