Chapter : Shipping Industry

The shipping industry transports cargo through designated sea routes. The Sea Cargo industry is not homogeneous, but consists of several discrete sectors, each of which operates in different commercial and regulatory regimes, whose needs are served by different types of purpose-built vessels. The global shipping industry is regulated by the International Maritime Organization (IMO). It can be broadly classified into:

Wet bulk: This includes the transportation of crude oil and other petroleum products.
Dry bulk: It involves the shipment of iron ore and coal.
Liners: They carry small shipments of general commercial freight.

Liners: 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. Liner shipping is the most efficient mode of transport for goods. Liner shipping connects countries, markets, businesses and people, allowing them to buy and sell goods on a scale not previously possible. Liner cargo services operate on regular scheduled services between advertised ports. Liner trades also operate on the principle of common carriage, and cargoes are transported for several shippers simultaneously, rather than the single contract which is the norm in the bulk sector. The liner sector is subject to a wide range of regulatory constraints, both of a safety and commercial nature.

An important feature of the liner-shipping sector is the high degree of collaboration that occurs between rival owners; this traditionally taking the form of conferences. The term "liner conference" is generally applied to formal or informal private arrangements between carriers or between shipping lines for their operations of a particular route or routes. They are multinational or national cartel type organizations, and there is great diversity in the contents and practical effects of conference agreements. Conferences of different membership may be present on both directions of a given route. There are a few single-nation conferences, all the members of which are of the same nationality; however, the vast majority is international in composition. With the advent of containerization, new forms of co-operation, such as consortia, strategic alliances, capacity accords and discussion agreements have also emerged.

Bulk Cargo: Bulk shipping operations are ordinarily carried out for individual shippers on non-scheduled routes. Bulk shipping operations are undertaken by vessels designed to carry homogeneous unpacked dry cargoes. Freight rates in bulk shipping are determined by the interaction of vessel demand and supply on an open market. Economic expansion and contraction, seasonal fluctuations and unforeseen political events can affect the performance of bulk sectors.

Bulk cargo services cover several key sub-divisions based on specific vessel types. Liquid cargoes are carried in chemical tankers, liquefied gas tankers, crude oil tankers and refined petroleum product tankers. Non-liquid cargoes are carried by dry bulk carriers and other carriers. Vessels operating on bulk trades generally do not operate on scheduled services, but on specific voyages in fulfillment of short or long term contracts, where the entire cargo shipped on a particular voyage belongs to one owner. Additionally, carriers may ply variable routes according to local demand in particular ports, and can transport a variety of bulk cargoes. These are customarily identified as a separate sector of the industry, known as tramp shipping. This unscheduled, open market mode of operation, is one of the major differences between “liner” and “bulk” shipping. From a regulatory point of view, bulk vessels operate in a generally free market, and are subject only to international and national safety requirements, although because of the relative hazard of many bulk commodities these regulations are strictly enforced. A common carrier is obliged to carry without discrimination goods for all those who are willing to pay the price.

The primary demand and supply driver in the shipping industry is freight rates, which determines the revenue of shipping companies. Other drivers of the shipping industry are:

Trade growth
Geographical concentration of trade
Threat of wars, piracy, storms and hurricanes
Government sanctions on shipment
Access to and suitability of other modes of shipment

The supply drivers of the industry include:

Demand for oil and dry bulk
Climatic conditions (rains, storms and tides)
Government restrictions on shipment

Collectively, the different branches of the global shipping industry are subject to a wide variety of regulations, reflecting administrative, economic, political or technical objectives. Each regulation reflects a response to specific issues that have arisen as the international trading system has evolved. These regulations may have international multilateral or bilateral origins, or may be applied on a national basis. They may cover flag state obligations, cargo liability regimes, restrictions on access to cargoes, commercial conduct, vessel design/construction and ships’ equipment. They may also cover conditions for ship manning and operation.

Several different vessel types are engaged in the liner trades - general cargo ships, container carriers, reefers, “multipurpose” ships, roll-on/roll-off and special purpose ships. Until the 1960s, general cargo vessels predominated on liner trades, but the advent of unitized cargoes was followed by massive expansion of containerized trade, and in many developed countries container traffic now accounts for over 75 percent of liner trades by volume. As container traffic has expanded this has encouraged the construction of increasingly larger container vessels in order to maximize economies of scale.

A side effect of move to larger vessels has been a consolidation of shipping companies into larger entities, and the tendency for cargo movements to focus on major trans-shipment or “hub” ports, at the expense of direct services to smaller ports and the servicing of “thin” trade routes. Container vessels have now reached 7 000 TEUs, and there are plans for vessels up to 10 000 TEU. The importance of this is that such vessels can only be operated by large companies, which will encourage further consolidation through mergers, consortia or alliances. Both of these developments may affect the regulatory regimes in which liner vessels operate. Also, very few ports can handle such ships, leading to a concentration of major services to a limited number of major ports, implying an increase in feeder and trans-shipment services to other terminals.

Fleet development/ownership: The capital intensive nature of the container shipping industry means that in mid 2000 the top twenty container service operators accounted for over 60% of the world container capacity. The importance of this factor is that again there is pressure on liner operators to exploit economies of scale, and that through various consolidations it is likely that ownership of the world’s liner shipping fleet will drift to an increasingly smaller number of - hands.

Advancing globalization, more flexible tax regimes and an increasingly mobile workforce are creating opportunities and challenges for the shipping industry. New corporate strategies and processes are required to deal with an industry which is being reshaped through market consolidation and shifts in the balance of world trade. Sustained profitability in many sectors, increasingly international operations and ever more sophisticated tax authorities are leading shipping companies to look at effective ways to align their corporate, operational and tax structures.

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

A PHP Error was encountered

Login Area

Create an Account

Understanding Sea Cargo Industry

Chapter : Shipping Industry

The primary demand and supply driver in the shipping industry is freight rates, which determines the revenue of shipping companies. Other drivers of the shipping industry are: