An exhilarating expansion: the world merchant ship fleet’s heady growth over the past decade


Richard Scott

Visiting Lecturer, Greenwich Maritime Institute and MD, Bulk Shipping Analysis

Vigorous enlargement has been one of the most prominent features of the world fleet of merchant (commercial) ships in recent years. During the past decade, from 2003 to 2013, the entire fleet almost doubled in size. It was a remarkable achievement involving vast capital investment. Shipowners in many countries participated, although just a small number of shipowning nations remained at the top and together continued to be the dominant players.

Bulk carriers, tankers and container ships comprise the majority of the global merchant ship fleet’s cargo capacity. Much of the growth has been concentrated in the three sectors. Other significant vessel types are gas carriers, multi-purpose and general cargo ships, ro-ro (roll-on/roll-off) vessels, car carriers, refrigerated vessels, cruise ships and offshore service vessels: some of these categories also have seen notable increases.

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Expansion in the fleet as a whole has decelerated in the past few years. But it remains brisk and there are clear signs of a continuing upwards trend, although prospects for different ship types vary widely. What are the salient points and why did such a huge enlargement happen in a relatively short period? This article examines the changes and looks at key influences and indications of future developments.

Flamboyant figures

At any point in time, focusing on what happened in the ten years just completed is often a statistical convenience. It is a period of sufficient length to enable trends and patterns to be identified which would not necessarily be apparent in a shorter period. The 2003 to 2013 decade proved especially notable, however. Precisely within this timescale, annual growth in the world fleet of ships accelerated greatly to a rapid average rate, compared with many preceding years when relatively slow increases were recorded.

By the end of last year, the capacity of the world merchant ship fleet, measured in deadweight tonnes, had reached 1,690 million dwt, according to statistics compiled by Clarksons Research. Ten years earlier, at the end of 2003, the total was 873m dwt. The difference between the two figures, 817m dwt, represented a 94 percent increase, resulting from average annual 6.8 percent rises. For comparison, in the four immediately preceding years, fleet increases averaged 2.6 percent annually, and for three years before then the average was 1.3 percent.

Looking at individual fleet sectors classified by ship type, it is clear that growth rates varied quite widely, reflecting differing circumstances (especially trade trends). Among the three largest sectors, comprising at the end of last year well over four-fifths of the world fleet’s entire deadweight capacity, bulk carrier and container ship fleet growth was the fastest. Over the past decade average annual expansion in both categories was about 9 percent. For tankers, a much less rapid but still brisk rate of just over 5 percent was seen. Within the group of other ship types, a noteworthy performance was achieved by the LNG (liquefied natural gas) carrier fleet, averaging 12 percent annual rises.

What were the main influences? Annual capacity changes, upwards or downwards, are mainly caused by the balance between two elements. Firstly, the volume of new ship capacity being introduced, known as newbuilding deliveries. Secondly, the volume of scrapping (recycling) of old or obsolete, inefficient vessels. Ship losses resulting from accidents are a very minor influence. Another element, which has been prominent in some past years, is conversions from one ship type to another, such as tankers converted to bulk carriers.

Within the entire world merchant fleet of all ship types, newbuilding deliveries from shipbuilding yards started to gain momentum in 2003, when 55m dwt was recorded, compared with 46-51m dwt in each of the previous three years. There then followed a remarkably strong acceleration, peaking eight years later in 2011 when 167m dwt was seen, based on Clarksons data. It was a lagged response to the massive ordering which had occurred earlier, with new ships being delivered several years after orders had been placed. Subsequently an abrupt precipitous fall occurred, to 109m dwt in 2013.

Scrapping began to decline in 2003, when 28m dwt of all types of ship was recorded, slightly below each of the two preceding years. In 2005 to 2007 it was very low, at 6-7m dwt annually. Then there was a rapid acceleration to 34m dwt in 2009 and a peak 59m dwt in 2012. This pattern demonstrated again how quickly, sometimes immediately, demolition sales respond to changing shipping market conditions and perceptions (latterly, a sharp deterioration). The scrapping total last year fell back to 48m dwt.

Looking at world fleet composition by shipowning nationality, it is evident that throughout the 2003 to 2013 period, four shipowning nations were dominant: Greece, Japan, China and Germany. Together they consistently comprised almost one-half of the world total, based on UNCTAD statistics. At the decade’s beginning, fleets owned by investors operating in these countries (identified according to the location of the true controlling interest, where the parent company is situated) comprised 46-47 percent of global fleet deadweight tonnage. A few years later the four countries’ proportion rose to 49-50 percent, where it has been maintained.

Although the aggregate proportion changed only slightly over this ten-year period, there were changes in individual countries’ world fleet shares. Top contributor Greece’s share declined after 2003, from 20 percent down to the current 15 percent. Japan’s second position rose by a couple of percentage points to peak at 16 percent, from where it has fallen back to about 14 percent in the past two years. China’s share rose solidly, doubling from 6 percent in 2003 to 12 percent in 2013, rapidly overtaking Germany in the past two years to become the third largest shipowning country.

Perplexing productivity

Ships’ tonnage statistics, whatever measurement is chosen, do not provide an accurate picture of the cargo-carrying work or transportation service performed, however. What is revealed by tonnage statistics is only how much weight or volume can be lifted by ships at a particular point in time, a snapshot view. Actual cargo-carrying work done over a period depends upon ships’ productivity: how efficiently they are operated. That requires much more complicated calculations and there are no comprehensive statistics available for the global fleet as whole.

The amount of cargo carried by an individual ship or fleet of ships within any period, such as twelve months, reflects numerous factors. These factors vary greatly over time and among different trades. Periods when the ship is moving ‘in ballast’ (empty) between loaded voyages, a typical feature of employment in the oil or dry bulk trades, vary substantially. Loaded and ballast voyage duration reflects a ship’s average speed, which is influenced by market conditions and can be modified by the operator. Slow-steaming at below ‘normal’ speed drastically reduces a vessel’s carrying capacity in a specific time period. Delays, often caused by congestion, and idle waiting time in ports or at canals also affects voyage duration. Some cargoes do not fill the entire ship (part-loading). Also, ships periodically are unavailable because of maintenance and dry-docking.

All these well-known aspects influence how productively a ship is employed. Only very rough calculations can be made, relating seaborne trade volumes within each sector to relevant ship deadweight capacity, deriving a ratio: cargo tonnes per deadweight tonne. But this ratio is not always a reliable guide. One main reason is that it is sometimes impossible to identify accurately from available figures which ship types are carrying the cargoes. For instance, large quantities of many minor dry bulk shipments may not be carried by bulk carriers. Consequently, when transport capacity statistics are required, ships’ deadweight (or another tonnage measurement) is usually used, despite imperfections as a measure of cargo carrying capability.

Inspired investment?

Capital investment in new ships is an indicator of fleet growth potential. During the past five years, 2009 to 2013, global investment in newbuilding vessels (based on Clarksons Research data) is estimated at $475 billion. Last year’s total was the highest annual amount, within the period, at $127bn. For individual shipowning countries, this indicator of capacity being added is only partial, because second-hand acquisitions, often a sizeable fleet development component, are not included.

Among the largest shipowning countries already identified, owners based in China spent the biggest sum on new ships in the five-year period, at about $53bn, although owners in Greece were almost at that level, with just under $52bn. Japan’s total was nearly $33bn, while Germany’s figure was much lower at about $14bn.

These enormous investment commitments are reflected in orderbook volumes. Ship orders of all types at shipbuilding yards around the world, measured at year-end, reached a peak at the end of 2008 at 619m dwt, which was more than 400 percent higher when compared with the volume on order six years earlier. Typically, the largest part of an orderbook is scheduled for completion within the following twenty-four months, but orders often stretch out over three or four years ahead. A significant comparison also, emphasising the vast extent of the very high end-2008 peak total, is that it was the equivalent of 51 percent of the existing world fleet’s size at that time.

