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INTRODUCTION
TO
SHIPPING ECONOMICS
AND
FINANCE
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• WHAT IS SHIPPING?
• HOW IT (SHIPPING ACTIVITIES/
BUSINESS) CONTRIBUTE TO WORLD
ECONOMY?
WHAT IS SHIPPING?
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CONTRIBUTION OF SHIPPING
TO WORLD’S ECONOMY
•
We live in a global society which is supported by a global economy –
and that economy simply could not function if it were not for
ships and the shipping industry. Without shipping,
intercontinental trade, the bulk transport of raw materials and the
import/export of affordable food and manufactured goods would
simply not be possible.
http://www.imo.org/KnowledgeCentre/ShipsAndShippingFactsAnd
Figures/Pages/Default.aspx
WHAT IS SHIPPING
ECONOMICS AND
FINANCE & IT’S SCOPE?
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WHAT IS SHIPPING
ECONOMICS?
 Shipping Economics is the holistic and integrated study of
(1) ocean transportation (shipping); (2) and global supply
chain management.
 * The concept was introduced in 1999 by Professor Hercules
Haralambides of Erasmus University Rotterdam who, at the
same time, also coined the term maritime logistics focusing,
more specifically, on the joint optimisation of container
terminals and liner shipping networks. Research in these
areas is reported in the scientific journal Maritime Economics
and Logistics (MEL), edited by Professor Haralambides.
(www.palgrave-journals.com/MEL) .
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 Shipping economics is the economics of
transportation, in studying the behaviour;
i. of its users (shippers and passengers),
ii. primary service providers (transportation
carriers and ports),
iii. secondary service providers (e.g., ship pilots
and towage, ship agents, stevedores and freight
forwarders) and
iv. resources (e.g., labour, infrastructure and
mobile capital such as ships).
As a field of study, shipping economics and finance
consists of ;
• shipping economics,
• ship economics and
• finance
 Shipping economics is concerned with the economics
of transporting freight by ships.
 Ship economics is concerned with the economics of
ships that are used in maritime transportation.
 Shipping finance is concerned with the remedies for
the shipping organization in managing the capital and
debt towards catering the day to day business needs
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HOW SEA BORNE CONTRIBUTE
TO WORLD TRADE ACTIVITIES?
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SHIPPING AND WORLD TRADE
1) Over 90% of world trade is carried by the international shipping industry.
2) Seaborne trade continues to expand, bringing benefits for consumers across the world
through low and decreasing freight costs. Thanks to the growing efficiency of shipping
as a mode of transport and increased economic liberalisation, the prospects for the
industry’s further growth continue to be strong.
3) There are around 50,000 merchant ships trading internationally, transporting
every kind of cargo. The world fleet is registered in over 150 nations, and manned by
over a million seafarers of virtually every nationality.
4) (UNCTAD) United Nations Conference on Trade and Development estimates that the
operation of merchant ships contributes about US$380 billion in freight rates within
the global economy, equivalent to about 5% of total world trade.
5) Shipping trade estimates are usually calculated in tonne-miles - a measurement of
tonnes carried, multiplied by the distance travelled. In 2003, for example, the industry
shipped around 6.1 thousand million tonnes over a distance of about 4 million miles,
giving over 25 thousand billion tonne-miles of total trade.
6)
Throughout the last century the shipping industry has seen a general trend
of increases in total trade volume.
7) Increasing industrialization and the liberalization of national
economies have fuelled free trade and a growing demand for consumer
products.
8) Advances in technology have also made shipping an increasingly efficient
and swift method of transportation. Over the last four decades total seaborne
trade estimates have nearly quadrupled, from less than 6 thousand billion
tonne-miles in 1965 to 25 thousand billion tonne-miles in 2003.
9)
As with all industrial sectors, however, shipping is occasionally susceptible
to economic downturns - a notable fall in trade occurred during the
worldwide economic recession of the early 1980s.
10) However although the growth in seaborne trade was tempered by the Asian
financial crisis of the late 1990s there has generally been healthy growth in
maritime trade since 1993.
IHS Global Insight - Economic Contribution of Liner Shipping Industry
http://www.ihs.com/products/index.aspx
In November 2009, IHS Global Insight, a recognized global leader in economic
and financial analysis and forecasting, completed an evaluation of the
economic contribution of the liner shipping industry using 2007 as a base
year.
Key findings include:
The annual economic contribution of the liner shipping industry was:
Direct gross output or GDP Contribution -- US$ 183.3 Billion
Direct capital expenditure -- US$ 29.4 Billion
Direct jobs -- 4.2 million
Compensation to those employees US$ 27.2 Billion
Full annual economic impact, including indirect and induced effects:
US$ 436.6 Billion
13.5 million jobs
IHS – Information Handling Services - US
•Cargo transported by the liner shipping industry represents about twothirds of the value of total global trade, equating each year to more
than US$ 4 trillion worth of goods.
• Workers at ports world-wide loaded and unloaded cargo for more than 10,000 liner vesselstops per week, with the average ship making 2.1 port calls per week.
• Liner shipping companies deployed more than 400 services providing regularly scheduled
service, usually weekly, connecting all countries of the world.
• In mid-2008, there were more than 17.8 million containers in the world fleet, which cost the
industry US$ 80.1 billion to purchase.
• In the United States alone, the industry spends US$ 869 million per year to operate the fleet
of chassis used to move containers over land.
• The liner shipping industry has spent over US$ 236 billion in more than a dozen countries on
the purchase of new vessels.
•Such scenarios showed how the world rely so much on sea borne activities in order to sustain their
nation’s economy / GDP.
THE BOX
- HOW THE SHIPPING CONTAINER MADE THE WORLD SMALLER AND THE
WORLD ECONOMY BIGGER
In 2006, former finance and economics editor for the Economist, Marc Levinson released this
book, which makes the case that the modern global economy would not exist were it not for
introduction of the container and the liner shipping industry that moves them. Some of his
notable observations:
The container made shipping cheap and changed the shape of the world economy.
Consumers enjoy infinitely more choices thanks to the global trade the container has
stimulated.
The U.S. imported four times as any varieties of goods in 2002 as in 1972, generating a
consumer benefit - not counted in official statistics - equal to nearly 3 percent of the
entire economy.
The ready availability of inexpensive imported consumer goods has boosted living standards
around the world.
The emergence of the logistics industry ... has led to the creation of new and often betterpaying jobs in warehousing and transportation.
The container not only lowered freight bills but saved time.
TYPES OF SHIPPING
 Discuss
 Liner shipping
 Tramp shipping
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How Liner Shipping Works
Liner shipping is the service of transporting
goods by means of high-capacity, oceangoing ships that transit regular routes on
fixed schedules.
There are approximately 400 liner services in
operation today, most providing weekly
departures from all the ports that each service
calls. Liner vessels, primarily in the form of
containerships and roll-on/roll-off ships, carry
about 60 percent of the goods by value moved
internationally by sea each year.
Source: Fearnley's Review
NB: Figure for 2004 is estimated
WHAT ARE THE FACTORS THAT
CONTRIBUTE TO THE INCREASE IN
WORLD SEABORNE TRADE VOLUME
=
ADVANTAGES OF LINER SHIPPING
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LIST OF BENEFITS /
ADVANTAGES
 EFFICIENCY

