China’s One Belt One Road initiative will impact the shipping industry

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Teresas Lehovd blog Höegh Autoliners Market Intelligence

China’s One Belt One Road initiative will impact the shipping industry

24

May 2017

China’s One Belt One Road (OBOR) global initiative is set to build land and ocean-related infrastructure to connect the country with Central and South Asia, Europe, Middle East and Africa. Although known across the globe, it seems so far to have slipped largely under the radar of the shipping community, and will have great impact on trade and shipping in the years ahead.

What is OBOR?


There are two parts to this project, the belt and the road - the belt being the physical road, joining China with Europe, with the road being the ancient east-west shipping lane known as the Silk Road connecting ports in Asia with Africa and the Mediterranean. OBOR is arguably the largest overseas investment drive ever launched by a single country. It encompasses 30 per cent of global economy, 65 countries and 60 per cent of the global population, and will have significant effect on shipping and trade both during the construction phase, but most of all after the realization.

Given the scale of the project, it is not surprising that it is referred to as China’s “Marshall Plan”, which was the American initiative to help rebuild Europe after the Second World War.  The initiative has the potential to help solve a global infrastructure gap. It could also aid growth in developing countries while boosting trade and generating investor returns.

Redefining the logistics network

There are around 900 OBOR-related projects to build a vast logistics and transport network either being negotiated or already in progress. Billions of dollars have already been invested in railways, bridges, roads, ports, industrial parks, oil pipelines and power grids along the various trade routes and further funds have been promised by China last week.

A prime example is the China-Pakistan Economic Corridor (CPEC), which includes the development of a major seaport at Gwadar, Pakistan. This will give China direct access to the Indian Ocean, in contrast to the South China Sea, reducing the transport time to Europe, Africa and the Middle East. To access the port, China is spending billions of dollars in developing the Karakorum highway through the mountains bordering China and Pakistan, to create a much shorter route to the west.

Impact on the shipping Industry

With the investments in port development along the Maritime Silk Road, this will inevitably boost containerised trade and broaden the container network.

For the car carrier industry, the new port infrastructure would open logistical connections to new markets. True, small volumes of niche cars could be transferred to rail in the Asia to Europe trade, but this loss will most likely be over-compensated by the emergence of other business opportunities when vast infrastructure network enables access to millions of new consumers. During the construction of the new infrastructure, massive volumes of various machinery and equipment will have to be transported to job sites along the route.

When established, transport infrastructure is usually an accelerator of economic growth. It will attract more investment and create demand for other industrial infrastructure, which will likely be transported from overseas.

As such, the Chinese world-spanning infrastructure initiative would potentially have a substantial, positive impact on the shipping industry in general, and on car carrier industry in particular.

One Belt One Road Map


Teresa Lehovd is the Head of Market Intelligence at Höegh Autoliners. She holds over 30 years of experience in the RoRo shipping industry, where of 20 years in various market research positions where she is specialised in the research of global automotive and heavy equipment industries. Teresa is also a guest lecturer at the Norwegian School of Management in the area of Competitive Intelligence and Shipping, and frequent speaker at various industry conferences.

 

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