Five years later, at the end of 2013, the world orderbook had shrunk by almost half to 318m dwt, representing a comparatively low 19% of the now much larger existing fleet. Over the period of five years there had been additional ordering, but newbuilding deliveries from the greater earlier orderbook had outpaced contracts added, resulting in orderbook shrinking. Contracting in 2009 to 2013 had added 537m dwt, while newbuilding deliveries totalled 705m dwt. Also contributing to the orderbook reduction were many cancellations and postponements.

Full speed ahead, or slow-steaming?

Some spectacular new ships have joined the fleet in the past few years. One prominent example is the ‘Triple-E’ series of container ships being introduced by Danish company Maersk, each capable of carrying 18,270 TEU (twenty-foot equivalent unit, the standard capacity measurement used in the sector). These giants, 20 of which have been ordered, are the largest container ships constructed so far, more than twice the size of the biggest container ships existing only a few years ago. Another example is the vast 35-ship fleet of 400,000 deadweight tonnes ‘Valemax’ ore carriers which Brazilian mining company Vale has almost completed introducing, including some chartered long-term from other shipowners. These goliath vessels carry more than double the cargo of a typical large 180,000 dwt capesize bulk carrier commonly used in iron ore trades.

The Maersk and Vale ships, and many others, have been designed for use in specific trades where huge volumes of cargo moving, and extensive contractual commitments, probably guarantee more or less full employment over their lifetimes. By contrast, a great number of ships, especially those built for the bulk trades, do not have long-term employment arranged, and their profitability remains heavily dependent upon evolving shipping (freight) market conditions. What are their prospects?

To begin answering this question, a brief look at some fundamental global shipping market features is needed. It is evident that shipping markets are cyclical, reflecting a continuous adjustment process, which aims to balance demand for seaborne transportation services with the supply of services. One key aspect is how participants attempt to anticipate events. Dynamic players try keeping one step ahead, enabling maximum benefits to be derived from any changes in market circumstances, upwards, downwards or sideways. Considerable risk-taking is often involved, based in many cases upon deep and detailed analysis and sound assessments of the interaction of market influences or, in other cases, based upon sheer speculation.

Reflecting shipping market characteristics, particularly in the bulk sectors, decisions on massive capital investments can be made and implemented relatively quickly. Compared with major capital expenditure in other industries, shipping investment often does not entail numerous years of planning and obtaining necessary official approvals. In the bulk trades investment can be a virtually instantaneous activity. That perception of the decision-making process may not be entirely accurate, however, because quick decisions are often based upon lengthy continuous assessments of prospects.

How these characteristics profoundly affect events has been illustrated dramatically in the past few years. In 2009, immediately after global shipping markets plummeted, ordering of new ships also fell steeply to about one-fifth of the volume (in deadweight tonnage) seen at the peak two years earlier when markets were very strong. Then, in the next year, 2010, despite an already vast orderbook resulting from the long previous freight market boom, many shipowners sensed market recovery. Newbuilding orders in that year bounced back rapidly, increasing by almost three-fold. Several years later, in 2013, another huge ordering surge was unleashed when many owners had renewed optimism that the long-awaited market recovery was approaching. The 2010 ordering surge is already having a large impact on global fleet growth, with resulting additional excess capacity delaying the rebalancing of supply with demand.

Currently, over-capacity is still a problem in the three main sectors – bulk carriers, tankers and container ships – to varying degrees. It seems entirely possible that this feature could persist for some time ahead. Continuing a trend seen since 2008, the gap between demand for ships, and the supply of ships, is still wide, leading to mainly subdued markets with low freight rates. Global seaborne trade’s overall growth and demand for shipping services has largely recovered from the setback following the 2008 global financial crisis and its aftermath, an exceedingly severe world recession. Trade has been increasing at a robust pace. But the world fleet of ships and transportation capacity provided (mostly) has been expanding too quickly.

World maritime trade’s powerful upswing in the new millennium (mainly thanks to China)

 by Richard Scott,

 Visiting Lecturer, Greenwich Maritime Institute and MD, Bulk Shipping Analysis

It could be called ‘the China decade’. World seaborne trade maintained a four percent average annual rate of growth during the past ten years, slightly better than the previous ten-year average. This achievement was especially notable in the light of the global economy’s evolution, featuring a wrenching severe recession. But trade growth at that rate would have been impossible without China’s super-size contribution.

During the past decade, from 2003 to 2013, in numerous highly visible ways, global maritime activities which already had been penetrated were then dominated by China’s presence. This pattern is still ongoing, and signs suggest that it will continue for many years ahead. One of the most important aspects of the trend is the phenomenal expansion of China’s seaborne trade, especially imports.

Other countries contributed rising import demand to world trade as well, but none as spectacularly as China. Until 2008, the global economy as a whole was advancing at a robust pace, providing a broadly favourable backdrop for seaborne imports into most areas. After the 2009 recession, economic activity picked up again, although beyond the initial rebound many countries struggled to make further progress against prevailing headwinds. These were difficult circumstances for trade to resume brisk and sustained expansion, yet that is what happened: world seaborne trade as a whole averaged over four percent growth in 2011 to 2013, returning to its ‘normal’ trajectory.

Goliath task for the shipping industry

Commercial shipping’s existence is mainly related to transporting cargoes. Rapid expansion of trade in goods explains why the world fleet of ships saw such strong growth over the past ten years. The huge trade enlargement recorded was remarkable, since this period included the global ‘Great Recession’ in late 2008, continuing through 2009, following the world financial crisis. That slump was widely seen as the most damaging setback for the world economy since the Great Depression in the 1930s. Global economic activity contracted, world seaborne trade was badly weakened and, unusually for an individual year, 2009 saw an actual decline in annual trade volume.

A few statistics emphasise how the pattern of trade evolved in the past decade. In 2003, world seaborne trade – including dry bulk commodities, oil, liquefied gas, manufactured goods (mainly container shipments) and all other cargoes – totalled 6,676 million tonnes. Ten years later, in 2013, the overall total reached an estimated 9,914mt, based on Clarksons Research calculations, cumulatively a 48.5 percent rise. Looking at individual years, a break in the trend is immediately evident. In 2009 there was a four percent reduction from the previous twelve months, followed by a swift ten percent bounceback in 2010. The general pattern was very positive including, significantly, the latest few years of the period up to 2013.

That is the broad picture, but the development pattern among the individual cargo sectors differed markedly. What is abundantly clear is that dry bulk trade made the biggest contribution to the overall advance. Global dry bulk commodity movements, which comprised 2,453mt (37 percent of the total) in 2003, expanded by seventy-six percent to an estimated 4,309mt in 2013, raising their share of the total to 43 percent. Container shipments also grew rapidly, rising by ninety percent, reaching 1,524mt. The second largest sector, oil (crude oil plus processed oil products) was a laggard, growing by a relatively modest twenty-one percent to 2,834mt over the ten years’ period.

A large part of this expansion, particularly in the dry bulk sector, was attributable to China’s multiplying appetite for imports. An especially valuable contribution to the global seaborne trade trend was seen in 2009. As already mentioned, trade declined in that year, but the downturn might have been much worse than actually occurred. A huge jump in China’s dry bulk commodity purchases, completely opposite to the pattern elsewhere, prevented a much greater overall decline.



Sea trade in the ten years ending 2013 as a whole was strengthened by many other countries needing increasing imports. A particularly substantial volume of imported cargo movements was added in Asia, alongside China’s additional volumes. Numerous countries in this region, including India, South Korea, Taiwan and smaller buyers, greatly raised purchases of dry bulks, oil, gas and manufactures. Further cargo import quantities were contributed by countries elsewhere around the world.


