The bulk shipping business: market cycles and shipowners’ biases

Despite a strong linkage with the macro-economic course, the bulk shipping market, in the short period, follows a typical cyclic pattern, where continuous freight adjustments balance demand and supply movements.

In this context—widely unstable but quite regular in its general scheme—the shipowners may have enough competencies and information to take logical and consistent decisions about ship purchasing and chartering.

Yet, why do they periodically make mistakes?

The analysis of shipowners’ behaviour provides a reasonable answer: mistakes incur when they ignore or undervalue the market trends, following their personal intuition or even unwisely imitating their competitors.

The analysis of the Handysize segment among the bulk shipping business offers a significant example of the lack of timeliness in shipowners' behaviour: after a long period of disregard, operators began to notice the opportunities of this market niche and they are now heavily investing in minor units. Maybe it's not too late, but the market has already changed and only a few brave—or lucky—shipowners took advantage of the magic moment.     

Using system dynamics in maritime economics: an endogenous decision model for shipowners in the dry bulk sector

In this paper, we consider the benefits of applying system dynamics in maritime economics. We build an endogenous shipowners' model for the dry bulk sector, incorporating both the decision process of individual shipowners and traditional shipping market conditions. The aim is to arrive at a simulation tool that can be used for a variety of applications, both for teaching/learning and for research purposes. Within the endogenous shipping model, we can distinguish between the strategic and the tactical choices shipowners face. As an application, we focus explicitly on a strategic decision-making process that is relevant to any shipowner, i.e. the sale of a vessel. System dynamics seems to be a tool well-suited for the detailed modelling of strategic and operational behaviour in the maritime business.     

Who pays the ferryman? An analysis of the ferry passenger's selection dilemma

Purpose: based on the known in the literature difference between expected and perceived quality, this study examines the factors and the ways that influence the passenger to select a ferry operator.

Methodology/approach: the research attempts to shed some light on the importance of every selection determinant by employing multinomial logistics analysis which identify that the convenience determinant is pivotal when selecting a service.

Findings: the main findings of the study indicate that among six different combinations of factors—models—perceived service quality together with price and convenience (satisfaction determinants) best describe the choice procedure followed by the passenger. The evidence is drawn from a survey performed in the Greek coastal shipping sector.

Originality/value of the paper: to survive in a competitive market, organizations must continuously strive to understand their customers' wants and needs. Although this is a highly recognized issue in the marketing agenda little or no research has been done on passenger satisfaction and the subsequent selection of a ferry operator.

Practical implications: by using the findings of this work, ferry operators may deeply and timely understand their customers' purchasing behaviour and adapt their marketing policies especially in a competitive and fast-changing environment.     

船东风险评估及实证研究

船东风险是造船企业面临的主要风险之一.船东风险持续时间长、发生的后果对造船企业造成的损失大,并且由于受航运市场波动的影响,具有很大的不确定性,因此船东风险评估成为造船企业风险决策的重要依据.在建立船东主要风险体系的基础上,应用模糊层次分析法建立船东风险评估模型,通过调研我国某家厂的国外船东A,应用建立的船东风险评估模型对其进行风险评估,并对该船东的风险进行了分析.基于模糊层次分析的船东风险评估模型,将对船东风险的模糊判断转化成风险数值,以直观的形式将船东风险及影响船东风险内外部特征的评估值呈现出来,为船厂对船东风险分析与接单决策提供技术支持,具有普遍意义.     

Competition for transhipment containers by major ports in Southeast Asia: slot capacity analysis

Container ports in Southeast Asia accounted for an estimated 30.0% of the world's transhipment traffic in 2004. The share of the region's transhipment trade was forecasted to increase to 32.5% in 2015. The potential offered by this large and expanding market encouraged major container terminal operators located in Port Klang, Singapore and Tanjung Pelepas to compete intensively for this business by attracting major container shipping lines that operated along key east-west sailing routes to hub at their terminals.

This paper analyses the annual slot capacity connected to the three selected ports that was deployed by all the container shipping lines in 1999-2004. The data are computed and categorized based on shipping trade routes. The study aims to shed light on port competition in Southeast Asia for transhipment containers by an in-depth and quantitative analysis.

The analysis finds that competition from Port Klang and Tanjung Pelepas had a negative impact on Singapore's transhipment performance. Although Singapore continued to enjoy a dominant position as the premier transhipment hub in the region in terms of market share by both transhipment throughput and annualized slot capacity, the evidence suggested that its hold on the market appeared to be slipping, albeit gradually. Overall, Tanjung Pelepas is expected to pose the strongest challenge to Singapore's transhipment hub ambitions. Managerial implications for the ports are drawn.     

The effects of marine cargo delays in law and commerce

With the development of door-to-door intermodal services and the advent of just-in-time supply systems, punctual delivery of cargoes is more than ever a priority both for shippers and for shipowners. This paper is about the incidence of delay in transportation, particularly in the marine mode, and its legal and commercial consequences.

The fundamental legal obligations of marine carriers have always included delivery with dispatch. Thus the law would seem to support the commercial expectations of shippers for reliable performance. The authors discuss the nature of these obligations, investigate their adequacy under modern conditions of trade and report on a survey of Canadian shippers and consignees.

The authors conclude that there appears to be a divergence in the toleration of delay, but that few of the Canadian companies suffering unacceptable delays received, or even sought, financial compensation and none of them planned to do more. The authors speculate about their reasons for absorbing the losses incurred through unacceptable delays. The evidence from the survey is that shippers, in spite of their dissatisfaction with the resolution or outcome of incidents of unacceptable delay, are loath to seek compensation through legal means, but instead prefer to resort to a range of commercial actions.     

Some current aspects of marketing in the near-sea ferry and liner trades with particular reference to the lrish Sea

The marketing of ferry services has almost unique characteristics but little literature exists in this field. This paper is the result of a preliminary investigation, based on a series of interviews, into some current aspects of marketing on the Irish Sea. The study considers three services types: container; freight only; ro-ro and multi-purpose ro-ro.

The complementarity, or otherwise, of carrying passengers and freight together is debated, as is the organizational conflict or confusion that may arise from this type of operation. The need to adopt different marketing strategies in the freight and passenger markets is derived from consumers' different buying behaviours. The sometimes contentious relationship between product differentiation and market segmentation strategies is explored and definitions provided. Both market coverage and specialization strategies are found in the ro-ro industries and the more competitive segments are identified. Using 'purpose of travel' as the basis for segmentation, potential growth segments of the passenger market are identified. The marketing strategies employed by the freight industry are less apparent, although segmentation does seem to play a major role in the identification of target markets.

The study indicates the extent to which shipping companies on the Irish Sea have adopted the marketing concept and that scope still exists for them to make greater use of this fundamental business philosophy.     

Job satisfaction and personality of Merchant Navy officers

Until recently little research had been carried out into job satisfaction of seafarers. Wastage in the shipping industry is higher than most other industries and although some improvements have been made to working conditions and facilities the wastage is still very high.

During the last two decades shipping technology has changed drastically, necessitated by changing economic factors, resulting in the need for highly trained personnel. Training costs are high, particularly for officers, and could be reduced if efficient selection processes were employed.

The project is designed to study perceived and implied (calculated) job satisfaction of officers who have served in the Merchant Navy for five years or more. Gone are the days of high port-time/sea-time ratios due to increased port and labour costs. Consequently seafarers may be confined together for longer periods at sea such that a different type of personality may be required to survive the stresses and strains of such a way of life. The project also attempted to discover whether the personalitics of the seafaring officers differ from those of the shoreside population and whether personality is related to job satisfaction at sea.

The project took the form of a survey by applying a questionnaire to Merchant Navy deck, engineer and radio officers at nautical educational establishments between September and October 1978.