LOW COST & SAVE TIME
 LOW ENVIRONMENTAL IMPACT
 COVERED BY NUMEROUS CONVENTION OF IMO
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BENEFITS OF LINER SHIPPING
International liner shipping is a sophisticated network of regularly scheduled
services that transports goods from anywhere in the world to anywhere in the
world at low cost and with greater energy efficiency than any other form of
international transportation.
EFFICIENCYN (COST & TIME)
I.
Liner shipping is the most efficient mode of transport for goods.
II. Large containerships can be operated by teams of just thirteen people
utilizing sophisticated computer systems.
GLOBAL ECONOMIC ENGINE
International shipping industry is responsible for millions of existing jobs and
plays a crucial role in stimulating new jobs.
It contributes hundreds of billions of dollars to the global economy annually
Two independent sources looked at the economic contribution of the liner
BENEFITS OF LINER SHIPPING
International liner shipping is a sophisticated network of regularly scheduled
services that transports goods from anywhere in the world to anywhere in the
world at low cost and with greater energy efficiency than any other form of
international transportation.
LOW ENVIRONMENTAL IMPACT
I.
Most carbon-efficient mode of transportation and produces fewer grams
of exhaust gas emissions for each ton of cargo
II. New International Maritime Organization regulations establish strict standards
for vessels' NOx, SOx, and particulate matter emissions. Also, the millions of
containers that are used around the world are now 98 percent recyclable
HOLISTICLY GOVERN BY NUMEROUS CONVENTION
THE PRINCIPAL REGULATIONS GOVERNING
MARITIME SAFETY
Dealing with the ship
•
SOLAS (International Convention for the Safety of Life at Sea, 1974)
•
•
•
MARPOL (International Convention for the Prevention of Pollution from Ships,
1973/1978)
•
•
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comprehensive range of minimum standards for the safe construction of ships and the basic
safety equipment (e.g. fire protection, navigation, lifesaving and radio) to be carried on board.
requires regular ship surveys and the issue by flag states of certificates of compliance.
requirements to prevent pollution that may be caused both accidentally and in the course of
routine operations.
concerns the prevention of pollution from oil, bulk chemicals, dangerous goods, sewage,
garbage and atmospheric pollution, and includes provisions such as those which require certain
oil tankers to have double hulls.

COLREG (Convention on the International Regulations for
Preventing Collisions at Sea, 1972) lays down the basic "rules of
the road", such as rights of way and actions to avoid collisions.

LOADLINE (International Convention on Loadlines, 1966) sets
the minimum permissible free board, according to the
season of the year and the ship's trading pattern.

ISPS (The International Ship and Port Facility Security Code,
2002) includes mandatory requirements to ensure ships and
port facilities are secure at all stages during a voyage.
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Dealing with the Shipping Company
– ISM (The International Safety Management Code, 1993) effectively
requires shipping companies to have a licence to operate. Companies
and their ships must undergo regular audits to ensure that a safety
management system is in place, including adequate procedures and
lines of communication between ships and their managers ashore.
Dealing with the Seafarer
– STCW (International Convention on Standards of Training,
Certification and Watchkeeping for Seafarers, 1978/1995) establishes
uniform standards of competence for seafarers.
– ILO 147 (The ILO Merchant Shipping (Minimum Standards)
Convention, 1976) requires national administrations to have effective
legislation on labour issues such as hours of work, medical fitness and
seafarers' working conditions.
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THANK YOU
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