Figures for seaborne trade compiled by UNCTAD (United Nations Conference on Trade and Development) emphasise how the Asian region led global cargo movements growth. Roughly four-fifths of the entire growth in trade recorded during the period from 2003 to 2012 (currently the latest year for which these statistics are available) was attributable to extra imports into Asia. Another feature, related to the remaining approximately one-fifth of trade growth, is evidence of a reduction in Europe’s imports, a decreasing tendency in North America and a flattish trend in Japan. By contrast both the Middle East area, and a group of all other countries together, showed considerable imports increases.


The real giant awakes

China’s share of global seaborne trade has risen enormously, resulting from its imports growth comprising a very large proportion of world imports growth. As well as providing more cargoes for a greatly increasing China-owned fleet of ships, this upsurge benefited many independent shipowners in numerous countries and, through part of the period, proved highly profitable. Since 2008, however, variable overcapacity in world shipping markets has suppressed earnings for shipping investors.


In the early 2000s, China’s imports of all cargoes – dry bulks, oil, gas and manufactured goods (mostly container shipments) – comprised 5-6 percent of the world seaborne trade total. Global import demand then was still dominated by European countries, Japan and other Asian countries. Starting in 2003, rapid and sustained expansion in China began. Within ten years, a relatively short historical period, a dramatic transformation had occurred. This resulted in China’s share of world seaborne trade expanding almost fourfold from the early millennium, reaching an estimated 20.4 percent in 2013.


The giant’s emergence as an economic powerhouse affecting the world had occurred earlier. In a memorable comment attributed to him, the famous nineteenth century French Emperor Napoleon Bonaparte foreshadowed the eventual impact when he suggested that China’s awakening would shake the world. But such a cataclysmic event was a long time coming. It started happening in 1979 when China’s paramount leader, Deng Xiaoping, began opening up the economy to world trade, bringing the country’s extended ‘slumber’ to a close.


By the 1990s successive reforms had enabled the Chinese economy to achieve many years of very rapid expansion. Because this development was partly based on export sales, particularly manufactured goods, China became a major and then dominant supplier of these products to the world market. There were huge consequences for the maritime scene: seaborne trade patterns in the container shipping sector changed greatly. The world’s new ‘workshop’ became solidly established. But an even larger impact on global maritime trade was still some way ahead, in the new millennium.


During the early 2000s China began focusing on additional external raw materials and fuels supplies amid rapidly expanding industrial output. More agricultural products were also needed. Although domestic resources of many commodities were widely available, these were insufficient in volume and sometimes in quality as well. Industries including steelmaking, power generation, aluminium smelting, and animal feed manufacturing started placing much heavier emphasis on seeking supplies from foreign sources. The strong advance in quantities imported was the result.


Growing annual seaborne imports into China also formed rising percentages of the upwards overall global trade volumes trend. Statistics illustrate how significant this pattern has been for the global shipping industry, which now depends upon China for a substantial proportion of its bulk carrier, tanker and other ship employment. In 2003 China’s seaborne imports totalled just under 500 million tonnes, within a global total of 6,680mt. By 2013 the China volume had risen to 2,026mt within a global 9,914mt total. These Clarksons Research figures emphasise China’s significance for shipping companies, indicating that, during the 2003-2013 period, annual world seaborne trade rose by 49 percent, while within this volume China’s element increased by 305 percent.


The figures quoted here underline how world seaborne trade has risen greatly, and how a large part of that expansion reflected China’s much more rapidly growing imports. From the angle of additional ship employment created, this point is reinforced by looking at the percentages showing what proportion of growth in world seaborne trade volume during the ten years’ period was comprised of China’s expanding imports. It then becomes even more abundantly clear why global shipping industry players are so intently focused on how Chinese industry and agriculture is progressing, the implications for imports, and the evolving relationship between ‘home’ domestic commodity output and import demand.


As already outlined, global seaborne trade grew substantially from 2003 to 2013. Arguably the most spectacular positive feature during the period was that almost one half (47 percent) of the expansion was contributed by additional imports into China. For dry bulk commodities, the contribution was even larger, and therefore even more striking. China’s extra imports of these commodities (raw materials, fuels, other bulk industrial products, soyabeans and other bulk agricultural products), formed fully two-thirds or 66 percent of overall world seaborne trade growth within the sector. Consequently, shipping industry participants are still transfixed by the China theme.


In a range of key individual trades – iron ore, steam coal (used mainly in power stations), soyabeans, bauxite/alumina, nickel ore, crude oil – China has become either by far the biggest importer or one of the biggest. Expanding Chinese import volumes have been, or in some cases continue to be, the main component of global growth in large-scale trades. Shipowners, charterers, brokers and analysts as well as many others are therefore always looking for any clues about key influences: how demand for the products made by relevant industries are developing, what impact there will be on output levels, and what other factors will determine how much raw materials and other inputs will change as a result.


Among individual commodities, iron ore imports into China experienced, over the past ten years, one of the most dazzling performances ever seen in the long history of global maritime trade. China’s iron ore imports have become gigantic, employing a vast armada of bulk carriers, after rising well over five-fold, from 148mt in 2003 to 820mt in 2013. As a result, these now have a dominant role in world seaborne iron ore movements (one of the largest commodity trades), comprising about two-thirds of the total. Moreover, the 2014 China volume could exceed 900mt. Another example of a large volume trade is coal imports, which rose steeply by over seven-fold in the past five years, from 44mt in 2008 to 327mt in 2013. Crude oil and products imports into China by sea in the past ten years also increased robustly, more than doubling from 114mt, to 293mt last year.


A galloping horse

What seems clear is that China will remain a prominent part of global seaborne trade, and probably a key contributor to its growth, over many years into the future. That is not just a wildly optimistic appraisal. Certainly the country’s economic activity is slowing, and the trend may persist, consistent with a maturing economy. This feature reflects the switch of emphasis, from a demand viewpoint, towards consumer spending and away from capital investment (especially infrastructure projects) and exports. Looking at the economy’s supply side, a switch from manufacturing towards services is foreseen. But, while these forces will restrain production of goods with high raw materials content, further growth in imported natural resources and energy is likely.


The Year of the Horse, 2014, in China seems set to prove another period of increases in many commodity imports, and that trend may continue in the medium term at least. There are positive indicators, although the earlier gallop may be moderating towards a fast trot. Nevertheless, there are also reasons for caution or uncertainty about the outlook. Several questions arise. How rapidly will the economy grow in the years ahead? What, precisely, will be the relationship between economic activity and seaborne trade? Is growth in import demand for commodities likely to continue outpacing production increases in dependent industries? How will foreign purchases of agricultural commodities evolve? Answers involve a complex range of factors which are far from easy to assess reliably.


Also relevant to the general picture of world maritime trade’s progress is the contribution of other prominent players around the globe. A detailed examination of export suppliers is beyond the scope of this article. As import generating areas, other Asian countries, and Japan and Europe as well as the USA are particularly significant. Also, some emerging economies in the Middle East, South America and Africa are becoming more prominent influences. Currently the advanced economies group (mainly Europe, USA and Japan) is still having difficulty shaking off the long term debilitating effects of the 2009 recession and its problematical aftermath, with adverse implications for seaborne trade. Until there is a stronger import purchases trend in these countries, world seaborne trade’s great reliance and concentrated focus on China will persist.


A maritime trade showpiece: starring China this year, old Soviet Union yesteryear

BLOG by Richard Scott, 30 June 2014

grain image grain on a ship grain-ship 2

Seaborne trade in cereals and oilseeds has been centre-stage in the maritime world for a very long time. From early civilisations to the present day, movements of these commodities have been a familiar feature of the international shipping business. In the contemporary era, what is referred to as grain and soya trade is broadly spread geographically, with many importers and many exporters participating. Among individual importing countries, one is now by far the largest and another, now a relatively minor participant, was the largest player three decades earlier.