The results showed that the majority of officers have a moderately high level of perceived job satisfaction whereas implied satisfaction was comparatively low. The personality of officers was found to be significantly different from that of the shoreside population in almost 50% of the 31 personality scales measured. There were also found to be differences between the personalities of deck and engineer officers.

A correlational study indicated that the personality of the Merchant Navy officer is related to overall job satisfaction.     

An analysis of efficiency of the bulk shipping markets

This article discusses the market efficiency of bulk shipping fleets in both the short and long term perspectives. In the short term it demonstrates that shipowners are profit maximizers and that freight rates are equal to marginal cost, that evidencing allocative efficiency of resources. It assumes that the market is differentiated but the intra-marginal substitution takes place. While it is shown that the marginal cost functions of individual vessels, which are aggregated to provide the market supply schedule, are only unique for a specific voyage, provided the general pattern of trade remains more or less constant the supply function is likely to be relatively insensitive to individual changes in ships' MCs. In the long term it is argued that the market is far less efficient with many factors combining to prevent accurate matching of supply and demand for any but for a very short period of time. In recent years supply has exceeded demand by a considerable amount and it is concluded that finance for ships should be provided primarily from shipowners' accumulated reserves and that loan capital should finance a much smaller proportion of the costs of independent tonnage.     

Contributions to maritime economics—Zenon S. Zannetos, the theory of oil tankship rates

This paper discusses the importance of Zannetos' 1966 book for the development of maritime economic thought. The main contributions of the book are recounted, and the empirical work in the book is reviewed.

The analysis of the present paper is a citation research on the maritime economics literature that refers to the book. Of the 42 papers in the set, about one-third refers to the book in general. A total of 35 papers refer to one or more elements of the book, with an equal number of references to: (1) the term structure of freight rates; (2) the empirical findings on the form of the supply curve; and (3) on the verification of his results.

The general conclusion of the citation analysis is that, apparently, a number of elements of his work are still very valid for current maritime economics thinking, while maritime economists have disregarded several other elements. The latter seems unjustified for some of the business structure observations that are made in the book, such as the notion that the ship is the firm, and the elasticity of expectations. The former observation is the basis for virtually all empirical work in maritime economics that is based on individual contract data (all freight rate analysis is of this nature), and the second is the basis for the analysis of investment behaviour in shipping, investigations of cyclicality and so on.

Zannetos can definitely be seen as the initiator of the important field of term structure analysis in maritime economics. In addition to this, there are several topics in the 1966 book that are as yet unexplored, and deserve empirical scrutiny.     

The impact of US regularory practices on the productivity of ocean liner services?

This United States stands alone amongst the nations of the world in its attempt to unilaterally regulate transnational ocean linear services. The major reason for current US regularity policies with regard to scheduled ocean transportation lies in its fundamental distruct of any form of co-operation amongst competitors as demonstrated by its history of antitrust legislation.

The linear industry, because of its unique technical and economic charectersitics has given rise to the establishment of ocean conferences—co ordinating sgreements between the operators of linear vessels. Whilst ocean conferences are permitted—even encouraged—by the their most diluted form, the so-called 'open conferences.

This Paper offers a critical review of Successive US regulatory practices in maritime transport. It is argued that these practices result in excess costs in US trades to the order of $1 billion annually, and that the linear industry's efficient functioning is seriously impaired by these rules-rules imposed by a government administration which fails to recognize that the linear industry's technical efficiency is of far greater importance than its market performance.     

The competitive environment of liner conferences

Although liner conferences are traditionally assumed to possess effective monopoly power, such a view ignores many important aspects of their competitive environment. This article examines some of these neglected competitive features and shows how they may decisively influence conference pricing strategies.

In the analysis of linear shipping, the notion that conferences are effective monopolists lies at the root of many of the grievances of the conference system. It has also become an integral part of the conventional wisdom of shipping economies, to such an extent that the monopoly power of conferences is virtually regarded as a matter of established fact rather than what it really is-namely a postulated assumption open to testing and refutation.

