The Supply of Ships Flashcards
What are the 4 main factors in shipping supply?
- Number of Ships
- Size of ships
- Ship speed
- Time at port
These 4 are linked; e.g. 2x 10,000 dwt ships is the same as 1 20,000 dwt, or a ship moving at 20kts will provide double the carrying capacity of one moving at 10
What are the completion dates of the Suez, Kiel and Panama Canals?
Suez = 1869
Kiel = 1895
Panama = 1915
Name and describe diseconomies of scale in relation to ship size
- Needing larger ports; ports come to the point where they cannot be widened/deepened further
- Handling equipment not big enough
- To avoid surplus production, refineries should be just big enough to fulfill demand in their local area, limiting onland storage/consumption rates
- Only 2 ULCCs are still in trade
Describe how economies of scale have impacted the development of container ships
- Naval architects built the largest possible ships that could transit the Panama in the 1970s, producing ships of 5000teu
- Container ships take priority in the Panama due to the ‘just in time’ economy, especially for USWC trade
- As container ships have grown, the cost of carrying manufactured goods has steadily decreased, stimulating global trade and even bigger ships (the largest are now 18300teu)
- Intermodalism; a container can be transported on various modes of transport without needing to be repacked/manually handled, allowing small ports to trade with big ships via transshipment; 1 big port will become a hub, and the smaller ports around it will feed it
- The biggest lorries now carry 45ft boxes, more 45fts are therefore being produced and more vsls are being built to accomodate these
What were considered ‘large’ tanker sizes by year?
- 1914; 8000dwt
- 1945; 15,000dwt
- 1951; 50,000dwt
- 1959; 100,000dwt
- 1967; 200,000+ dwt (VLCCs)
- 1970s; 330,000+ dwt (ULCCs)
- 1974, largest tanker ever; 555,000dwt
Discuss the speed of ships
- Ship speeds have broadly increased, however after a certain point the additional fuel required will be disproportionate to the increase in speed, meaning different types of ship have different ideal/most efficient ranges of speed
- If trade is poor, rates are low or fuel is expensive, speeds will be cut
- Engineers try to make the most efficient range of speeds for a ship as wide as possible to allow vsls to alter their speed to meet their timetable as efficiently as possible (v important for container ships/just in time economy)
- Most large container ships cruise at around 25 knots, whereas bulk carriers/tankers average around 14 knots
What were Liberty class vessels?
Mass produced vessels designed in WWII in the UK (but built in US) to rapidly replace the merchant fleet as it was destroyed by submarines. By the end of the war, submarine defences had improved, leading to the oversupply of ships.
The fastest ever ship to be built in this design was the Robert E Peary which was completed in 4.5 days
What happened in 2008 to container ships?
Before the economic downturn in 2008 a large number of container ships around 12,000-13,000teu were ordered as global trade bloomed, however many of these were delivered as trade was stagnating. Lass trade + more ships led to incredibly low freight rates, prompting owners to put their ships into storage (‘laying up’) and operating their remaining fleet at slower speeds (‘slow steaming’)
This situation had been predicted by many, including the German classification agency Germanischer Lloyd, which had been questioning the need for such fast container vessels for several years. Now, the optimum speed for a container is generally considered around 20 knots, however some argue that 18knots is appropriate.
How can the shipping industry accomodate rising demand?
- Ships take 2yrs to be designed and built, by which time the percieved demand which prompted its order may have dried up
- As demand for commodities grows, existing sources can’t always keep up, and new sources need to be found or previously uneconomical projects restarted. This may be further away from demand centres, meaning that as the demand for a commodity grows, the demand for shipping grows disproportionately (e.g. a 20% increase in tonnes needed may lead to a 50% increase in tonne miles)
- Design changes to ships must also be accomodated by ports; bulk/oil terminals are typically owned by mining/oil companies and so can be built in line with their expectations for demand. Otherwise port changes must be driven by commercial competition
What are the factors a container ship will consider when choosing a port?
Competition between ports is fierce in the container industry; as containers are intermodal, they can be transported to whichever ports give the best financial return for the ship owner rather than being limited to loading close to where goods are manufactured.