China has emerged in the twenty-first century as the biggest single importer, mainly of soyabeans although grain (comprising wheat plus corn and other coarse grains such as barley) is becoming more significant. Not so long ago, in the nineteen-eighties, it was the old Soviet Union that was in a similar position of prominence. In those days Soviet grain imports – mainly wheat and corn, accompanied by limited volumes of soyabeans – were an especially difficult-to-predict element of global dry bulk commodity trade, and the sudden emergence of a large Soviet buying programme sometimes had a jolting impact on the panamax bulk carrier market and freight rates.

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During much of the 1980s, the Soviet Union’s demand for grain from foreign suppliers often mesmerised attention in both commodity and freight markets. At its peak this import demand comprised a maximum 25 percent of total global grain and soya trade, and was typically a lower percentage. So it was not really dominant but nonetheless was huge, very variable from year to year, famously unpredictable, and the abrupt changes in monthly shipment volumes gave the trade a reputation for highly erratic progress. Over the following decade it fell back to relatively small volumes.


By contrast the current number one purchaser China, which in 2013 comprised just under 20 percent of global grain and soya imports, exhibits steadier momentum. The usual pattern of activity does not have such a massive disrupting effect on markets as that of the previous top importer, thirty years earlier. Moreover, the longer-term trend for Chinese imports is, arguably, clear: substantial evidence points to vigorous further expansion through the 2010s and perhaps beyond.


Shipping’s Kremlin-watchers

In the decade or so prior to the break up of the Soviet Union into its constituent republics at the end of 1991, grain purchasing on international markets was tightly controlled by the state through its buying agency Exportkhleb. Consequently, Kremlin-watching in the grain and freight markets became an art form. Traders, shipbrokers and shipowners were looking for any signs indicating how much imported grain would be needed, the countries of origin, and what were the likely shipment periods. All these elements greatly affected bulk carrier demand and freight rates.


Dry cargo shipbrokers often focused intently on grain. Although by 1980 iron ore already had been for some time the biggest seaborne dry commodity trade, and coal trade volumes exceeded grain volumes by the mid-1980s, grain retained a disproportionately great influence on the freight market. A widely held view, much of the time, was that grain moved the freight market up and down (although this was not always meant completely literally: it was a broad generalisation).


Several factors explained grain’s market-moving ability. Substantial trade volumes typically entered the market abruptly and, often, unexpectedly. Demand for shipping capacity was augmented by longer loading and discharging operations (compared with mineral trades, for example) with slow discharge rates especially evident in many ports. Delays due to port congestion could be a feature. Relatively inefficient use of a ship’s deadweight (a measure of carrying capacity based on weight lifted) was observed, because some grains were ‘light’ and would fill a ship’s cubic capacity without making full use of the weight capacity available.


Also, characteristically, much grain cargo transportation was arranged on a ‘spot’ basis. Movements often did not form steady flows but were ‘bunched’ (due to the nature of grain buying activity with its fluctuations both in timing and geographically). The related predominant single-voyage charters, as the main chartering mode, amplified the impact of the other features.


All these ship demand enhancing and market-moving aspects were prominently displayed in the Soviet grain import trades. But it was the sheer magnitude (relative to other dry cargo movements in that era) of the Soviet Union’s requirements, and the variability of volumes coupled with forecasting difficulties, which magnified the freight market impact.


Conversation among shipbrokers meeting on the trading floor of the impressive old Baltic Exchange building in St Mary Axe, London had often turned to grain trade. One familiar refrain was “people need to eat” and, as if to underline the point, this discussion might be soon followed by a visit to the luncheon room downstairs to consume a healthy repast. Although perhaps simplistic, the identification of necessary food intake based on imported grain, as justification for a positive view of grain trade and its requirement for shipping capacity, was essentially correct. In the second half 1970s world seaborne grain trade had increased by an average 7 percent annually, although in the 1980s growth was much slower, averaging under 1 percent annually.


More sophisticated arguments were discussed in the 1980s when analysts visited the US Department of Agriculture’s sprawling complex in downtown Washington DC. Talk immediately turned to the Soviet Union’s grain imports. Questions included how much would they buy, over what period, and from where. USDA economists wanted to know whether there were any indications of unusual large-scale activity in the charter markets which could give advance clues to the Kremlin’s import programme ahead, and what might be the impact on ocean freight rates. Answers, if there were any, were often hazy. Most of the time, nobody really knew until the anticipated activity actually happened.


Potent performer: the old Soviet Union

What was the extent of Soviet grain imports in the 1980s and why were the volumes so changeable? Annual imports, mainly wheat plus corn and other coarse grains, together with relatively small quantities of soyabeans, varied between 29 million tonnes and 56mt. For six individual years within the decade, the range was fairly narrow, at between 29mt and 35mt. Three years saw 40-49mt. Within these totals, soyabeans comprised about one million tonnes annually.


The Soviet grain imports peak occurred in trade year 1984/85 (a twelve months’ period measured from the middle of one calendar year to the next, commonly used in agricultural trade statistics) when 56mt was recorded. It was preceded and followed by volumes at the low end of the range, 34mt in 1983/84, and 32mt in 1985/86. This surge and retreat, and some other sizeable year-to-year changes during the decade, had a great impact on short-term demand for bulk carriers.


Large annual variations in the Soviet Union’s domestic grain production, and associated variations in state procurements, mainly explain the fluctuations in foreign purchases, although numerous other factors were reflected in import changes as well. When a poor harvest (compared with the previous harvest) was experienced, mainly caused by changed weather patterns, higher imports were arranged in the ensuing twelve months to offset the shortfall. Conversely, a good harvest was followed by reduced imports. For example, a 20mt (20 percent) fall in grain output in the 1984 harvest, reducing the total to 173mt, prompted the following 23mt imports increase to 56mt.


Production variations (both volume and quality) and, especially, severe shortfalls in some years were not entirely due to weather changes. Temperature or rainfall extremes were detrimental, as in most other grain producing countries. Varying degrees of ‘winterkill’ were experienced, while an occasional sukhovey (extremely hot, desiccating wind) sweeping across the Steppelands of Kazakhstan and Western Siberia severely cut grain yields. Additionally, Soviet farm operational efficiency was not always adequate, and sometimes noticeably lacking, partly reflecting state organisational deficiencies. The results were seen in avoidable planting delays and insufficient seed supplies; inadequate fertiliser or pesticide supply, or mistimed application, or both; and farm machinery shortages or breakdowns and lack of spare parts (for tractors, combine harvesters and other machines).


Another clearly observable influence affecting Soviet grain import requirements was rising demand. Consumption as human food remained fairly static over most of the 1980s period, at about 47mt per year. By contrast, consumption within the feed sector (livestock feed) rose by over 2mt annually, or about 20 percent cumulatively during the decade, amid intentions to boost meat and dairy products availability.


On the supply side, an endemic problem was the large amount of the domestic grain harvest wasted as a result of system inefficiencies. Losses before and after harvesting, and in transport, storage and processing, were proportionately much higher than seen in other countries. USDA economists made estimates for ‘dockage-waste’ varying between 16mt and 30mt annually during the 1980s (10-15 percent of gross harvest output). These amounts included allowances for above-average moisture content (exaggerating the grain volume), and extraneous matter included such as weeds, soil and pebbles which also inflated the total, as well as transport and handling losses.


Soviet Union imports were also affected by changes in grain stocks, and in availability of other domestic crops contributing to livestock feed, known as forage crops. Finally, the amount of grain bought from foreign suppliers depended upon hard currency availability (earnings acquired from oil exports were influential), payment terms, international grain prices, and foreign exchange rates. Ocean freight costs were significant as well.


