INTRODUCTION TO SHIPPING ECONOMICS AND FINANCE

1. INTRODUCTION TO SHIPPING ECONOMICS AND FINANCE

2. DISSCUSIONS WHAT IS SHIPPING? HOW IT (SHIPPING ACTIVITIES/ BUSINESS) CONTRIBUTE TO WORLD ECONOMY?

3. WHAT IS SHIPPING?

5. CONTRIBUTION OF SHIPPING TO WORLD’S ECONOMY • We live in a global society which is supported by a global economy – and that economy simply could not function if it were not for ships and the shipping industry. Without shipping, intercontinental trade, the bulk transport of raw materials and the import/export of affordable food and manufactured goods would simply not be possible. http://www.imo.org/KnowledgeCentre/ShipsAndShippingFactsAndFigures/Pages/Default.aspx

6. WHAT IS SHIPPING ECONOMICS AND FINANCE & IT’S SCOPE?

7. WHAT IS SHIPPING ECONOMICS? • Shipping Economics is the holistic and integrated study of (1) ocean transportation (shipping); (2) and global supply chain management. • * The concept was introduced in 1999 by Professor Hercules Haralambides of Erasmus University Rotterdam who, at the same time, also coined the term maritime logisticsfocusing,more specifically, on the joint optimisation of container terminals and liner shipping networks.Research in these areas is reported in the scientific journal Maritime Economics and Logistics (MEL), edited by Professor Haralambides. (www.palgrave-journals.com/MEL) .

8. Shipping economics is the economics of transportation, in studying the behaviour; • of its users (shippers and passengers), • primary service providers (transportation carriers and ports), • secondary service providers (e.g., ship pilots and towage, ship agents, stevedores and freight forwarders) and • resources (e.g., labour, infrastructure and mobile capital such as ships).

9. As a field of study, shipping economics and finance consists of ; • shipping economics, • ship economics and • finance • Shipping economics is concerned with the economics of transporting freight by ships. • Ship economics is concerned with the economics of ships that are used in maritime transportation. • Shipping finance is concerned with the remedies for the shipping organization in managing the capital and debt towards catering the day to day business needs

10. HOW SEA BORNE CONTRIBUTE TO WORLD TRADE ACTIVITIES?

11. SHIPPING AND WORLD TRADE Over 90% of world trade is carried by the international shipping industry. Seaborne trade continues to expand, bringing benefits for consumers across the world through low and decreasing freight costs. Thanks to the growing efficiency of shipping as a mode of transport and increased economic liberalisation, the prospects for the industry’s further growth continue to be strong. There are around 50,000 merchant ships trading internationally, transporting every kind of cargo. The world fleet is registered in over 150 nations, and manned by over a million seafarersof virtually every nationality. (UNCTAD) United Nations Conference on Trade and Development estimates that the operation of merchant ships contributes about US$380 billion in freight rates within the global economy, equivalent to about 5% of total world trade. Shipping trade estimates are usually calculated in tonne-miles - a measurement of tonnes carried, multiplied by the distance travelled. In 2003, for example, the industry shipped around 6.1 thousand million tonnes over a distance of about 4 million miles,giving over 25 thousand billion tonne-miles of total trade.

13. Throughout the last century the shipping industry has seen a general trend of increases in total trade volume. Increasing industrialization and the liberalization of national economies have fuelled free trade and a growing demand for consumer products. Advances in technology have also made shipping an increasingly efficient and swift method of transportation. Over the last four decades total seaborne trade estimates have nearly quadrupled,from less than 6 thousand billion tonne-miles in 1965 to 25 thousand billion tonne-miles in 2003. As with all industrial sectors, however, shipping is occasionally susceptible to economic downturns - a notable fall in trade occurred during the worldwide economic recession of the early 1980s. However although the growth in seaborne trade was tempered by the Asian financial crisis of the late 1990s there has generally been healthy growth in maritime trade since 1993.

14. IHS Global Insight - Economic Contribution of Liner Shipping Industry http://www.ihs.com/products/index.aspx In November 2009, IHS Global Insight, a recognized global leader in economic and financial analysis and forecasting, completed an evaluation of the economic contribution of the liner shipping industry using 2007 as a base year. Key findings include: The annual economic contribution of the liner shipping industry was: Direct gross output or GDP Contribution -- US$ 183.3 Billion Direct capital expenditure -- US$ 29.4 Billion Direct jobs -- 4.2 million Compensation to those employees US$ 27.2 Billion Full annual economic impact, including indirect and induced effects: US$ 436.6 Billion 13.5 million jobs IHS – Information Handling Services - US

15. Cargo transported by the liner shipping industry represents about two-thirds of the value of total global trade, equating each year to more than US$ 4 trillion worth of goods. • Workers at ports world-wide loaded and unloaded cargo for more than 10,000 liner vessel-stops per week, with the average ship making 2.1 port calls per week. • Liner shipping companies deployed more than 400 services providing regularly scheduled service, usually weekly, connecting all countries of the world. • In mid-2008, there were more than 17.8 million containers in the world fleet, which cost the industry US$ 80.1 billion to purchase. • In the United States alone, the industry spends US$ 869 million per year to operate the fleet of chassis used to move containers over land. • The liner shipping industry has spent over US$ 236 billion in more than a dozen countries on the purchase of new vessels. • Such scenarios showed how the world rely so much on sea borne activities in order to sustain their nation’s economy / GDP.

