The Middle East shipping industry would grow by five per cent this year, a drastic drop from last year's double-digit growth, the president of UAE Ship Owners said.
"If you can have five per cent growth that would be good," Sharfuddin Sharaf told Emirates Business. "It is lower than last year but the growth here in the Middle East will be faster than other parts of the world as countries near the GCC – like Iraq, Iran, India – would still need infrastructures."
Sharaf, who is also the Vice-Chairman of Sharaf Group, said although shipping trade in the Middle East would grow, people should be "cautious" at various projections by different analysts.
"Growth rates of 30-35 per cent have been quoted however in my opinion it is more likely to be less than last year's 25 per cent," he said.
Sharaf said the region is more likely to fare better than its peers because most of the shipping companies here are still cash-rich.
"Companies here are more diversified. Most of the ship owners here have their own businesses, surely they are not dependent on their maritime business only," he said on the sidelines of the Marine and Money Conference. "And the banks in this region are still lending although that comes with stricter policies. In some areas they are not lending at all. Now however they look at what you own besides shipping before they lend you."
He said the high demand for oil worldwide, the increasing demand for commodities within the Middle East and the positioning of the region as a major logistics hub are helping the regional shipping industry to continue to grow.
"The (Opec) cuts in the long term may affect the oil transport business but the demand for oil will not vanish," he said, adding that the region is also home to the emergence of new markets and is poised to gain from the growing demand for Brazil, Russia, China and India.
The shipping industry is one of the most affected by the liquidity squeeze.
"This system has greased the wheels of trade for over 400 years," Sharaf said. "The credit collapse is the first and foremost of the concerns that the shipping industry is facing today."
According to United Nations Conference on Trade and Development, the world's merchant fleet had expanded to a record 1.12bn deadweight tonnes, with the orderbook for new vessels reaching a peak of 10,053 ships. But from the middle of last year, companies were cancelling new ships on order, even when they were losing their 10 per cent deposit.
"In real terms, this translates to millions of dollars in real term," he said.