Powerful player: China      

Compared with the predecessor prime player the factors explaining China’s emergence, as the top individual importer of grain and soyabeans, have been more transparent. The country has remained largely self-sufficient in wheat, corn and other coarse grains (as well as rice), although there are now signs of greater dependence on foreign supplies. For soyabeans, which comprise the biggest proportion of overall grain and soya imports into China, there has been a strong upwards trend over many years as domestic production remained limited amid vigorously expanding consumption.


In calendar year 2013, China’s imports of grain and soya reached 75mt, comprising approximately one-fifth of global seaborne movements in that category. The annual total had expanded rapidly over the preceding decade, from 23mt in 2003, a cumulative 234 percent rise. Within this total, the dominant soyabeans imports more than tripled, to reach 63mt last year. Moreover, a sustained expansion seems likely to continue in the years ahead, based on evidence of underlying influences.


Consumption growth was an especially notable trend affecting imports. The capacity of Chinese oilseed crushing mills has been greatly enlarged so that imports of soyabeans, the form in which most foreign soya is purchased, can be processed into the required meal and oil output. Soyameal is a key high-protein ingredient of livestock feed, usage of which has expanded amid increasing domestic production of animals providing meat and dairy products to satisfy rising consumer demand and amid large-scale poultry exports. Soyaoil consumption in food manufacturing and home cooking has risen greatly, resulting from growth in these activities.


The strong soyabeans import trend also has reflected lack of growth, and subsequently reduction, of domestic soyabeans production in China. During the period of five years up to and including 2010, soyabeans harvests averaged just over 15mt. The next three years saw a declining trend to about 12mt in 2013. Another factor boosting imports was the government’s policy of building up strategic reserve stocks (responding to growing dependence on foreign suppliers).


China has been successful in raising its wheat, corn and other coarse grains output in recent years, despite limiting factors such as land and water availability. This trend was encouraged by continuing reforms over an extended period, as the agricultural sector experienced a transition from a planned economy to a market based economy. Last year’s harvest, totalling 346mt, was 51 percent higher than average annual output in 2003-2005. But the domestic market for these grains has tightened, amid rising consumption. Consequently imports, while still relatively small, have increased. In 2013 the total reached over 12mt, an almost seven-fold rise compared with a decade earlier.


Beneficiary: the shipping industry

Both these examples – yesterday’s Soviet Union and today’s China – show how, in different periods, a grain and soya importing country became a very prominent maritime trade feature. In each case the impact on the global shipping industry created substantial additional employment for bulk carriers. Much of the trade involved long-distance voyages from loading ports in the USA, Canada and South America (Brazil and Argentina), as well as shorter voyages from elsewhere, further enhancing ship employment. China is expected to remain an expanding user of maritime transport capacity for this purpose, over the decade ahead.


Direct effects on the ocean freight market, especially when sharp changes in chartering activity occurred, were more prominent during the earlier episode. Soviet chartering often had a great impact on market conditions and freight rates for panamax and other size bulk carriers, although not always for extended periods. The intensity of impact varied amid differing tonnage (vessel) supply/demand balances and amounts of tonnage available on the open market for spot employment. In the early- to mid-1980s, a general global tonnage surplus tended to mitigate the positive impact on freight rates of temporary extra trade volumes.


Although the ‘China effect’ from this commodity category in the present era has not been as striking as the earlier ‘Soviet effect’ was at times, it looks set to be longer-lasting. But all predictions should be treated with caution. As the Chinese proverb says: “he who lives by the crystal ball will die of ground glass”. A useful reminder!


Richard Scott

Visiting Lecturer, Greenwich Maritime Institute and MD, Bulk Shipping Analysis

Are shipping investors becoming too bullish?

Shipping investment is returning to favour. The amount of money invested in new tankers, bulk carriers and container ships last year was dramatically higher than seen in the previous twelve months. Shipping investors perceived a period of better markets approaching (if still some way off), while the drastic reduction in shipbuilders’ prices for new buildings seen over the past few years greatly increased the attractions of ordering new tonnage, especially more economical tonnage. But will these huge investments prove well-timed? Accurately predicting the cycle has always been a hazardous exercise.

The statistics for new building orders placed at world shipyards in 2013 are impressive. Bulk carriers led the pack: 937 vessels with a capacity of 80 million deadweight tonnes were ordered, one-sixth more than the total for the previous two years together. Tanker contracts, 376 ships of 34m dwt, exceeded by two-fifths the previous two years’ volume. Container ship orders, by contrast, at 223 ships totalling 21m dwt, were one-fifth lower based on the same comparison, but this amount was still far higher than seen in the immediately preceding year. These calculations, based on provisional figures compiled by Clarksons Research, demonstrate the massive scale of renewed enthusiasm for capital investment spending within the industry.

Despite persistent worries about where investment funds would be obtained, substantial new money became available. Stories about the traditional providers of finance, the shipping banks, withdrawing from the market remained at the forefront, but other investors stepped in. As the incentives appeared to improve, amid signs of a bottoming-out of the long shipping recession, private equity funds, hedge funds and various alternative sources gained prominence.

Combined with shipowners’ internally generated funds, the external sources were sufficient to enable an estimated $104 billion to be invested in new buildings of all types in 2013, a 16 percent increase from the previous year. Investment in tankers, bulk carriers and container ships last year was more than double the value seen in the preceding twelve months. By contrast, investment in the now very large offshore sector saw a huge reduction, limiting growth in the grand total.

Trade growth incentives

Looking at how trade has been growing in the past few years, shipping investors can be forgiven for thinking positively. Global seaborne trade in all cargo types, during the period of four years from 2010 to 2013 (including an estimate for last year), averaged remarkably strong 5.5 percent growth annually. This performance is somewhat exaggerated by including the ‘bounceback’ year of 2010, when a recovery took place from the effects of the world financial crisis and ensuing severe global recession. Nevertheless, it is still a very creditable achievement amid lacklustre growth in the world economy.

A glance at seaborne trade growth rates over the past three decades reveals how unusual it is to find a phase of similar length and strength. There was only one: 2003 to 2006, within the ‘boom’ period, when annual increases over four years averaged 5.4 percent. Given that both ‘super growth’ periods happened within the new millennium, and that prospects for more trade expansion in the future are clearly visible, it is not altogether surprising that eagerness to invest in new shipping capacity is evident.

In previous cycles, a significant period of more robust trade expansion and vessel demand was often reflected in high freight markets, until vessel supply caught up and overtook the demand trend when additional newbuildings became available. This pattern has not occurred in the past few years, at least not on a sustainable basis.

The explanation is fairly straightforward. After the freight market boom ended in 2008, surplus transport capacity was created by enormous fleet expansion, caused by what proved to be excessive ordering of new ships while the boom was still in progress. This over-capacity has overwhelmed even a sustained robust upwards trend in seaborne trade movements in the past few years. Mainly subdued freight markets resulted, although there have been temporarily stronger episodes. But the excess capacity is being reduced, and demand-supply gaps are closing or likely to begin closing soon, hence improving the prospects for freight market returns and, in turn, improving the investment outlook.

Two charts in the latest monthly report of shipbroking company Platou clearly demonstrate how much surplus capacity has occurred in the global tanker and bulk carrier fleets during recent years. These charts provide a general view, because circumstances vary among different sizes and types of tonnage within the sectors. For tankers, fleet utilisation is shown as declining from around 90 percent at the 2008 peak, to nearer 80 percent last year, although towards year end there were signs of an improvement emerging. For bulk carriers, the decline was more dramatic, from close to full 100 percent fleet utilisation in 2007-08, to around 85 percent in 2013, followed similarly by signs of a distinct upturn getting underway later in the year.

