Professor Manered Zachcial
3. Shipping Markets
States has kept, mostly under flags of convenience, a much lower percentage, while Japan remains steadily in the second position (Table 1). The rise of new maritime nations from Asia was evident; by 1992 China owned more tonnage than Great Britain, while South Korea was close. The world division of labour in world shipping had changed dramatically.8 The booming markets of the period 2004–2008 contributed to the sharp increase in the world fleet, and to the slight change in the hierarchy of world maritime powers. Great Britain and Norway decreased their fleet and share in the world shipping, while Greece and Japan followed the opposite direction and increased both their tonnage and share.
Germany made a very impressive comeback rapidly increasing its tonnage, especially of containerships. A remarkable change was that of China. Being the driving force of the world economy, China is continually developing its fleet.
The conditions that prevail in the world shipping and shipbuilding markets after the collapse of the freight markets in 2008, make safe the forecast that sooner or later, China will become the driving force in world shipping.
oligopoly and protectionism for the liner market with the formation of the shipping cartels from the 1880s, the conferences, and almost perfect competition for tramp ships.
The unprecedented increase of world production and trade in the first post- World War II era brought more distinct changes in the structure of the markets that led to a gradual decrease of substitution between the markets.9 In tramp/bulk shipping, the introduction of new liquid bulk cargoes on a massive scale, like oil, and of the main dry bulk cargoes as mentioned above (coal, ore, fertilisers and grain) led to the creation of specialised bulk markets and to the building of ships to carry specific cargoes (Figure 1). The liner market continued along the same lines of oligopoly but witnessed increased competition into their protected markets from competitors from developing and socialist countries.
The 1970s were the landmark decade for the liner industry; unitisation of the cargoes, called also containerisation, had been introduced during the 1960s but became widespread during the 1970s, brought a revolution in the transport of liner cargoes (Figure 2).While in 1970 the world container fleet was of 500,000 TEU by 1980 this had increased by more than six times to reach 3,150,000 TEU.10 The new organisation of liner shipping that demanded excessive investments in infrastructure (terminals, cargo handling facilities, ships, equipment and agencies), led to an increase in ship and port productivity, an increase in ship size,11 and economies of scale and decrease of transport cost.12
Figure 1: Shipping markets, 1870s–1970s
Figure 2: Shipping markets, 1970s–2000s
Containerisation included radically new designs for vessels and cargo-handling facilities, global door-to-door traffic, early use of information technology, and structural change of the industry through the formation of consortia, alliances and international mega-margers.13 The above led to a total transformation of the liner shipping companies that became the archetype of a globalised multinational shipping company. The high capital investments required to operate a unitized general cargo transport system led to consolidation in liner shipping.14 This transformation was further provoked by the continuous trend to globalisation.
Liner companies ought to serve the transport needs of their customer on a global basis. Although consolidation in liner shipping was increasing from the 1970s, during the 1990s it progressed faster. Liner companies were enforced to establish global networks in order to meet their customers’ needs. The enlargement of the companies’ size through mergers and acquisitions and the formation of global alliances were the necessary steps toward this. Strategic alliances between competitors have become the dominant form of cooperation in liner shipping.15 Alliances allow competing liner operators to exploit economies of scope and to offer to shippers global geographical coverage.16 It has been stated that increased complexity and intra-alliance competition among partners undermine the stability of strategic alliances.17 Indeed, many changes have been noted over the years. For example, the Grand Alliance in 1995 had as members the Hapag Lloyd, NYK, NOL, and P&O. A few years later MISC entered the alliance while NOL left to follow the New World Alliance. Recently MISC withdraw and today the alliance includes the Hapag-Lloyd, the NYK and the OOCL, the seventh, ninth and twelfth biggest liner companies.18
In parallel, strategies of internal development, merger and acquisitions have led to an increase in the concentration of the supply of liner services. The combined market share of the top four liner companies increased by 7% in a period of three years, i.e. from 31% in 2004 to 38.4% in 2007, while the Herfindahl—Hirschmann Index of the top four players (HHI–4) increased by 182%, from 268 in 2004 to 449 in 2007.19
For example, the biggest liner shipping company in the world, the Danish Maersk, which has a market share of 15%, operates more than 500
containerships ((two millions TEU) of which 211 are owned by the company) and more than 50 terminals worldwide, while its network includes more than 150 local offices worldwide. In 1999 Maersk acquired Sealand, the biggest American liner shipping company, the first company in the world to introduce innovative container technology, while in 2005 it acquired P&O Nedlloyd, then the third biggest liner company. It is thus evident that such a multinational company is a global network by itself and offers global services to its clients.
This kind of development resulted in a total restructuring in the port systems of the various regions and created the need for minor shipping lines to serve regional transport needs or offer feeder services for global liner companies. The major liner companies approach main international ports, from which minor shipping lines distribute the products to regional ports through the so-called feedering services.20 These two groups of companies, the big and minor container companies are not in competition with each other, rather they complement each other.
On the contrary, the development of tramp shipping did not involve such innovative technological developments and no dramatic changes took place in the organisation and structure of markets. The general pattern has not changed over the last 140 years. However, since the 1970s we are not talking of tramp shipping, but of bulk shipping since the type of ship does not characterise the market anymore, but instead the cargoes that are transported. Four main categories of bulk cargo are distinguished:21 the liquid bulk (crude oil, oil products and liquid chemicals), the five major bulk (iron ore, grain, coal, phosphates and bauxite), minor bulk (steel products, cement, sugar forest products etc) and specialist bulk cargoes with specific handling or storage requirements (motor vehicles, refrigerated cargo, special cargoes). Gradually need adapted to demand, and the “tramp” ship was replaced by specialised ships that were built according to the bulk cargoes and the specialised bulk shipping markets; reefer ships for the refrigerated cargo, chemical tankers for chemical gases, lpg and lng for liquefied petroleum and natural gas, heavy lift vessels for specific cargoes etc.
Globalised bulk shipping, even to the present day, is an industry based on trust. Companies form networks of collaborating competitors on the basis of common national cultures of traditional maritime nations such as Britain,
Greece, Norway and Japan (Figure 2). Even members of the same network compete with each other and competitiveness is based on cost. During the twentieth century size did not play an important role in the competitiveness of the company.22 Bulk shipping consists of companies of various sizes – these vary from large companies of more than 50 large ships to single-ship companies that directly compete with each other. For example in 1970, the Greek-owned shipping company of Stavros Niarchos and the Norwegian shipping company of Wilhem Wilhelmsen which operated more than 60 ships co-existed and competed with the British Turnballs that operated five ships and the various Bergen-based and Piraeus-based small companies that operated ships of similar characteristics. Tramp shipping was mainly formed by groups of family enterprises which retained many characteristics of a multinational enterprise.23 No matter what the size of these enterprises, their organisation, structure and strategies had a lot in common.24