Economic Factors Affecting The Shipping Industry

The best world to describe the shipping industry is the world “Dynamic”. When the economist talk about a dynamic market they mean a market when the price signals is the result of continual changing in both demand and supply of any particular product or group of products(Investopedia,N.D). Similarly in shipping market this price is called fright rate and comes from the changing of supply and demand for world merchant fleet and the volume of goods traded by sea. Stopford (2009) notes that the shipping industry characterized by Shipping Market Cycles and that the supply and demand are the economic mechanisms to control them. If the people can understand the factors that affect the demand and supply maybe they can predict some of the future cycles.

The shipping industry is not immune from any recession and booming of the world economy. Therefor when there are incidents, negative or positive, that affecting the world economy there can be huge losses or profits in the shipping industry. In 2008 the world economy faced its most dangerous crisis after the previous Great Depression of the 1930s, when a huge home price in the United States turned decisively downward, first to the entire U.S. financial sector and then to financial MARKETS overseas. Share prices plunged throughout the world by the end of the year, a deep recession had enveloped most of the globe. As a result of the recession in the economy the exports and imports of goods and services decreased dramatically. The above Graph shows the trend of exports, imports and Gross Domestic Product (GDP) of the members of the Organisation for Economic Cooperation and Development, or OECD. As is shown between 2008 and 2010 there was a sharp decrease in percentage of imports and exports level and world Gross Domestic Product. As a result of that decrease in 2008 165 container ships were unemployment with the biggest casualties to the ships of 1,000 teu 2,000 teu capacity (Figure

Carrying cargo is just one of small part of what merchant ships do, the other are discharging, loading, repairs, incident laid up ,long and short storage and other. The productivity of ships depends upon four main factors: speed, port time, deadweight utilization and loaded days at sea. First when there is high freight rate ships increase their speed to carry more cargo. As a result of increasing speed they increase they incomes and became more productive. Second the port time play important role in the productivity. The introduction of containerization dramatically reduced port time for liners. Third deadweight utilization refers to the cargo capacity lost owing to bunkers, stores etc. The figure 2.4 shows the loss of capacity in TEU due to increased bunkers. If we apply an average of 14 mtons gross deadweight for full laden TEU, the 1500 TEU represent 21000 mtons. Consequently, carrying only heavy cargo may lead to a decrease in intake basis deadweight limitations. As an example, and assuming maximum deadweight intake is 21000 mtons, average container weight of 18 mtons gross per TEU, will result in maximum acceptance of 1,166 TEU or a filling degree of 78 percent (Notteboom,2011).Finally a vessels time is divided loaded days at sea and