More enjoyable times ahead?

Bulk carriers have re-emerged as a favourite for shipping investors. The rehabilitation of this sector’s attractions last year has raised some eyebrows. It has suggested the possibility that renewed enthusiasm, and resulting new capacity ordered for delivery in the next couple of years, could delay a sustainable freight market recovery.

A clear example of how such a setback can be triggered is provided by events in 2010. At the beginning of that year, there was still a colossal volume of orders for bulk carrier newbuildings at shipyards around the world, totalling 298m dwt. This quantity, mostly scheduled for delivery over the following two or three years, was equivalent to 65 percent of the existing global bulk carrier fleet, implying massive capacity expansion ahead. During 2010, shipping investors’ optimism about a freight market recovery resulted in a further huge 103m dwt of orders being placed, raising the total order book even higher despite its already vast size.

The consequences of this questionable eagerness are still being observed today. For individual investors, there are often compelling reasons justifying the purchase of new tonnage, but if too many have the same idea at the same time the results can be unpleasant.

So what are the main factors which will determine whether the large investments seen over the past twelve months and previously, in tankers, bulk carriers and container ships, will prove worthwhile in the years ahead? At the beginning of 2014, according to Clarksons figures, new tankers on order at shipyards were equivalent to 13 percent of the existing world tanker fleet. Much higher percentages were evident elsewhere. In the container ship sector, the equivalent of 20 percent of existing tonnage was on order, and in the bulk carrier sector the figure was similar at 21 percent. Most of the new tonnage is scheduled for delivery this year and next year. These percentages imply considerable fleet expansion.

On the ship demand side of the picture, trade growth could absorb the new capacity. Currently, there are clear signs pointing to global seaborne trade growing solidly over the next few years, although prospects for crude oil trade to increase are limited. Much depends on the world economy’s performance: there is some anxiety about whether China, the main driver of growth in many market segments, will continue to perform as strongly as seen in recent years. Changes in geographical trade patterns, affecting voyage distances and tonne-miles (a more accurate measure of shipping demand), also will be influential.

On the ship supply side of the picture, newbuildings entering the fleet will be partly offset by scrapping (recycling) old or uneconomic vessels. The extent of this offset is always difficult to estimate. Many new ships are specifically designed to cut bunker fuel consumption: these could accelerate replacement of older tonnage. Then there is the productivity factor. Large proportions of the existing fleets are ‘slow steaming’ to reduce fuel costs, amid subdued markets and vessel earnings. The annual transport capacity provided by these ships could expand if, as a result of improving markets, slow steaming is reduced, enabling ships to perform more voyages in the same time period.

It is a conundrum, a large one! In the global shipping business, great uncertainties are not abnormal, and are what experienced shipowners are quite familiar with. Whether all the newer players are as familiar with the imponderables remains to be seen. Recent investments in new ships certainly have the potential for proving highly lucrative, if changes in market conditions greatly reduce over-capacity. If that does not happen the results may be much less palatable. It is not an industry for the risk-averse, and this characteristic explains why the shipping business is so exciting for investors.


Richard Scott

Visiting lecturer, Greenwich Maritime Institute and MD, Bulk Shipping Analysis


Voyages of Separation: Modern Container Ships and Seafarers

A visit to a jetty at the little port of Harwich on England’s east coast, facing the North Sea, is a good place to get a glimpse of the modern global shipping industry’s enormous scale. From this vantage point the much bigger Felixstowe port on the opposite bank of the River Orwell can be seen in panoramic view in all its glory: bustling activity along the waterfront with a long line of huge container ships loading and discharging.

RS Blog 1

Even for maritime professionals well-acquainted with this shipping sector, it is an impressive sight, underlining the vastness of international seaborne trade in containerised goods of all sorts and varieties. But only a small part of the population sees this vital maritime activity at Felixstowe or elsewhere in ports around the world and, among those who do, many will be blissfully unaware of its true significance. Mostly these ships, and indeed other vessel types, and the ports which serve them, are well hidden from public view in remote locations.

That is why a new book by Rose George published last year, entitled ‘Deep Sea and Foreign Going’, provides a valuable contribution to understanding the importance of this obscured-from-view industry. The author’s voyage on a container ship from the UK to Asia is the setting. In particular, the narrative offers a fascinating insight into the working lives of the people who make it happen, the seafarers.

Clearly described is the difficult and, at times, potentially very dangerous environment in which seafarers not only work but totally exist for periods of many months while employed on long-distance voyages. There is no escape from the working environment while a ship is at sea (virtually all the time). These circumstances are not comprehended by most users of the goods which the ships transport. Many consumers have no idea how electrical or electronic devices, for instance, get to the shops from the manufacturers in China, Korea or other origins. Some think it all arrives by air freight. There is even less understanding of what seafarers have to encounter, and their separation indeed isolation from the civilised world, living in a small and sometimes not very sociable closed community, while serving at sea for extended periods.

Despite these features, Rose George acknowledges on page 9 that “seafaring can be a good life”. Another acknowledgement is that “most ship owners operate decent ships that are safe, and pay their crews properly” (page 86). On the other hand, some owners hide behind a flag of the open registry variety and cut corners, which can lead to disasters for both ship and crew. And, disturbingly, in concluding comments on page 265, the author quotes the master of the container ship on which she travelled as saying that the crew are “mere chattels, a human resource, dispensible non-entities”. This opinion is not exactly a ringing endorsement of comfortable relationships between managements and seafarers.

It is a highly readable book, quite gripping in parts, written in an easy-going style. Ignoring some lengthy deviation about a ship rescue in the second world war, and whale preservation in the northeastern USA, it serves a useful purpose. But as an educational exercise, for the general public, presumably the author’s aim as a piece of ‘investigative journalism’, much more could have been said about the global container shipping industry. A few short paragraphs of miscellaneous and not especially helpful industry statistics, as background, are insufficient to provide meaningful context.

One essential fact, which could have been included as contextual information for the aspects identified during the voyage, is that container ships now comprise 13 percent of the world fleet of all cargo vessels, a fleet including many other important ship types. Another is that container ships numbered 5,106 at the end of 2012, with a capacity of 16.2 million teu (twenty foot equivalent units, the standard measurement), based on data from Clarksons Research. Container ship fleet growth over the preceding decade was 168 percent and capacity continues to rise. And increasing ship sizes – 18,000 teu leviathans are joining the fleet, compared with vessels only half that size which were the norm only a few years ago – are a feature of progress, ensuring more economical transportation.

Another storyline emphasis might have been the services these ships provide for global manufacturing industry, how container services are organised and why they are so effective and efficient. World seaborne containerised goods shipments are estimated to total over 1.5 billion tonnes per year currently, after almost doubling during the past decade. Ocean freight cost is generally a low proportion of most products’ value. The impact on, and advantages for, the globalisation process are apparent. Many countries have been integrated into the global trading system when previously they were on the fringes, if participating at all.

None of the foregoing maritime achievements are satisfactorily set out in ‘Deep Sea and Foreign Going’. Arguably, such a preliminary discussion is required for a balanced view to be offered. Nevertheless, the book certainly has great merit in opening eyes to the stark realities of seafarers’ lifestyles and, frequently, the lack of attention paid to this noble profession. Many spectators standing on the remote Essex jetty watching the impressive ships coming and going could gain a useful perspective by reading it.

Richard Scott, Visiting Lecturer, Greenwich Maritime Institute and MD, Bulk Shipping Analysis

Valuable UNCTAD Review Analyses Maritime Matters

In a characteristically thorough and perceptive analysis the ‘Review of Maritime Transport 2013’, just published by UNCTAD (United Nations Conference on Trade and Development), throws light on most of the main issues currently faced by maritime activities around the world. This annual publication, which started life in 1968, has achieved a solid reputation as a first point of reference for many people about industry trends and possible future events. Its utility is greatly enhanced by ready availability free of charge on the organisation’s website.