It is the purpose of this paper to explore the competitive conditions of the industry in which liner conferences operate and to try and establish the extent and limitations of their market power. This will involve an analysis of hte bariers to entry which conferences may be protected by, the manner in which the relevant industry should be defined, the possibility and consequences of new entry, and the response of conferences to their competitive environment.     

Cargo handling productivity. Part 2. The findings

This is the second of two papers on cargo handling productivity presenting the results of the model developed int he first [1] which had been designed to test a productivity measurement method with cross-sectional empirical data. Four productivity measures were employed. Two related cargo handling to time, with labour brought into the analysis as an independent variable. The third productivity measure expressed total throughput as an aspect of labour productivity, while the final measure was a full productivity index developed by relating output to both capital and labour.

The productivity measurement technique demonstrated that this method can be used for cross-sectional studies and can cope with and allow for variation in non-controllable extraneous factors, thus proving useful for policy decision-makers in shipping lines and/or port authorities.

This paper presents the results of the prodictivity analysis for which the analytical design was decribed in Part 1. The first section briefly restates the productivity indices developed. The principal results and tests on these measures are present in Section 2 with conclusion following in Section 3.     

The relationship between design and economic performance of ships

Success in the shipping industry depends to large extent on the quality of the main asset: the ship. The owner or operator will ask herself: do I have the right ship for a certain job, and what performance can I achieve with a given ship. The relationship between the specifications of the ship, which are fixed in the design stage, and the economic performance of the ship has received some attention, but most of the previous work lacks in the extent to which economic performance is measured or expressed.

This paper describes an attempt to operationalize the concept of design for service in the maritime industry. The paper presents a lengthy review of previous work, which shows that some attention was devoted in the past to the relationship between economic and technical aspects of shipping. However, the 'economics' usually turned out to be simple cost calculations, instead of clear insight in costs and benefits of certain design decisions. The main variable for the shipowner to buy a ship, or to operate a ship on a certain route is earnings potential. The relation between technical specifications and earnings potential is fairly direct: desired earnings potential influences the design specifications, and the specification of the finished ship determine the earnings potential. The analysis in this paper shows that shipowners also consider cargo carrying capacity, speed and versatility, but no other, more detailed, design factors.

Subsequently, we present the design for service framework for the shipping industry. This framework points the attention to a thorough service requirements analysis that drives the design stage. Finally, some preliminary work is presented on empirical studies that are currently developed in the Netherlands.     

US shipping policy under conditions of a new world economic and political environment

The maritime policy of the US has evolved over more than 100 years from the support of US shipping through mail and fleet auxiliary contracts before the turn of the century, to the present array of direct and indirect Government aids and regulations based on the assumption that a strong maritime industry composed of both US-flag shipping and US-shipbuilding capacity is essential for the economic well-being and defence of the country. Notwithstanding massive direct and indirect aid to the US merchant marine, amounting to well over a billion dollars a year in recent years, US shipping and shipbuilding has declined dramatically and now comprises less than 3% of world shipping. Only 2.8% of US foreign trade by volume and 6% by value is today carried in US flag ships. Government aids constitute well over 33% of total revenues of US-flag shipping.

The traditional argument for US Government support has been the need for cost parity to permit US-flag shipping to compete effectively in international trade against foreign shipping serving the same routes with presumably lower operating costs. This argument is difficult to sustain today, as vessel costs of many other industrialized nations are now about equal to those of US-flag ships.

In 1970 the US enacted a new, vastly more liberal, maritime act for the support of the US maritime industry. Notwithstanding its even more liberal terms and elimination of the strict cost-parity interpretation, the US maritime industry continues its decline. The recent bankruptcy of two old, established subsidized shipping companies has caused tremors in the industry, yet no new ideas, policies, or plans seem to be forthcoming. It is the objective of this paper to study the development and effects of various historic US Government policies relating to the support of the US maritime industry, and evaluate the positions taken by proponents or opponents of the maritime policy leading to the policy development.

