Don’t downplay trust issues

COMMENT: The OECD recently published a report with a global outlook on freight transport – the Freight Outlook 2015 – including a forecast for the volumes handled by ports in various regions of the world, but can it be trusted, asks Peter de Langen.
Such forecasts are necessary elements in port development. However, forecasts can also be wrong. A comparison of forecasts from some decades ago with real developments clearly demonstrates this and also shows the relevance of the ‘zeitgeist’: before the oil crisis in the 1970s predictions foresaw continuous high growth; after the crisis and on the back of forecasts of an economic downturn, low growth was the order of the day.
The OECD forecast reflects the belief that trade growth will continue to drive transport and consequently port volumes. North American port volumes are forecasted to increase by close to 400% in 35 years. Volumes in Europe (including Turkey) are expected to rise with a factor of about 2.5, while port volumes in China and India together – albeit it an odd pairing of countries – will increase by a factor of 7.
These results are based on a combination of models that project GDP and trade between countries, turning those into cargo flows in volumes and finally predicting a distribution of volumes over transport modes. This approach certainly is sophisticated, but that does not imply the results are to be trusted. The modelling approach does not capture potential disruptions of past growth patterns. Could 3D printing disrupt supply chain structures? Could initiatives to improve the circularity of commodity flows (more re-use and less waste) change commodity flows in, for instance, the steel and chemicals industry? Or could the ‘sharing economy’ (where we share houses through Airbnb, and cars through Uber or Blablacar and others) impact the need for assets? Studies indicate sharing driverless cars can reduce the number of cars required in major cities by a factor of 5.
There are no answers to these questions, but we do know that people tend to extrapolate past experiences and downplay the effects of potentially disruptive trends. Acknowledging this, I would not put my money in companies that build ports and terminals in North America based on an assumed 400% growth up to 2050. And I would certainly not advocate governments putting taxpayers money in port infrastructure based on the results from a forecasting model alone either.