Among topics selected for special attention in the latest edition, the Review focuses on how the global shipping industry will be financed in future years. Where will new money come from? The partial withdrawal of the banking sector as a traditional source of finance has left a large gap needing to be filled. Private equity funds have stepped into this void, and are making an increasingly noticeable impact. Although shipowning previously had not been the most obvious private equity target (because the volatility and downside risks of the shipping sector were unpalatable for them), involvement recently seemed a much more attractive proposition.

The Review’s authors conclude that “the role of private equity funds appears fundamental for the growth of the sector and could affect its development in several ways, including through the consolidation and vertical integration of transport services.” But the authors draw attention to a notable feature: many private equity investors are not long term players. Investments are made by private equity at what they consider to be at or near the bottom of the market. Involvement is often for a temporary period (which may be several years) until the market rebounds, enabling the selling or flotation of investments at a sizeable profit.

In another section focusing on selected emerging trends affecting international shipping, the UNCTAD Review highlights fuel costs and slow steaming, lower-sulphur fuels and air emissions, and innovative ship designs and eco-ships. These separate topics are, of course, linked and feature in much discussion within the maritime industries. They emerge against a background of climate change and its implications. As noted in the report “of all the prevailing challenges…the interconnected issues of energy security and costs, climate change and environmental sustainability are perhaps the most unsettling.” Nevertheless, despite these problems and difficulties, on a more positive note opportunities for the shipping industry are arising from a number of trends which could strengthen or enhance shipping services.

What will be of especial value to many readers of the Review is its comprehensive regular analysis of the fundamental influences affecting the maritime industry, contained in three chapters – developments in international seaborne trade; structure, ownership and registration of the world fleet; and freight rates and maritime transport costs. This analysis is accompanied by detailed statistical tables. There is also a chapter about port developments and another about legal issues and regulatory developments. A discussion about access to maritime transport for landlocked countries is included as well.

One event emphasised, which occurred in 2012, is the turn of the largest shipbuilding cycle in recorded history. Given the chronic overcapacity which has been a feature of many shipping sectors for some time, and the consequent low freight rates prevailing, this is highly significant. For the first time since the beginning of the new millennium, the tonnage of new vessels of all types delivered from world shipyards in 2012 was lower than seen in the preceding twelve months. Every previous year had seen an increased volume.

The resulting capacity expansion over the decade, sometimes very rapid, has seen the world fleet of commercial sea-going ships more than double since 2001, reaching 1.63 billion deadweight tonnes in January 2013. But, reflecting newbuilding deliveries greatly outpacing additional orders placed, the world orderbook for new vessels at shipyards has declined dramatically during the past few years. After an interval, newbuilding deliveries, as highlighted in the Review, are now falling as well. This changing picture, along with other influences including ship recycling and of course further trade growth, can be expected to assist in correcting the excess transport capacity still existing.

Meanwhile global seaborne trade has been growing at a healthy, or what might be described even as a remarkable pace (amid economic setbacks in various countries), in the past few years. The UNCTAD Review emphasises how trade performed better than the world economy in 2012, expanding by an estimated 4.3 percent, nearly the same rate as in the previous year. A volume of 9.2 billion tonnes of goods was loaded in ports worldwide last year, resulting from growth driven in particular by more domestic demand from China, as well as increased intra-Asian and South-South trade.

China’s contribution to all this trade growth has been immense. Calculations based on figures which are not contained in the Review underline the point. These figures compiled by Bulk Shipping Analysis suggest that in the period of ten years between 2002 and 2012, expansion of China’s imports of all cargo types contributed around 46 percent of the entire world increase. For dry bulk commodities, comprising the largest part (over two-fifths) of all world cargo movements, the proportion of growth contributed by China is higher at 63 percent. The Review highlights as a cautionary note the great dependence of dry bulk trade expansion on Asian (and particularly Chinese) demand, and on only two commodities, iron ore and coal.

Looking at aspects of the global merchant shipping fleet, a table showing the world’s 35 largest national fleets by ownership always makes fascinating reading. As in previous years the top four remain the same: Greece, Japan, Germany and China. Country of ownership of a vessel is defined as the place where true controlling interest (the parent company) is located. Significantly, among the top four, China rose from fourth to third position during 2012 so that, at the beginning of this year its fleet of 190.1m deadweight tonnes formed 12 percent of the world total. One year earlier, the Chinese fleet had been 9 percent of the global total, rising from 5-6 percent in the early 2000s. Consequently China is rapidly approaching Greece’s 15 percent and Japan’s 14 percent. Just over two-thirds of China-owned tonnage is registered under foreign flags. When will China’s fleet become the world’s largest? Probably quite soon, although the Review does not say so.

The UNCTAD Review of Maritime Transport is keenly awaited by many who benefit from its extensive coverage of the maritime scene. The updated statistics are very valuable. And its discussion of specific currently prominent aspects (‘hot topics’) justifies anticipation. The latest 2013 edition does not disappoint.


Richard Scott

Visiting Lecturer, Greenwich Maritime Institute and MD, Bulk Shipping Analysis


A Magnificent Transformation: World Shipping 50 Years Ago and Today

It began to take shape fifty years ago. Parts of the outline of the highly efficient global merchant shipping industry we see today started to become visible in the early 1960s. The transformation process was already well under way by then, in the tanker sector. But back in 1963 much of the world’s shipping system, consisting of cargo liner services and dry cargo tramp trades, was not functioning well. Dramatic changes were beginning, however, which would revolutionise the dynamics over the next decade and beyond.

The preceding revolution, the changeover from sail to steam propulsion, had greatly improved performance in the shipping industry. This fundamental technological change had increased capacity and enabled scheduled services to operate, but some inefficient aspects continued. In many trades cargo-handling in ports was said, jokingly, to have remained unchanged since the time of the Phoenicians, except that powered winches had replaced muscle-power. In the next revolution, from the 1960s onwards, old methods and traditions would be swept away by new technology and new working practices.

Industry characteristics and economics were studied in the early sixties by ambitious young men, working in London shipping offices, who enrolled for the shipping certificate course at the City of London College (in this era few women aspired to senior positions in the industry, which was male dominated). The course involved two years of evening classes. These keen students learned that the world fleet of ships at that time was dominated by liners (cargo and passenger), tramps (dry cargo) and specialised ships, including tankers.

Ship 1


Cargo liners were versatile, multi-deck ships with installed cargo-handling gear, carrying mostly manufactured goods, often accompanied by refrigerated products, together with some bulk cargo parcels. They operated on regular scheduled services. Tramps (dry cargo), available on the charter market, usually carried full shiploads of bulk commodities. Many of these tramps were similar, in size and specification, to cargo liners and their role was often interchangeable between the sectors. Tankers mainly transported oil and oil products. During the early sixties, two changes were prominent. Bulk carriers, including ore carriers and dual-purpose combined carriers (able to carry either oil or dry bulk cargo), were coming in strongly, and passenger liners (operating on regular routes) were going out.

Fifty years ago many ships spent a large proportion of their working lives stationary in port. In the cargo liner trades especially, cargo handling – loading and discharging – was often slow, or very slow, caused by labour-intensive methods. This sluggish performance frequently was exacerbated by poor labour relations with dock workers. Consequently, a huge global fleet of ships was chronically under-utilised. Expensive, sophisticated cargo liners could be in port for up to 60 per cent of available time for transport movements (equivalent to 200 or more days annually) and much of that was idle time, when no cargo was being handled. Profitability suffered heavily, and the system struggled to perform adequately. A more efficient service was needed to cope with fast trade expansion and the solution was containerisation, which developed quickly from the late-1960s onwards.