* Geographical position. Shipowners will try to keep the voyage as short as possible
* Accommodating all sizes of ships (esp bigger ones), allowing them to berth with minimal delay
* Dredging; port authorities can increase their max draft by deepening approaches to and areas alongside berths. E.g. Rotterdam increased its depth by 15 meters over the 20th century
* Correct equipment/infrastructure; the speed at which quayside cranes can move containers on/off a ship determines the length of time a ship spends in port
* Port charges – per container/per tonne of cargo moved
Why do countries encourage domestic ship ownership/operation?
- Conserving foreign exchange; using domestic vsls means that freight charges are paid in the same country/currency, meaning there is no drain on foreign reserves
- Control of trade/international prestige; establising a national shipping line reenforces a country’s independance, however these have been in decline as national airlines are given higher priority (existing commercial shipping lines can generally provide sea transport at a lower cost)
- Earning foreign exchange; operating ships (esp cruiselines) can be profitable in both foreign policy and real terms, e.g. the Soviet Union’s cruiseline’s construction/operating costs were all in rubles, meaning they could provide low cost cruises to foreigners at substantial profits. This is less easy in merchant shipping due to the high cost of competing with established maritime countries, but is possible if a country has enough natural resources (e.g. Brazil’s mining company Vale)
- Strategic needs; having a minimum domestic tonnage that can be called upon in times of emergency (e.g. war)
Outline methods of protectionism in shipping
- Cargo preference schemes (requiring the use of domestic-flag vessels in the movement of cargo that is associated with the government); Only countries with substantial domestic ship building (e.g. South Korea) have been able to maintain a cargo preference scheme (only moving cargoes on domestic ship), however the costs of maintaining/operating a fleet may still be too high depending on market fluctuations
- Subsidies for buying ships
- Subsidies for shipyards; as well as developing/maintaining a domestic fleet this can also maintain local ship building industry
- Indirect subsidies; e.g. tax successions, cheap rates of finance
Define ship registration
- Every seagoing ship must have a nationality and is therefore required to be registered with a specific home port and country (United Nations Convention on the Law of The Sea, Part VII, Article 91(1))
- Registration serves to confer the right of the ship to have the nationality of the state in which it is registered requiring the owner to abide by the domestic law of that state
- This country is painted on the stern, and they fly the flag of this country (hence a ship being ‘flagged in’ somewhere)
- Originally all vessels were flagged to the location of their owner’s home office, including landlocked areas (e.g. Switzerland or Zambia)
- Over time, some areas became too expensive to register ships – the local wage levels may be too high, governments/unions may impose higher minimum staffing levels etc.
- Owners therefore started looking for countries that impose lower taxes and/or less demanding controls with which to register their ships
Describe the first open registries
- Panama and Liberia operated simple schemes which allowed owners to set up shell companies and therefore quickly became owners’ registries of choice – Liberia specifically was endorsed by the US, as US ship owners had no other way of operating efficiently without increased government assistance
- Other countries followed their example in establishing open registries; traditional maritime countries countered this by also opening their own registries, which maintained the national flag and safety conventions but with relaxed financial/crewing rules
- IMO conventions must be ratified by a minimum number of states, controlling a certain percentage of the world’s fleet, to take effect. It would be impossible to pass conventions without the support of open registry counties due to the large proportion of the global fleet they represent. Panama and Liberia have both been supportive of environmental and safety controls; Liberia was the first country to agree to MARPOL
What are some critisisms of open registries?
- Open registries have been criticized for their lack of control and alleged lack of care around observance of international safety measures, particularly SOLAS and MARPOL – traditional maritime countries and some other countries have ratified these agreements, however some have not done so – these attract ship owners with a lack of care for safety
- Criticisms around compliance have prompted open registry countries to take greater interest in the enforcement of international conventions, implementing measures such as kicking out ships that don’t meet requirements or closing the door to newcomers
- Many open registries, particularly poorer ones, are not controlled by the government of the country they represent – instead they’re commercial enterprises that pay a fee to the gvmt . In smaller/impoverished counties this is seen as an easy way to generate income
- Substandard ships aren’t limited to open registries; some nation’s flagged ships compare unfavorably to the average open registry vessel
- To tackle the problem of substandard ships, the international transport workers federation (ITF) arranges ‘swoops’ in which unions representing port workers boycott the ship until its owner agrees to sign an improved contract with its crew
