Future of Shipping the Shipping Term Paper
- Length: 55 pages
- Sources: 55
- Subject: Business
- Type: Term Paper
- Paper: #37683344
Excerpt from Term Paper :
Newly independent countries joined in the shipping industry as a way of demonstrating their economic independence, leading to an increase in the number of open registers as owners in the traditional maritime countries could now register in countries with less demanding tax laws and lower costs for workers. Shipbuilding, which had long been dominated by Europe and North America, moved instead to East Asia. Other changes also took place in the industry:
Shipowners, still seeking to cut costs, looked to the developing countries for seagoing personnel, and multinational crews became more and more common. Some owners left the operation of their ships to specialist ship management companies. Manning agencies supplied an increasing proportion of the world's seafarers. Some, or indeed all, of these companies may come under different jurisdictions (Shipping: The shoreline of time and technology 1997, p. 85).
Ship management was not immediately affected by these changes, but the changees did lessen the authority of individual governments, leading to more safety violations:
Some newer shipping nations lack the trained personnel, systems and institutions required to run a shipping administration effectively, and some shipping companies have seen this as an advantage. While no Government sets out to run substandard ships, statistics show clearly that some flags have more of them on their register than others. Clearly, the weakness of the administration concerned is regarded as an advantage by shipowners who know that their vessels are in such bad condition that they would not be allowed to operate under other flags (Shipping: The shoreline of time and technology 1997, p. 85).
As the industry moved from major nations to smaller countries, there was also a reaction to some of the technological changes made, such as the use of new standardized container boxes. This change began in 1955 and made it possible to deliver goods by ship in a box that could then be unloaded directly onto transport truck trailers. One problem with this was an increase in conflict among shipping lines, trucking firms, railroads, and unions, delaying full implementation of the change until 1966:
In the years that followed, standardized containers were constructed, generally twenty or forty feet long without wheels, having locking mechanisms at each comer that could be secured to a truck chassis, a rail car, a crane, or other containers inside a ship's hole or on its deck. The use of standardized containers also meant that intermodalism of international trade, the movement of cargo from an origin in one country to a destination in another by more than one transport mode, became commercially feasible (Talley 2000, p. 933).
Among the long-term changes brought about by the switch to this technology was a restructuring of the ocean transportation of general cargo, leading to the formation of container shipping lines, or ocean carriers specializing in the transport of containers. In 1980, the twenty largest container shipping lines controlled 26% of the world's capacity. By 1995, the twenty largest lines controlled almost 50% of this capacity (Brooks 1996).
Of this fifty percent, 49% belong to Asian operators, 33% to European operators, and 14% to the United States, while the remaining four percent were controlled by others. By 1997, the twenty largest container shipping lines accounted for 78.2% of the traffic (Dow 1998, 8D). The top three of these were Sea-Land, Evergreen, and Maersk, and these three accounted for 33.2% of the traffic (Talley 2000, p. 933). Data showing the countries involved and the tonnage they carry, in terms of twenty-foot equivalent unit (TEU), can be seen below:
International Seaborne Trade: Container
Throughput of World Ports
Source: Global Container Port Demand and Prospects, Surrey, United Kingdom.
The major ports of the world are indicated in the chart below:
Ocean Shipping Consultants, 1997
The World's Twenty Largest Container
Ports (for 1997)
United Arab Emirates
New York/New Jersey
Source: A survey conducted by the American Association of Port Authorities. (Talley 2000, p. 933).
The greater concentration of shipping has produced greater financial deterioration for the container shipping line industry. In 1966, the estimated collective losses of container shipping lines operating in the transpacific, transatlantic, and Europe/Far Asia trades reached $411 million (Porter 1996), with losses thought to show the continuing imbalance between market supply and demand, as represented by excess ship capacity and declining freight rates. Facing this change, container companies have found it difficult to raise rates to make up for their losses. They have therefore attempted to improve their financial situation by reducing costs, and they have done this by forming alliances, merging, and investing in more cost-efficient ships. Many of the largest container shipping lines have formed such alliances so they can share vessels and other assets (such as terminals), helping to reduce operating costs without any sacrifice in the frequency of service. At the same time, they can remain independent in their operations: "By reducing its number of port calls, an alliance line would save ship capacity as well as improve transit times. The saved ship capacity, in turn, could be diverted to new service routes" (Talley 2000, p. 933).
The Greek Shipping Industry number of studies of the shipping industry use the Greek shipping industry as a representative of the whole industry, largely based on the clannish nature of the Greek branch of the industry, assuming then that any change in management style is significant. Choi and Grammenos (1999) note that many industries are undergoing changes because of globalization, and they find that this is affecting the Greek shipping industry as well. They state that this industry is traditionally based in Greece with a wide international network, but it is being forced to make structural adjustments in response to changes in the regulatory environment and requiring different methods of financing. The authors also note that there will also be inevitable change to the competitive structure of the industry as a whole. The authors write,
Ethnic homogeneity can provide market signals that can compensate for the contract uncertainty arising from the absence of legal means of contract enforcement. We also consider the implications for shipping finance and organizational structure of recent changes in international shipping regimes such as those involving shipping cartels and safety and environmental concerns (Choi and Grammenos 1999, p. 34).
The Greek shipping industry as it exists today was created over a period of two centuries, and the major European powers considered the Greeks to be middlemen in their trade with the Ottoman Empire. Later, Greece would become a maritime nation in its own right:
Two factors have contributed to the global competitiveness of Greek shipping industry. First, the Greeks, using the opportunities in their trade as middlemen, organized themselves into an international shipping network resembling a clan where members form a clublike arrangement. Such an arrangement generates positive network externalities such as transaction cost saving, buildup of reputation capital, and quality assurance through trust, which stems from "Greekness." This type of arrangement based on ethnically homogeneous grouping is akin to the Chinese middlemen network in Southeast Asia and the Maghribi traders in the medieval Mediterranean, so that "Greekness" or the Greek ethnic identity has a special meaning in the shipping industry (Choi and Grammenos 1999, p. 34).
In addition, the Greek government has sought to attract overseas Greek shipping companies to Greece and has also worked to keep existing shipping companies in place by offering favorable tax agreements.
In spite of this, the Greek industry has been changing as changes take place in the international regimes governing the shipping industry. These changes are expected in time to make it necessary for shipping companies "to increase their capital base, make new investments, disclose more information about their operations, and professionalize their management structure" (Choi and Grammenos 1999, p. 34). Shipping companies should also be able to affect the functioning of the shipping network and its relationships with the environment and to do so because international regimes influence the behavior of actors in the global economy by setting the "rules of the game":
One area of shipping management that is most profoundly affected is shipping finance, because it ultimately involves the governance system of shipping companies. The stringent vessel requirements and enhanced quality standards of shipping industries are forcing Greek shipping companies to rely on global financial capital markets for financing; this, in turn, requires changes in business processes through increased disclosure and an enhanced investor relationship, because the rules in global financial markets are set by the Anglo-Saxon capitalist system where shareholder value takes precedence over other claims. The use of capital markets, therefore, will force the shipping companies to grow in size (Choi and Grammenos 1999,…