Shipping Markets

To understand the economic mechanisms that have brought about these changes one must step warily. While the shipping market is in some senses a single economic unit, there are important subdivisions. We have already referred to the liner and bulk industries, and probably the most striking aspect of the shipping business to an outsider is the totally different character of the companies in these sectors. Liner companies and bulk shipping companies belong to the same industry, but they seem to have little else in common. The Rochdale Report commented on these divisions within the industry as follows:

Shipping is a complex industry and the conditions which govern its operations in one sector do not necessarily apply to another; it might even, for some purposes, be better regarded as a group of related industries. Its main assets, the ships themselves, vary widely in size and type; they provide the whole range of services for a variety of goods, whether over shorter or longer distances. Although one can, for analytical purposes, usefully isolate sectors of the industry providing particular types of service, there is usually some interchange at the margin which cannot be ignored.

This suggests that there are several important ground rules for approaching shipping economics. First, it emphasizes the importance of the commercial divisions within the shipping market—the liner business carries different cargoes, provides different services and has a different economic structure from bulk shipping. Second, it acts as a reminder that shipping is in another sense a single market. Some shipping companies are active in both the bulk and liner markets and many ships are designed to operate in several different markets; indeed, this is one of the important shipowning decisions that we shall discuss. Consequently, we cannot afford to treat the market as a series of isolated compartments. We must recognize that, particularly in a depressed market, owners can move their investment from one market sector to another in order to avoid problems.

As a result supply/demand imbalances in one part of the market can ripple across to other sectors.The final point is that, however hard we might try to develop the analysis in economic terms, shipping is an international business and the economic forces that make it so significant in economic terms also make it the subject of national and international political intervention. The Rochdale Report concluded its definition of the shipping industry with the comment that ‘Most of the industry’s business is concerned with international trade and inevitably it operates within a complicated world pattern of agreements between shipping companies, understandings with shippers and policies of governments.’ Such matters cannot be ignored. Since the mid-1960s the maritime industry has seen an escalation of political involvement, ranging from the efforts of the Third World countries to gain entry to the international shipping business through the medium of UNCTAD, to the subsidizing of domestic shipbuilding; the regulation of liner shipping and the increasing interest in safety at sea, pollution, and crew regulations. Just as these subjects cannot easily be understood without some knowledge of the maritime economic framework within which the game is being played out, an economic analysis cannot ignore the politicalinfluences on costs, prices and free market competition.