Shipping Industry

Shipping Industry

BIBLIOGRAPHY

Shipping has been a major means of transporting bulky commodities since prehistoric times; the stones used to construct Stonehenge were moved by sea and those used in the Egyptian pyramids came by barge down the Nile. The shipping sector was central to the economies of many early Mediterranean civilizations and, for example, provided the bulwark for Minoan power. Shipping became entwined with early financial institutions as individuals in Athens financed the long lead times between investments and returns, although it was not until the ninth century that the first mercantile bank was established. The Roman Empire and those in China depended extensively on their commercial shipping for trade and to bring the fruits of distant domains back to the core regions.

The role of shipping was subsequently a facilitator in the growth of the more explicit maritime powers after the fall of Rome. The Vikings exerted their influence from Greenland to Russia and down into modern Turkey almost exclusively through their control over trade and the quality of their military vessels. Commercial shipping has always been entwined, because of the lags and uncertainties involved in voyages, with insurance and banking; and the emergence of sophisticated finance markets in Italy in the fourteen and fifteenth centuries led expansions in Mediterranean maritime activities. The Spanish financed their sixteenth-century European wars more directly with gold brought back by galleons from their colonies in the New World.

Subsequently the Dutch and British empires were founded upon powerful navies that complemented and protected extensive civilian trading fleets. In particular, in the early phases of the Industrial Revolution when land transportation remained difficult, maritime trade allowed new export markets to be served and new sources of raw material to be exploited. Many of the major seaports in Britain, such as Liverpool and Bristol, and in the southern states of the United States, such as Charleston, South Carolina, grew on the back of the triangular trade routes carrying manufactures, raw materials, and slaves that linked Europe, Africa, and the Americas. In Asia, the growth of maritime trade in spices and commodities using oceangoing junks underlaid the prosperity of Indian and Chinese coastal areas. In addition to the transportation role, the shipping industry made direct contributions to production in the fishing and whaling industries that grew to feed and supply industrializing nations with food and oil.

The advent of the steam engine made for more reliable and safer shipping services but also, in the context of its linking with the railways that provided feed and distribution service to ports, increased the potential markets that could be served. Technological developments (such as refrigerated ships and steel hauls), the demands for new products (such as oil) in the late nineteenth century, and the emergence of new technologies (such as the container and the mega-ships) in the late twentieth century have helped to maintain the momentum of the industry.

Much of the emergence of the scale of the modern shipping industry can also be traced by the impetus given it by World War I and World War II that not only required a large mercantile marine for military logistics reasons, but also subsequently dumped a stock of vessels on the market that allowed entrepreneurs to build up commercial fleets at relatively low capital costs and with suitable discharged sailors available to man them.

In the early twenty-first century the international shipping industry carries about 90 percent of global trade by weight. While much of this involves transoceanic movements, short-sea shipping plays an important role in many large freight markets. Shipping also provides important ferry and passenger services. In 2005 globally there were approximately 42,200 registered ships with a combined tonnage of nearly 600 million gross tons. Of these more than 20,000 were general cargo vessels, 6,100 bulk carriers, 3,200 container vessels, 11,300 tankers, and nearly 5,700 passenger ships. This pattern reflects the changing technologies and production priorities of the larger supply chain (e.g., the advent of containers from the 1960s and just-in-time production) and the types of commodities carried (e.g., the increased demands for oil.) The global fleet is registered (flagged) in a variety of countries with registration often depending on local tax structures rather than the locations of shipping activities. The widespread registration under “flags-of-convenience” reflect these financial considerations.

Cargo activities can be divided between unscheduled, tramp shipping, which involves the leasing of a ship for a particular trade, and liner activities. The latter provide regular sailings and carry partial loads. Liner activities have existed from the 1870s when steamship technology allowed for reliable scheduling of sailings and often involved some form of cartel arrangements between shipping companies. These have evolved through “conferences” that coordinate services and rates, allocate capacity between members, and offer loyalty discounts for specific, often unidirectional, routes; through “consortia” from the 1970s whereby some conference members offered joint services; and through alliances that engage in cross-route rationalization and do not issue a common tariff. These tendencies toward a degree of collusion are often seen as important to ensure that regular services can be provided and that shipping companies can make a reasonable return on their large capital investments in what would otherwise be an excessively competitive market. Economic regulatory bodies, especially in the United States, however, have regularly been concerned about the potential monopoly power they might create.

Policy challenges remain, and many extend beyond conventional market regulation. Shipping has always been closely associated with the environment. Classical times saw Greece being denuded of trees to build fleets and a similar fate nearly befell the British oak tree in the eighteenth century. From a different perspective, it was shipping that brought the Black Death pandemic to Europe in the fourteenth century that killed one-third of the population. In the early twenty-first century, the high visibility of major maritime disasters, especially when there are major adverse environmental implications, poses challenges, as does the concern that ships or their cargos may form the basis for terrorist actions. The problems are seen to be growing as scale economies stimulate the use of larger vessels (e.g., post Panamax ships), which have the potential for inflicting massive environmental damage in the event of an accident, and as the general growth in world trade, both in aggregate and in the diversity of nations involved, makes policing the shipping industry more complex. The growth in the number of vessels operating under flags of convenience adds to these difficulties.

In order to confront the more traditional challenges posed by the shipping industry, as well as the newer ones, industry is heavily regulated at several levels—most notably at the global level by the United Nation’s International Maritime Organization (IMO) that oversees safety and environmental matters and the International Labor Organization (ILO) that focuses on labor standards in the shipping industry. National governments control movements within territorial waters, register vessels, and regulate within their antitrust policies the nature of the services that can be used for their trading activities, for example, the particular features of any cartel arrangements. But shipping is also regulated in a de facto way by local governments that often own and, inevitably, control ports that form the terminals for shipping operations. Integrating the roles and activities of this hierarchy of institutions so that effective maritime policies can be achieved has often proved elusive.

SEE ALSO Automobile Industry; Aviation Industry; Railway Industry; Transportation Industry

BIBLIOGRAPHY

Kendall, Lane C., and James J. Buckley. 2001. The Business of Shipping. 7th ed. Centreville, MD: Cornell Maritime Press.

Sjostom, W. 2004. Ocean Shipping Cartels: A Survey. Review of Network Economics 3 (2): 107-134.

Kenneth Button