4 Major Roles of Shipping in World Trade

The shipping industry handles the majority of world trade. It can transport a variety of goods to most locations worldwide. Today, most big corporations rely on shipping companies to transport their goods to consumers. Different types of vessels pass through several shipping routes to reach their destination. As technology continues to advance, the shipping industry is adopting new technologies to make each trip safer and more efficient. This article discusses four major roles of the shipping industry that affects global trade.

1. The shipping industry is responsible for almost 90% of world trade.

The shipping industry handles a whopping 80 to 90% of global trade annually. More than 80% of trade by volume is carried by cargo ships to various ports around the world. Think of all the consumer goods you receive through different courier services. Most of these goods were likely shipped to you by overseas manufacturers via the shipping industry.

Furthermore, an estimated 70% of world trade by value is transported by sea. Cargo ships carry high-value imports and exports daily. Global manufacturers are all over the world, and they rely on the shipping industry to reach their consumers on all continents.

Imagine a world without the shipping industry. You won’t be able to enjoy goods that originate from other continents! The globalization of trade has contributed to a resurgence in world economies. The trade experienced a 4% growth rate in 2017 and continues to be on the rise today. Thus, without the shipping industry, global economies will decline.

2. The shipping industry transports different types of cargo.

The shipping industry can transport all types of cargo. These include luxury cars, jewelry, precious stones, and electronics. They also include fast-moving consumer goods such as food supplies and necessities. That is why it has now become easier to buy high-value items overseas and have them shipped to your location.

When transporting different goods, different types of vessels are also used. These include the following:

  • Bulk carrier ships for bulk solid loads such as cement, wood, and grains. These ships can also carry bulk liquid loads including cooking oil and petroleum.
  • Gas carriers for liquid gas.
  • Oil tankers for raw oil.
  • Container vessels for fast-moving consumer goods such as clothing, electronics, and documents.
  • Livestock vessels for live animals.
  • Reefer vessels for perishable goods, usually vegetables, fruits, fresh food, and temperature-sensitive medicines.

3. The shipping industry can impact the flow of global trade and shipping costs.

Major players in the shipping industry can affect the amount of trade traversing through each port daily. They can also affect the cost of shipping to and from each port. But how does this happen?

There is currently an imbalance in global trade. Some countries have a large volume of exports, while others rely on imports. For example, China has a massive export system that they rely on for economic growth. Chances are that a lot of the goods that you have purchased come from a Chinese factory.

But, China doesn’t have a huge store of raw materials such as minerals and grains. Raw materials such as coal are more available on the American continent. Thus, China must rely on the importation of raw materials to be able to produce their export goods.

In the same way, some third-world countries have massive stores of raw materials but no capacity to develop them. So, they rely on exporting raw materials such as minerals while importing finished products such as electronics.

This export-import imbalance affects the costs of shipping, which major shipping companies dictate. For instance, ships carry cargo to a certain port. But on their return trip, the ships are empty because that port didn’t have any goods to load for exportation. One-way trips like this lead shipping companies to charge a higher shipping cost. If an empty ship travels to a certain port to collect cargo, this will also entail higher costs. Thus, shipping rates vary depending on the origin and destination of the goods.

4. The shipping industry can speed up global trade through technology.

The shipping industry handles most of the global trade, and there is a need to adopt new technologies. Gone are the days when ships would take months to reach their destination. Shipping companies now apply new techniques with the use of big data and route optimization. This results in faster travel time, better ship routing, and ease in port congestion.

The Bottom Line

The shipping industry plays a major role in global trade. Not only does it carry the majority of goods around the world, but it also affects trade flows. The industry can also impact the speed and cost of each shipment.

Shipping companies are now implementing corporate sustainability goals. These goals allow ships to continue to transport goods while managing carbon emissions. As engineers continue to develop innovations in ship technology, the future of the industry is in automation and efficiency, which will further enhance global trade.

 

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