The decision processes are studied by evaluating literature on the evolution of Congressional, administration, industry, and labour interest and positions on the issue of Government aid to the maritime industry. The impact and effectiveness of various elements of past and present US maritime policy is evaluated in relation to the stated objectives. The alternatives to these policies are reviewed in the light of the changing US position in international trade, military strategy, and political objectives. In addition the effectiveness of the present and alternative policies is evaluated as it is and will be affected by changing technology in use, composition of ownership, and operations of US-flag shipping and shipbuilding.     

A model for forecasting future supply of shipping services at Australian ports

This paper aims to develop an integrated model for forecasting both the number of ship visits and their characteristics in the medium and long term. Knowledge of future shipping trends for any port is no doubt important, as the future number of ship visits and their characteristics may have implications for the physical facilities of a port. In addition, more reliance on tonnages as a revenue source has made this knowledge more valuable. The proposed model identifies such major economic determinants as the expected trade throughput, world shipping trends, standards of facilities and future plans of shipping companies/agents. The model examines three possible scenarios for the Port of Melbourne and produces a range of shipping forecasts based on certain assumptions. From the model the major findings were:

world trends in shipping did not have any immediate impact on the shipping trends at the Port of Melbourne;

Future shipping services at the Port of Melbourne in the next 11 years are most likely to be determined by trade demand rather than by technological developments overseas;

there has been no evidence to indicate that the Port of Melbourne has been excluded from the schedule of general cargo ships due to the Port's physical constraints.     

The choices of employing seafarers for the national shipowners in Taiwan: an empirical study

This paper focuses on the binary choice behavior of employing seafarers for the Taiwanese' national shipowners and embraces the empirical investigation based on the Binary Logit Model. First, three groups of important factors have been identified having a bearing on the national shipowners' hiring preferences: crew cost, competence and efficiency (including knowledge, skills, communication, physical and psychological attitude and conditions), as well as quality standard system complying with STCW95. Then, an empirical analysis, based on a Binary Logit Model about the national shipowners' choosing seafarers, is conducted to demonstrate the conceptual framework developed in this paper. The results show that the hiring decision is significantly affected by the crew cost. The national shipowners also consider several other factors when hiring officers and ratings. In addition, there are significant differences in hiring preference between the sailing international services and operating the liner ships. In the future, when the Measure shall be amended, the national shipowners will change their behavior to re-choose the foreign seafarers.     

Delphi forecast of the dry bulk shipping industry in the year 2000

Technological forecasting in general, and the Delphi method in particular, are new decision making tools which so far have not gained wide acceptance in shipping circles.

An attempt was made to use the Delphi method to obtain the views of industry leaders on a host of issues governing dry bulk shipping. A three-round Delphi exercise became the basis for a scenario of the industry in the year 2000.

In addition to dating future events, the exercise tested the respondents' attitudes towards investment and innovation in the field of 'bulking' new edible commodities. The scenario and other data were used as input to the process of selecting an optimal vessel for the carriage of the relevant commodities.     

Potential port responses to new information systems on ships

Innovations in information technology, satellite navigation and hydrography are making it technically possible for commercial ships, run by very small crews, to be navigated in the world's seas and oceans with positional accuracies measured in tens of metres. If shipping lines do make the necessary investment in technological hardware, training, operational readjustments and data acquisition, and are also allowed to exploit the full potential of GPS, it will not be surprising if they then expect the ports to provide levels of information that allow the ships to exploit their new capabilities right up to the berth. Ports wishing to hold or improve their perceived service quality in the competitive port league will need to consider whether, and how, they can meet the shipping lines' requirements.

The introduction of strict product liability law adds a new dimension to the assessment of commercial risk in the various technological possibilities available to the ports. The possible costs involved in cases where third party data processors, software producers and electronic chart hardware manufacturers all stand between the port's data output and the user's perception and use of it, in a completely ephemeral form on a screen, need to be considered carefully. Simpler forms of data transmission, such as via traffic advice broadcast or by pilots in person may be seen as the more prudent choice in the five to ten year horizon.