16. THE BOX • - HOW THE SHIPPING CONTAINER MADE THE WORLD SMALLER AND THE WORLD ECONOMY BIGGER • In 2006, former finance and economics editor for the Economist, Marc Levinson released this book, which makes the case that the modern global economy would not exist were it not for introduction of the container and the liner shipping industry that moves them. Some of his notable observations: • The container made shipping cheap and changed the shape of the world economy. • Consumers enjoy infinitely more choices thanks to the global trade the container has stimulated. • The U.S. imported four times as any varieties of goods in 2002 as in 1972, generating a consumer benefit - not counted in official statistics - equal to nearly 3 percent of the entire economy.  • The ready availability of inexpensive imported consumer goods has boosted living standards around the world. • The emergence of the logistics industry ... has led to the creation of new and often better-paying jobs in warehousing and transportation. • The container not only lowered freight bills but saved time.

17. TYPES OF SHIPPING • Discuss • Liner shipping • Tramp shipping

18. How Liner Shipping Works Liner shipping is the service of transporting goods by means of high-capacity, ocean-going ships that transit regular routes on fixed schedules. There are approximately 400 liner services in operation today, most providing weekly departures from all the ports that each service calls. Liner vessels, primarily in the form of containerships and roll-on/roll-off ships, carry about 60 percent of the goods by value moved internationally by sea each year.

19. Source: Fearnley's Review NB: Figure for 2004 is estimated

20. DISCUSSION WHAT ARE THE FACTORS THAT CONTRIBUTE TO THE INCREASE IN WORLD SEABORNE TRADE VOLUME = ADVANTAGES OF LINER SHIPPING

21. LIST OF BENEFITS / ADVANTAGES • EFFICIENCY • LOW COST & SAVE TIME • LOW ENVIRONMENTAL IMPACT • COVERED BY NUMEROUS CONVENTION OF IMO

22. BENEFIT OF LINER SHIPPING

23. BENEFITS OF LINER SHIPPING International liner shipping is a sophisticated network of regularly scheduled services that transports goods from anywhere in the world to anywhere in the world at low cost and with greater energy efficiency than any other form of international transportation. EFFICIENCYN (COST & TIME) Liner shipping is the most efficient mode of transport for goods. Large containerships can be operated by teams of just thirteen people utilizing sophisticated computer systems. GLOBAL ECONOMIC ENGINE International shipping industry is responsible for millions of existing jobsand plays a crucial role in stimulating new jobs. It contributes hundreds of billions of dollars to the global economy annually Two independent sources looked at the economic contribution of the liner

26. BENEFITS OF LINER SHIPPING International liner shipping is a sophisticated network of regularly scheduled services that transports goods from anywhere in the world to anywhere in the world at low cost and with greater energy efficiency than any other form of international transportation. LOW ENVIRONMENTAL IMPACT Most carbon-efficient mode of transportation and produces fewer grams of exhaust gas emissions for each ton of cargo New International Maritime Organization regulations establish strict standards for vessels' NOx, SOx, and particulate matter emissions. Also, the millions of containers that are used around the world are now 98 percent recyclable HOLISTICLY GOVERN BY NUMEROUS CONVENTION

27. THE PRINCIPAL REGULATIONS GOVERNING MARITIME SAFETY Dealing with the ship • SOLAS (International Convention for the Safety of Life at Sea, 1974) • comprehensive range of minimum standards for the safe construction of ships and the basic safety equipment (e.g. fire protection, navigation, lifesaving and radio) to be carried on board. • requires regular ship surveys and the issue by flag states of certificates of compliance. • MARPOL (International Convention for the Prevention of Pollution from Ships, 1973/1978) • requirements to prevent pollution that may be caused both accidentally and in the course of routine operations. • concerns the prevention of pollution from oil, bulk chemicals, dangerous goods, sewage, garbage and atmospheric pollution, and includes provisions such as those which require certain oil tankers to have double hulls.

28. COLREG (Convention on the International Regulations for Preventing Collisions at Sea, 1972) lays down the basic "rules of the road", such as rights of way and actions to avoid collisions. • LOADLINE (International Convention on Loadlines, 1966) sets the minimum permissible free board, according to the season of the year and the ship's trading pattern. • ISPS (The International Ship and Port Facility Security Code, 2002) includes mandatory requirements to ensure ships and port facilities are secure at all stages during a voyage. 

29. Dealing with the Shipping Company • ISM (The International Safety Management Code, 1993) effectively requires shipping companies to have a licence to operate. Companies and their ships must undergo regular audits to ensure that a safety management system is in place, including adequate procedures and lines of communication between ships and their managers ashore. Dealing with the Seafarer • STCW (International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, 1978/1995) establishes uniform standards of competence for seafarers. • ILO 147 (The ILO Merchant Shipping (Minimum Standards) Convention, 1976) requires national administrations to have effective legislation on labour issues such as hours of work, medical fitness and seafarers' working conditions.

33. THANK YOU