Global shipping – a dynamic market
Growth through globalizationThroughout history the oceans have been important to people around the world as a means of transportation. Unlike a few decades ago, however, ships are now carrying goods rather than people. Since the rise of intercontinental air travel, sea travel has become limited to shorter trips (ferry services across the Baltic and North Seas, the Mediterranean, Japan and Southeast Asia) and recreational cruises. The latter have recently experienced a tremendous boom and represent an increasingly lucrative source of tourist income. As markets became increasingly globalized, shipping volumes soared. From the 1950s to the latest global economic crisis, the growth rate of international trade was almost consistently twice that of economic activity as a whole. From 2000 to 2008 world trade increased by an average 5.4 per cent each year, while economic activity, as measured by the global Gross Domestic Product (GDP), increased by only 3 per cent per annum. Due to the spectacular rise of trade vis-à-vis economic growth, world trade since the 1950s has more than trebled to 45 per cent of the global GDP, while goods destined for the processing industry have in fact more than quadrupled.
- With respect to the value of the goods, about 23 per cent of world trade is between countries with a common border. This percentage has remained fairly constant over recent decades. Between continents, however, it differs a great deal depending on their level of development. In Europe and North America the proportion is the highest at 25 to 35 per cent. This trade is predominantly transacted by road and rail. Cargo between countries without a common border is carried mainly by sea, although increasing quantities of manufactured goods are being forwarded by air. Growth rates for air freight are more than double those for shipping in recent years. Which mode of transport handles how much cargo depends on the (relative) transportation costs and the value-to-weight ratio of the goods – the higher the value per unit of weight, the less significant the cost of transportation. Punctuality and reliability are considered more important for valuable commodities.
- According to research by economists, higher-income households purchase higher-quality products. The residents of wealthy countries therefore tend to buy more quality goods. Accordingly, rising incomes influence the demand for transport in three ways. First, quality goods are more expensive. Their value-to-weight ratio is therefore higher and the cost of transporting them is lower compared to their value. Second, as incomes rise, consumers are more likely to purchase certain expensive products and fancy goods. At the same time they expect to receive the articles within a very short time. Third, the delivery period itself is a key element of product quality, having an increasing influence on purchasing decisions; customers are no longer prepared to tolerate long delays. All of these factors have contributed to the even higher growth rates of air freight in comparison to shipping.
What fuels maritime trafficAs mentioned, the main reason behind the massive increase in shipping was the growth in world trade. But institutional and technological factors also had a role to play. In the past, the liberalization achievements of GATT and its successor the WTO provided a new momentum to world trade. China’s economic opening to the outside world, which led to their admission to the WTO in 2001, was also very significant – its exports quadrupled within 5 years. Another example of integrated markets boosting international trade is a trebling of exports from Mexico to the USA within 6 years of NAFTA being established.
- The appetites of the industrial nations and newly-industrializing emerging economies, particularly China and India, for energy and mineral resources led to increasing quantities of goods being transported from far-distant countries. The information and communications technology revolution dramatically reduced the costs of mobility and accessibility. It allowed new network connections and production processes such as just-in-time production, outsourcing and offshoring, and provided a tremendous stimulus to logistics. As a result of rising demand, transportation costs fell. Ships increased in size. Economies of scale were exploited. Furthermore, there were technological advances and organizational improvements in port management – of general cargo traffic, for instance. Of overriding importance was containerization, the greatest transportation revolution of the 20th century.
- The increasing spread of open ship registries, most notably embraced initially by Panama and Liberia, allowed the shipping companies to combine the relatively low capital costs in the industrial countries with the low labour costs for seafarers from developing countries like the Philippines. It became possible to compensate for sharply rising labour costs, especially in the industrial nations. Furthermore, by changing to an open registry, ship-owners could avoid very costly regulations (such as national labour and employment laws). It is hardly surprising, therefore, that according to UNCTAD, the ten top open and international registries accounted for about 55 per cent of the global merchant fleet in 2008. In 1950 this figure was only 5 per cent. This development has helped shipping to become a genuine global economic sector. As far as ownership structure is concerned, however, it is far less global. A few countries own the bulk of the fleet. About 54 per cent of world tonnage (measured by carrying capacity or “deadweight tonnage”, dwt) is controlled by owners (shipping companies) in Japan (16.0), Greece (15.3), Germany (9.5), China (8.4) and Norway (4.5). In July 2009 the global merchant fleet consisted of a total of 53,005 vessels, made up of 31 per cent traditional general cargo ships, 27 per cent tankers, 15 per cent bulk carriers, 13 per cent passenger liners, 9 per cent container ships, and 5 per cent other vessels. In terms of carrying capacity in dwt, however, the great variation in ship sizes gives quite a different picture. From this perspective tankers and bulk carriers each account for 35 per cent, container ships 14 per cent, general cargo ships 9 per cent and passenger liners less than 1 per cent. In all, the global merchant fleet has a capacity of just under 1192 million dwt. >