The economic significance of Filipino seafarers: The state of the shipping industry

(Part 3)

The demand for Filipino seafarers will grow as maritime trade continues to expand as it bounces back from the global crisis resulting from the US-Iran conflict in the Middle East. Although this trade will continue to develop, there are significant shifts in the horizon. Any opportunity or threat in maritime trade must not be overlooked, given how much of the global economy rests on it as we experienced in 2025.

According to the United Nations Conference on Trade and Development (UNCTAD), shipping trade amounted to 12,292 million tons worth of volume in 2023, with an average projected growth of 2.4% from 2025 to 2029. The growth was even more marked in ton-miles at 4.2% from 2022 to 2023, given shifting trade patterns that resulted from increases in US tariffs, supply chain uncertainties brought about by international disputes such as the war in Ukraine, and climate change.

One clear sign of trade shifts is the fact that the “average distances traveled per ton of cargo have been increasing since 2005, with the average voyage estimated at 4,675 miles in 2000 and 5,186 miles in 2024,” as the UNCTAD study reported. These shifts should be closely monitored as developing economies rely more heavily on these shipments for growth than the developed ones. The 2021 transport work intensity (TWI) in developing economies for both exports and imports were twice as much as those recorded for the developed ones.

Hence, the demand for seafarers from developing economies will increase even more as these countries’ trade continues to intensify, and their working populations continue to expand. For example, as Philippine conglomerates increasingly invest in corporate farming (bamboo, high-value coconut, palm oil, coffee, etc.) following the example of Vietnam, there will be an increasing demand for manning services as these products are exported. The same can be said for the prospects of increased exports of high-value semiconductor components and processed mineral ores as the US and Japan invest heavily in the so-called Luzon Economic Corridor in order to attract the manufacture of these products to the Philippines and away from China for geopolitical reasons.

The steady increase in the global fleet lends a lot of opportunities for the Philippine economy in general and the manning services industry and Filipino seafarers in particular. Broadly speaking, the global fleet is expected to grow at a slower 3.2% to 3.3% (lower than the average 5.2% recorded from 2005 to 2023). As a benchmark, in January 2024, the global fleet, including both cargo and non-cargo, came to 109,000 vessels with the equivalent capacity of around 2.4 billion deadweight tons (DWT). Most of the 2023 to 2024 growth in the global fleet capacity was driven by container ships (42.7% of total capacity) at 7% annual growth, and liquefied gas carriers (4% of total capacity) at 6.4% annual growth. While oil tankers also composed a significant 28.3% of total capacity, it had grown only at 1.9% in the same period.

This fleet growth, however, is accompanied by ageing. The report states that by the start of 2024, the global fleet age was 12.5 years by DWT and 22.4 years by vessel count. This aged 2% more than in 2023, and over three years more mature than the average age in the past decade. This means that the industry as a whole “will not be operating a younger, more efficient and environmentally sustainable fleet.”

It is not that there is a lack of new technology: there are retrofitting options, new orders in specific ship types like bulk carriers, and the existence of “eco-design” ships. Rather, ships cannot be so easily retired as they have to address rerouting and increased distance-adjusted demand for ships. Renewal progress is slow because of “limited ship demolition activity due to factors such as strong charter markets and demand for shipping capacity arising from disruptions and increased distances,” effectively “extending the lifespan of older vessels and delaying their removal.”

In any case, there are orders for newer, greener ships coming in, although slightly less than previously recorded.

The report stated that as regards ship manufacturing in 2023, “the global ship outlook increased by 9.8% in terms of vessels and by 9.1% in terms of capacity; this is less than three times the increase in 2022. Limited availability of berths at shipyards and high prices for newbuilds (also) contributed to moderating growth.” The tempered growth hence comes with adjustments from the shipyards regarding their capacity and variety of ship builds. For instance, more recent orders shifted to LNG carriers (50% of active capacity), tankers (7.5%), and bulkers (9.7%).

Container ships still account for around 25% of the orderbook’s active capacity but are waning after the order highs seen in 2021 and 2022. On the other hand, there is also an inherent time lag in the shipping cycle when it comes to aligning demand and supply due to the immediate shift in shipping needs versus the long lead time of ship manufacturing.

In 2023 and the first half of 2024, the supply of ship capacity and vessel utilization were shaped by system inefficiencies and new opportunities to deploy fleet capacity arising from ongoing supply chain disruptions and rerouting. An example is the use of “shadow” fleets (particularly in tankers) amplified by the continued war in Ukraine and reinforced by the latest disruptions. The trend has reinforced the service life for existing ships, boosted ship sales and purchases, increased second-hand prices, slashed ship demolition levels, and motivated some investments in newbuilt vessels. It still remains to be seen how the US-Iran war will modify this trend.

These ships, whether new or old, are subject to a range of operational decisions, including some adjustments, capacity expansion, priority for cargo types, and flag state registration. For instance, while fleet capacity has grown much faster than maritime volume, shifts in shipping routes (especially due to the situation at the Strait of Hormuz during the ongoing US-Iran war) as well as supply chain uncertainties, have largely mitigated the effects of this surplus. Another observable operational trend is the registration of ships under the flag of developing economies, despite the fact that the majority of these vessels are owned by entities based in developed countries.

It is obvious that global industry forces, especially after the disruption to international trade caused by the US-Iran war, will lead to dynamic changes in the shipping industry on several fronts: the number of ships in the global fleet, the variety of ships needed, and the registration-ownership patterns. The manning services industry and the seafaring workforce should be able to ride on or preferably ahead of these dynamic and growing shifts in the global shipping sector.

One thing is sure: as we continue to benefit from our demographic dividend, despite our falling fertility rate, the Philippines will continue to be dominant in the seafaring workforce. As is happening in all the industrial sectors of the Philippines, there should be a constant effort to reskill, upskill and retool our seafarers.

Bernardo M. Villegas has a Ph.D. in Economics from Harvard, is professor emeritus at the University of Asia and the Pacific, and a visiting professor at the IESE Business School in Barcelona, Spain. He was a member of the 1986 Constitutional Commission.

bernardo.villegas@uap.asia