WORLD shipping industry faces slowdown in trade growth and an oversupply of vessels, according to the International Monetary Fund (IMF), reports Seoul's ChosunBiz.

As ships ordered during the boom period are being delivered, there are predictions that freight rates will show weakness, and if the uncertainty of trade policies deepens, demand may also decline, said IMF analysis.

The IMF expects trade growth rate to fall 0.2 per cent from the body's earlier estimate to 3.2 per cent. Last year's trade growth rate was 3.4 per cent.

The estimated trade growth rate for developed countries, including the United States, Germany, France, Italy, Spain, Japan, the United Kingdom and Canada is 2.1 per cent, down 0.5 percentage points from the initial estimate.

The trade growth rate for developing countries, including China, India, Russia, Brazil, Mexico, and Nigeria, is five per cent, an increase of 0.3 percentage points from the initial estimate.

"The uncertainty of trade policies has dampened investment sentiment," said the IMF, believing that uncertainty will gradually dissipate by next year with trade growing 3.3 per cent in 2026.

The shipping industry believes that the decline in trade growth rates in developed countries will have a greater impact. This is because the growth of routes from Asia to North America and Europe last year accounted for a significant portion of market growth, the IMF said.

According to shipping research firm Alphaliner, the average weekly capacity deployed on routes from Asia to Europe last year was 469,683 TEU, which is a 7.8 per cent increase compared to the previous year.

The capacity deployed on routes from Asia to North America also increased by 3.7 per cent compared to the prior year, averaging 546,751 TEU per week.

Trade growth rates impact the performance of shipping companies. In 2023, as the trade growth rate fell to 0.7 per cent, shipping companies recorded poor performance.

At that time, HMM's operating profit was KWR584.8 billion (US$41 million) a 94 per cent decrease from the previous year, and sales also dropped 55 per cent to KWR840.1 billion.

Sinokor Merchant Marine also saw its sales and operating profit during the same period decline by 37 per cent and 81 per cent, respectively, to KRW304.0 billion and 34.45 billion. SM Line recorded an operating loss.

This year, concerns of oversupply also exist as ships ordered by shipping companies that benefited from the Covid scare are beginning to be delivered.

The Korea Maritime Institute (KMI) estimates that global shipping capacity will increase by 3.2 per cent this year.