Containerisation proceeded apace through the 1970s and 1980s, and was truly a revolutionary upheaval, enabling manufactured goods to be transported around the world rapidly, securely and cheaply. Cargo liner trades became integrated into a through-transport system providing a door-to-door service for manufacturers, a new way of organising transport involving vast capital investment in ships, ports and cargo-handling equipment. This reconfiguration hastened and greatly assisted the world’s transition to a globalised economy, with its extended supply chains, as we know it today.

In other shipping sectors, bulk (dry and wet) and specialised trades, developments were also dramatic, although not quite so revolutionary. But notable changes greatly enhanced efficiency and provided more economical transport. In a large number of international trades much larger ships of improved designs were utilised. Different types of specialised vessel were introduced. Coupled with high speed shore-based cargo loading and discharging equipment, this amounted to a transformation.

Over the past five decades world seaborne trade growth has been astounding. Global seaborne trade of all types totalled 1.35 billion tonnes in 1963, according to UNCTAD statistics, of which 53 percent was liquids, mostly oil (tanker cargoes). The 2013 figure, based on calculations by shipping information providers Clarksons, could be 9.9bn. This total represents a more than seven-fold expansion over the fifty year period, having already reached an estimated 9.5bn last year, of which oil cargoes comprised 29 percent.

Another aspect is longer voyage distances in numerous trades. More remote supply sources for commodities and other goods were located and became economical to use, while globalisation and reduced transport costs altered geographical trade patterns. Tonne-miles, the standard measure of shipping demand because it reflects both cargo volume and voyage distance, was further boosted. A great enlargement of carrying capacity was required.

Shipowners responded to this requirement with huge investment in new tonnage, continuously expanding the global fleet of ships. Measured in gross tons, the world fleet of all types of merchant vessel in mid-1963 totalled 145.9 million GT, comprising 39,571 ships, according to Lloyd’s Register statistics. Fifty years later the mid-2013 fleet, based on Clarksons data, was 1,114.8m GT, consisting of 85,642 ships. This growth, over seven-fold, was similar to the trade volume percentage increase. But the productivity of the fleet had also improved. More specifically, a typical ship’s annual carrying capacity, as distinct from the single cargo capacity measured by vessel tonnage, had risen. Higher speeds at sea, less time spent in port, coupled with enhanced operational efficiency was instrumental in ensuring that each ton of ship’s capacity carried more cargo in a typical year. Another feature accompanying fleet tonnage growth was the 253 percent rise in the average ship size, from 3700 GT in 1963, to 13000 GT in 2013.

Currently, in the early 2010s, the world fleet of ships meeting the needs of cargo movements is comprised of three main sectors. Today’s students, such as those pursuing post-graduate maritime studies at Greenwich Maritime Institute, London are well aware that bulk carriers, tankers and container ships dominate. These vessels are accompanied by what has become a very large group of special purpose ships, such as liquefied gas carriers and car carriers. A prominent feature in many trades has been the great increase in the size of vessels typically employed, demonstrating advantages to be gained from economies of scale, amid pressure to reduce the unit cost of providing services.

From these brief highlights we can see that a fascinating and impressive period of progress has evolved in the global shipping industry, during the past 50 years. World seaborne trade has expanded enormously. The fleet of cargo-carrying ships, of various types and varieties, has been required to tackle an ever more challenging task, and has done so pretty effectively. Sometimes though, fleet growth in various sectors has been far too rapid, as investors collectively misjudged – always a difficult judgement – or ignored the shipping market cycle. What is abundantly clear is that great improvements have been made in the efficiency and sophistication of the sea transport system, restraining costs and freight rates and contributing massively to the globalisation era.

Richard Scott, GMI visiting lecturer and MD, Bulk Shipping Analysis

China’s Maritime Growth and Global Sustainability

In the early part of the 21st Century, the global community has gained enormous advantages from the expansion of China’s trade and maritime activities. Numerous countries have greatly benefited from China’s much closer integration into the world economy and maritime scene. Yet the huge demand for foreign resources, to assist China in maintaining its robust economic growth, has focused attention upon sustainability aspects, specifically the challenges and opportunities.

Many questions arise in a sustainability context. How are China’s shipping and trade evolving, and what is the impact? What are the social and human implications for China as a major supplier of maritime labour to the world market? How are environmental issues being handled in China, for instance those involving marine protected areas, ship recycling and maritime pollution? These elements have global as well as national impacts and ramifications.

A forthcoming Greenwich Maritime Institute (University of Greenwich) conference arranged by the GMI’s China Maritime Centre, on 10th September 2013 within the London International Shipping Week, will examine a wide range of topics. The conference is entitled ‘China’s Growth as a Maritime Power: Challenges and Opportunities for Global Sustainability’. Speakers from industry and academia have been invited to present their ideas. A prominent feature is new knowledge gained from cutting-edge academic research projects on China’s maritime issues, making the conference particularly informative. Discussion and debate will follow.

The Greenwich conference framework for China topics is maritime business and economics, social and human issues, and environmental aspects. The title echoes the theme adopted by the International Maritime Organization for World Maritime Day 2013. A theme of ‘Sustainable Development: IMO’s contribution beyond Rio+20’ was adopted for that occasion. In his speech to launch the theme, the IMO secretary-general clarified a crucial point. What does sustainable development actually mean? Reference was made to an earlier UN report where a clear definition was given: “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

This event at Greenwich takes place, arguably, at a significant juncture. The Chinese economy appears to have reached a transitional period, between near or actual double-digit GDP growth rates until relatively recently, and a ‘more sustainable’ era of rather less rapid but still vigorous expansion. Maritime activities and their sustainability will be affected by the changing pace.

China’s role as a major player and, in some maritime activities, the largest and dominant player inevitably places its global involvement and implications under a spotlight. A few achievements are particularly noteworthy. China has become the leading influence shaping world seaborne trade and is by far the largest importer of dry bulk commodities. The merchant ship fleet controlled by Chinese companies is now one of the biggest. As well as being the largest shipbuilding country (by deadweight volume and contract value), China is a major ship recycler. It is also a prominent supplier of maritime labour to the global market. Much or most of these gains have been made within the past decade, a relatively short period for such a performance. The combined impact is hard to exaggerate.

As a result of this large-scale activity, steps which China is taking to tackle sustainability issues are viewed with great interest by the international community. On many maritime and related issues, it is noticeable that significant advances to correct any deficiencies are being made, and signs of likely further progress over the years ahead are visible.

Richard Scott
GMI visiting lecturer and MD, Bulk Shipping Analysis

China Maritime Centre – A Successful One-Day Course

The China Maritime Centre (GMI) ran a successful one-day short course ‘A Leading Global Player: Maritime Business Activities in China’, 10th June 2013. The short course was organised against the background that over the past decade China has become the leading influence shaping global seaborne trade, as result of a remarkable upsurge in trade volumes. This short course was led by the Director of China Maritime Centre Dr Minghua Zhao, international shipping analyst Richard Scott and researcher Yifan Liao who specialises in ship recycling. The course investigated how and why China has become such a prominent part of the global maritime scene within a relatively short period since the early 2000s and also provided with some clues about future trends.

Three specific areas of growth within the maritime industry in China were discussed at the course: China’s maritime trade in a global context, the rapidly growing China-owned merchant ship fleets and ports and a new era for shipbuilding and ship recycling in China.

This course has attracted a good number of participants from a range of sectors of the maritime community, including delegates, for example, from shipping companies, maritime law firms, maritime media and research institutions, maritime museums, seafarers welfare organisations and others.

Short Course Image, June 2013

The next event of the China Maritime Centre will take place on 10th September 2013 and is a one-day conference, ‘China’s Growth as an International Power: Challenges and Opportunities for Global Sustainability’. More details can be found on our booking website: