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The Blackwell Companion to Maritime Economics presents comprehensive and in-depth coverage of the entire scope of issues relating to shipping and port economics. * Unprecedented survey of maritime economics provides full coverage of shipping and port economics * In depth examinations offer an up-to-date study of the field including all facets of shipping, ports, logistics, and maintenance and topical discussion on security and environmental problems * Presents original theories relating to theories for maritime carriers and ports * Features contributions from the most respected international specialists in the field

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Table of Contents

Cover

Blackwell Companions to Contemporary Economics

Title page

Copyright page

Dedication

List of Figures

List of Tables

Notes on Contributors

Preface

Part I: Introduction

1 General Introduction

2 The Evolution of Maritime Economics

2.1 Introduction

2.2 The Foundations

2.3 Approaches to Maritime Issues to World War II

2.4 The Period of Transition, 1945–1973

2.5 Maritime Economics since 1973

2.6 Summary

3 The Business of Shipping: An Historical Perspective

3.1 Introduction

3.2 The Business of Shipping: Up to the Medieval Period

3.3 The Business of Shipping: the Medieval Period

3.4 The Age of Exploration and the Early Modern Period

3.5 The Emergence of Steam-Powered Vessels

3.6 The Great War and the Interwar Period

3.7 World War II and Post-War Reconstruction

3.8 Towards Today’s Business of Shipping

3.9 Recent Trends

3.10 Summary

4 International Seaborne Trade

4.1 Introduction

4.2 Crude Oil

4.3 Oil Products

4.4 Natural Gas

4.5 Coal

4.6 Iron Ore

4.7 Steel

4.8 Grains

4.9 Minor Bulk Cargoes

4.10 General Cargoes

4.11 Summary

Part II: Maritime Carriers and Markets

5 Maritime Carriers in Theory

5.1 Introduction

5.2 Maritime Transportation Service

5.3 Maritime Transportation Service Costs

5.4 Transportation Demand

5.5 Effectiveness

5.6 Summary

6 Maritime Freight Markets

6.1 Introduction

6.2 Freight Rate Cycles for Ocean Shipping

6.3 Ocean Shipping Networks

6.4 Service Characteristics in Tramp and Liner Shipping

6.5 Summary

7 Intermodalism and New Trade Flows

7.1 Introduction

7.2 The Evolution of Intermodalism

7.3 Intermodal Container Transportation: Advantages and Impacts

7.4 Empirical Application

7.5 Summary

Appendix: Economics Literature Review – New Entrants and Exits

Acknowledgments

8 Cruise Lines and Passengers

8.1 Introduction

8.2 Historical Perspective: The Liner Years

8.3 Passenger Ships Through Time

8.4 Current Market and Economics

8.5 Future Perspectives and Trends

9 Ferry Passenger Markets

9.1 Introduction

9.2 Definition

9.3 The Ferry Market: A Brief History

9.4 The Ferry Market: Demand Side

9.5 The Ferry Market: Supply Side

9.6 Market Structure and Competition

9.7 Industry Attractiveness

9.8 Summary

Part III: Shipping Economics

10 Dry Bulk Shipping

10.1 Introduction

10.2 Twenty-First-Century Dry Bulk Shipping Markets

10.3 International Division of Labor in Dry Bulk Shipping: Developments and Prospects

10.4 Illustrating Twenty-First-Century Bulk Shipping Trends: Market Practices

10.5 Summary

11 Liquid Bulk Shipping

11.1 Introduction

11.2 Liquid Bulk Shipping: The Freight Rate Generation Mechanism

11.3 Parameters of the Global Liquid Bulk Shipping Market System

11.4 The Freight Rate Generation Mechanism

11.5 Summary

12 Container Shipping

12.1 Introduction

12.2 Growth in the Container Shipping Industry

12.3 Capacity Management in Container Shipping

12.4 Pricing and the Risks Associated with Revenue Streams

12.5 In Search of Scale and Scope

12.6 Dynamics in Container Shipping Networks

12.7 Summary

13 New Business Models and Strategies in Shipping

13.1 Introduction

13.2 The Changing Shipping Landscape

13.3 Shipping Business Models

13.4 Shipping Business Model Archetypes

13.5 Competitive and Cooperative Strategies within the Shipping Value System

13.6 Discussion

13.7 Summary

14 Shipping Regulatory Institutions and Regulations

14.1 Introduction

14.2 Regulatory Authorities

14.3 UN Agencies

14.4 Safety Conventions

14.5 Environmental Regulation

14.6 Maritime Labor

14.7 Convention Enforcement: The UK

14.8 Convention Enforcement: The European Maritime Policy

14.9 Summary

Appendix: Principal IMO Conventions

15 Shipping Taxation

15.1 Introduction

15.2 The Shipping Industry

15.3 The Traditional Approach to Shipping Taxation

15.4 Corporate Tax Systems

15.5 Tax Positions

15.6 The UK Shipping Industry

15.7 The Tonnage Tax System

15.8 The Impact of Shipping Taxation Policies

15.9 The Shipping Business in a Wider Context

15.10 Summary

16 Seafarers and Seafaring

16.1 Introduction

16.2 The Seafaring Labor Market

16.3 Recruitment and Retention

16.4 Mobility and Migration

16.5 Market Segmentation

16.6 Discrimination

16.7 Seafarer Representation

16.8 Summary

17 Safety in Shipping

17.1 Introduction

17.2 Vessel Safety Regulation

17.3 Vessel Accident Studies

17.4 The Model

17.5 Data

17.6 Estimation Procedures

17.7 Estimation Results

17.8 Marginal Effects

17.9 Summary

18 Piracy in Shipping

18.1 Introduction

18.2 Piracy in an Historical Perspective

18.3 Definitions of Piracy

18.4 Geography and Modi Operandi of Piracy in Recent Times

18.5 Economic and Socio-political Instability as Root Causes of Piracy

18.6 Summary

Acknowledgments

Part IV: Ship Economics

19 The Economics of Ships

19.1 Introduction

19.2 Basic Criteria

19.3 Optimizing Ship Economic Performance

19.4 Risk Management

19.5 Summary

20 Ship Finance: US Public Equity Markets

20.1 Introduction

20.2 US Shipping Equity Capital Markets: Reasons to Go Public, Advantages and Disadvantages, and Underwriters

20.3 US Shipping Equities 1987–2010

20.4 Pricing and Long-Run Performance of an IPO

20.5 Key Issues: Investors and Shipping Companies

20.6 Summary

21 Ship Finance: US High-Yield Bond Market

21.1 Introduction

21.2 The Anatomy of the Shipping High-Yield Bond Market, 1992–2010

21.3 Advantages and Disadvantages of High-Yield Bonds

21.4 Credit Ratings, Yield Premiums and the Probability of Default

21.5 Summary

22 Ship Finance: Hedging Ship Price Risk Using Freight Derivatives

22.1 Introduction

22.2 Formation of Ship Prices: The Link between Ship Prices and Forward Rates

22.3 Data and Methodology

22.4 Long-Term and Short-Term Correlation

22.5 Cointegration and Causality

22.6 Minimum Variance Hedge Ratio

22.7 Estimation Results

22.8 Summary

Appendix

23 Marine Insurance

23.1 Introduction

23.2 The Rise of Lloyd’s and the London Insurance Market

23.3 The Marine Insurance Market Today

23.4 Principles of Insurance Law

23.5 Hull Insurance

23.6 Cargo Insurance

23.7 Conditions

23.8 Summary

Part V: Port Economics

24 Ports in Theory

24.1 Introduction

24.2 Port Interchange Services

24.3 Port Interchange Service Costs

24.4 Port Demand

24.5 Port Effectiveness

24.6 Summary

25 Port Governance

25.1 Introduction

25.2 The Evolution of Port Reform

25.3 Port Governance Structures: Update and a Survey

25.4 Summary

Appendix: Key Definitions

Acknowledgments

26 Port Labor

26.1 Introduction

26.2 Casualism

26.3 Containerization

26.4 Commercialization

26.5 Summary

27 Port Competition and Competitiveness

27.1 Introduction

27.2 Defining Port Competition

27.3 Defining Port Competitiveness

27.4 Research Methodology

27.5 Research Findings

27.6 Summary

28 Container Terminal Efficiency and Private Sector Participation

28.1 Introduction

28.2 Literature Review

28.3 Methodology

28.4 Data Collection

28.5 Results

28.6 Assessing the Determinants of Terminal Efficiency

28.7 Discussion

28.8 Summary

Acknowledgments

29 Determinants of Users’ Port Choice

29.1 Introduction

29.2 Literature Review: Shippers

29.3 Literature Review: Shipping Lines

29.4 Port Choice from a Logistics and Supply Chain Management Perspective

29.5 Methodology

29.6 Empirical Results

29.7 Summary

30 Port Investment and Finance

30.1 Introduction

30.2 Efficiency Drive in the Maritime Industry

30.3 Port Investment and Finance Strategies

30.4 Options for Port Investment

30.5 Issues in Investment Finance

30.6 Evaluation Perspectives

30.7 Summary

31 Ports as Clusters of Economic Activity

31.1 Introduction

31.2 Defining a Port Cluster

31.3 The Cluster Perspective and Port Governance

31.4 Ports in Proximity: One Port Cluster?

31.5 Summary

32 Port State Control Inspection Deficiencies

32.1 Introduction

32.2 Substandard Vessels Using PSC Data: A Survey

32.3 Descriptive Statistics

32.4 Determinants of Deficiencies

32.5 Recurrent Deficiencies and State Dependence Effects

32.6 Summary

33 Port Security: The ISPS Code

33.1 Introduction

33.2 The New “Securitized” Transport Environment

33.3 The ISPS Code and the Obligations of Ports

33.4 Implementing the ISPS Code in Hong Kong and Piraeus: Methodology

33.5 Implementing the ISPS Code in Hong Kong and Piraeus: Results

33.6 Discussion

33.7 Summary

Acknowledgements

34 Port Security and the Quality of Port Interchange Service

34.1 Introduction

34.2 US Port Security Legislations and Programs

34.3 Port Interchange Service

34.4 Port Security Service

34.5 An Empirical Analysis

34.6 Summary

Appendix: Questionnaire

Index

Blackwell Companions to Contemporary Economics

The Blackwell Companions to Contemporary Economics are reference volumes accessible to serious students and yet also containing up-to-date material from recognized experts in their particular fields. These volumes focus on basic bread-and-butter issues in economics as well as popular contemporary topics often not covered in textbooks. Coverage avoids the overly technical, is concise, clear, and comprehensive. Each Companion features introductions by the editors, extensive bibliographical reference sections, and an index.

A Companion to Theoretical Econometrics edited by Badi H. Baltagi

A Companion to Economic Forecasting edited by Michael P. Clements and David F. Hendry

A Companion to the History of Economic Thought edited by Warren J. Samuels, Jeff E. Biddle, and John B. Davis

A Companion to Urban Economics edited by Richard J. Arnott and Daniel P. McMillen

The Blackwell Companion to the Economics of Housing: The Housing Wealth of Nations edited by Susan J. Smith and Beverley A. Searle

The Blackwell Companion to Maritime Economics edited by Wayne K. Talley

This edition first published 2012

© 2012 Blackwell Publishing Ltd.

Blackwell Publishing was acquired by John Wiley & Sons in February 2007. Blackwell’s publishing program has been merged with Wiley’s global Scientific, Technical, and Medical business to form Wiley-Blackwell.

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Library of Congress cataloguing-in-publication-data

The Blackwell companion to maritime economics / edited by Wayne K. Talley.

p. cm. – (Blackwell companions to contemporary economics)

Includes bibliographical references and index.

ISBN 978-1-4443-3024-3 (hardback : alk. paper)

ISBN 978-1-4443-4563-6 (epdf)

ISBN 978-1-4443-4564-3 (epub)

ISBN 978-1-4443-4565-0 (mobi)

1. Shipping–Economic aspects. 2. Merchant marine. I. Talley, Wayne Kenneth.

HE582.B56 2012

387–dc23

2011045993

A catalogue record for this book is available from the British Library.

To my wife,

Dorothy (Dolly) Cordle Talley

List of Figures

4.1   World seaborne trade shares, in billion ton-miles 4.2   World seaborne trade development by major commodity, in million tons 4.3   World seaborne trade development, in million tons, and average haul 4.4   Crude oil import development, 2001–2009 4.5   Crude oil export development, 2001–2009 4.6   Oil product export development, 2001–2009 4.7   Oil product import development, 2001–2009 4.8   The choice between gas pipeline and LNG 4.9   Natural gas trade development, 2001–2009 4.10   Hard coal trade development, 1980–2009 4.11   Seaborne iron ore trade development, 1975–2008 4.12   Steel products trade development, 1975–2008 4.13   Seaborne grain trade development, 1975–2008 4.14   World merchandise trade by major commodity groups, 2008 4.15   Volume and value of seaborne trade by cargo type, 2006 4.16   Containerized trade volumes, 2009 (estimates) 5.1   Shipper demand for maritime freight transportation service at full prices 5.2   Passenger demand for maritime passenger transportation service at full prices 6.1   Volatility in Baltic Exchange freight indexes 6.2   Time charter rates for container vessels, 2000–2009, in US$/day 7.1   Average quantity over time (million kilo) 7.2   Surviving and failing new flows – linear 7.3   Surviving and failing new flows – log 7.4   Probability of exit, entry size and containerized 8.1   North American passenger market 8.2   Average annual passenger traffic growths (%) – North America (1999–2008) 8.3   Mexican and Central American market 8.4   Average annual passenger traffic growths (%) – Mexico and Central America (1999–2008) 8.5   Caribbean ports passenger market 8.6   Average annual passenger traffic growths (%) – Caribbean (1999–2008) 8.7   European passenger market 8.8   Average annual passenger traffic growths (%) – Europe (1999–2008) 8.9   Far East and Oceania passenger market 8.10   Average annual passenger traffic growths (%) – Far East and Oceania (1999–2008) 9.1   Overlaps in the ferry market 9.2   Hierarchy of ferry demands 9.3   The diversity of the top five ferry operators, 2008 9.4   Number of trailer-decks on ferries delivered 1965–2010 9.5   Strategic types of shipping markets 9.6   Positioning of the ferry shipping segment 10.1   Bulk cargoes, 1970–2008 10.2   Tanker and bulk carrier capacity in million dwt, 1970–2009 10.3   Fixture counts per contract type per month, 2001:1 to 2009:12 (in percentage share) 10.4   Fixture counts by month, 2001–2009; loading iron ore at West Australian ports 10.5   Contracts duration and average period rate, Capesize vessels 11.1   The shipping cycle stages 11.2   Ras Tanura–Rotterdam 280K tons VLCC Worldscale rate time series 11.3   VLCC vessel capacity supply time series in million tons DWT 11.4   Oil tanker capacity demand time series 11.5   Laid-up tonnage for oil tankers 11.6   150,000 tons DWT oil tankers in slow steaming mode 11.7   OBO ships, Capesize >160,000 tons DWT supply time series 11.8   O&P Aframax Tankers order book time series in tons DWT 11.9   Future market for Capesize Bulker in tons DWT 11.10   Newbuilding prices for a VLCC of 315,000–320,000 tons DWT VLCC in US$ million 11.11   Price in US$ million for a five-year-old double-hull 310,000 tons DWT VLCC 11.12   Scrap prices in US$ million for VLCC oil tankers time series 11.13   Interaction between shipping market variables in the time field 11.14   Cross-correlation between supply for transport services and freight rates 11.15   Cross-correlation between freight rates and demand for sea transportation services 11.16   Oil production of OPEC countries versus VLCC oil freight rates 11.17   Freight rate generation mechanism 11.18   Effects of external factors on freight rates 11.19   Schematic approach of the freight rates generation mechanism 12.1   Container trade on the main routes, in TEU (full containers) 12.2   Traffic imbalances on the main routes, based on volumes in TEU (full containers) 12.3   Container rates (including BAF and CAF) from a North European container port to a series of overseas destinations, in October 2009, in US$ 12.4   Evolution in strategic alliance configuration in liner shipping 13.1   Portfolio: owning steel – Seaspan example (container fleet owner) 13.2   Portfolio: using steel – Clarkson offshore hedge fund example 14.1   Structure of the IMO 14.2   Timber load line mark and lines to be used with this mark 15.1   The EU maritime cluster 15.2   Comparison of fiscal regimes 18.1   Number of reported acts of piracy and armed robbery against ships (1996–2008), by year 18.2   Number of reported acts of piracy and armed robbery against ships (1996–2008), by location 18.3   Number of reported acts of piracy and armed robbery against ships (1996–2008), by type 18.4   Number of reported acts of piracy and armed robbery against ships (1996–2008), by status of ship when attacked 18.5   Number of reported acts of piracy and armed robbery against ships (1996–2008), by type of vessel 18.6   Relationship between number of attacks and GDP per capita, 1996–2008 18.7   Real GDP per capita (in 2005 US$) and location of attacks, 1996–2008 18.8   Number of reported acts of piracy and armed robbery against ships and socio-political indicators in Indonesia (1996–2008) 18.9   Number of reported acts of piracy and armed robbery against ships and socio-political indicators in Bangladesh (1996–2008) 18.10   Number of reported acts of piracy and armed robbery against ships and socio-political indicators in Nigeria (1996–2008) 18.11   Number of reported acts of piracy and armed robbery against ships and socio-political indicators in Somalia (1996–2008) 20.1   US shipping IPOs and secondary offerings 1987–2010 (as of March 2010) 20.2   Average number of analyst coverage per share 21.1   US shipping high-yield bonds 1992–2010 (as of March 2010) 22.1   Plot of second-hand ship values and Cal2 4TC FFA in the Capesize sector 22.2   Plot of second-hand ship values and Cal2 4TC FFA in the Panamax sector 22.3   Plot of second-hand ship values and Cal2 6TC FFA in the Supramax sector 24.1   Shipper demand for port freight interchange service at full prices 24.2   Passenger demand for port passenger interchange service at full prices 24.3   Maritime-carrier demand for port vessel interchange service at full prices 24.4   Surface-carrier demand for port vehicle interchange service at full prices 25.1   A broader view of governance 25.2   The multi-modal governance vision 25.3   The local infrastructure or transportation governance structure 27.1   Framework for analyzing inter-container port relationships for the case of two ports 27.2   Analysis of changes in container shipping services for the case of two ports 27.3   Evolution of market share and average annual growth based on annual throughput in TEU 27.4 (a)   Development of ASC which called at Port Klang, Singapore and Tanjung Pelepas 27.4 (b)   Development in share of ASC connected to the selected ports 27.5   Evolution of market share and average annual growth based on annual throughput in TEU 27.6 (a)   Development of total ASC which called at Hong Kong and Shenzhen (in TEU) 27.6 (b)   Development in share of ASC connected to the selected ports 27.7   Evolution of market share and average annual growth based on annual throughput in TEU 27.8 (a)   Development of ASC that called at the selected ports in Northwest Europe (in TEU) 27.8 (b)   Development in share of ASC connected to the selected ports 28.1   Relationship between efficiency (DEA-CCR) and scale (throughput) 28.2   Relationship between efficiency (DEA-BCC) and scale (throughput) 30.1   Decision making on port investment and finance strategies 30.2   Interdependent stages in the port cargo transfer process 30.3   Schematization of a port from a national welfare perspective 30.4   Efficiency gains due to economies of scale in port exploitation 31.1   A “decision tree” for a cluster manager 31.2   The ownership structure of CMP 31.3   Evolution of CMP market share in Sweden and Denmark (1998–2008) 31.4   Dynamic port portfolio analysis of CMP and eight relevant competing ports 32.1   Mean number of deficiencies (bar) and detention rates (line) over time, by type of vessel and year 32.2   Type of deficiency detected by port state control authority, vessel age at inspection and flag of registry 32.3   Change in number of deficiencies detected between two successive inspections, by type of vessel 32.4   Change in number of deficiencies detected between two successive inspections, by type of deficiency 33.1   Port security administration structure in Hong Kong 33.2   Port security administration structure in Greece 33.3   The three-tiered security levels adopted by the port of Hong Kong 33.4   Information on the current security level in Greece 33.5   Procedures for the approval of PFSAs and PFSPs in the port of Hong Kong 33.6   Procedures for the approval of PFSAs and PFSPs in the port of Piraeus 

List of Tables

2.1   Segmentation profile of research 4.1   Oil trade matrix (2009) 4.2   Oil and refined products trade flows (2009) 4.3   LNG trade matrix (2009) 4.4   Coal trade flows (2008) 4.5   Iron ore trade flows (2008) 4.6   Steel trade flows (2008) 4.7   Wheat and coarse grains trade flows (2007) 4.8   Soybeans and rice trade flows (2007) 7.1   The twenty leading service operators of container ships at the beginning of 2009 7.2   Degree of containerization in a selection of European mainland ports 7.3   New trade flows by year 7.4   Coefficient estimates for equation (1) 7.5   Coefficient estimates for equations (1) and (2) with a natural log dependent variable 7.6   Failure proportions by containerization 7.7   Coefficient estimates of failure probability 8.1   Revenues for three major cruise lines in 2009 8.2   Aggregate revenues for three major cruise lines between 2005 and 2009 8.3   Operating expenses for three major cruise lines for 2009 8.4   Aggregated operating expenses for three major cruise lines in 2007, 2008 and 2009 8.5   Operating and net income for three major cruise lines in 2009 8.6   North American market ships 8.7   European market ships 9.1   Fleet for four segments 2008, including ships on order 9.2   Distribution of world ferry traffic volumes, 2008 9.3   Number of routes and competitors in selected ferry regions, 2006 9.4   European ferry routes with three or more competitors 9.5   Ferry traffic in the Greek archipelago in 2005 9.6   Selected large non-European ferry operators, 2008 9.7   Ranking of European ferry operators by passenger capacity of ships, 2008 9.8   Market shares of top twenty ferry operators 9.9   The route basis of the top ten operators, with the percentage of their passenger capacity 9.10   Possible ranking of technologies regarding various route aspects 9.11   Development of market shares on the Dover–Calais route (%) 9.12   Ferry industry attractiveness, from a route perspective 10.1   World population and large dry-bulk cargoes in million metric tons, 1960–2009 10.2   Major iron ore importers, mid-1980s and 2008 10.3   Dry-bulk vessel sizes, mid-1980s and mid-2000s 10.4   Share of vessels > 200,000 dwt in total bulk carriers within age bands 10.5   Share of the leading dry-bulk carrier fleets in the world dry-bulk tonnage by flag, 1989 and 2009 10.6   Top six dry-bulk carrier fleets controlled by nationals, January 2009 11.1   Top 15 crude oil producers and consumers 11.2   Top 15 crude oil importers and exporters 11.3   Estimated productivity of tankers, bulk carriers and the residual fleet, selected years 11.4   Cross-correlation tests between oil production of OPEC countries and demand for oil tanker transport service 11.5   Cross-correlation between oil production of OPEC countries and VLCC oil freight rates 12.1   World container port throughput and its components for selected years 12.2   Top twenty container ports based on throughput in million TEU (1975–2009) 12.3   The ranking of major container handling regions in the world (in million TEU) 12.4   Composition of the world cellular container ship fleet in October 2009 12.5   Composition of the cellular container ship fleet for selected dates 12.6   Changes in fleet operations, TEU-mile supply 12.7   Financial results for a number of major container shipping lines 12.8   Breakdown of transport costs Shanghai–Brussels for a 40-foot container with a cargo load value of 85,000 euro (market prices of February 2007) 12.9   Slot capacities of the fleets operated by the top twenty container lines (in TEU) 13.1   Shipping business model archetypes 15.1   Calculation of the effective rate of tax 15.2   Net present value per £1 m invested 15.3   Tonnage tax in different flags in 2009 15.4   UK tonnage tax rates 16.1   Estimated supply of seafarers 2005 16.2   Estimates of numbers of seafarers for top ten supplying countries 16.3   Estimated demand for seafarers 2005 17.1   Variable definitions and descriptive statistics 17.2   Cargo vessel accident damage severity equation estimates 17.3   Marginal cargo vessel accident damage severity probabilities 18.1   Characteristics of 3,957 reported acts of piracy and armed robbery against ships (1996–2008), by location of attack (%) 20.1   US Initial Public Offerings and Secondary Offerings statistics 1987–2010 (as of March 2010) 20.2   Total world fleet (DWT million), March 2010 20.3   Total world orderbook (DWT million), March 2010 20.4   Institutional ownership per sector (as of March 2010) 20.5   Deadweight and average age of US public shipping companies 21.1   Characteristics of shipping companies that defaulted in 1999 21.2   Shipping high-yield bond offerings according to year of issuance as of March 2010) 21.3   Brief description of rating standards 21.4   Shipping high-yield bond offerings according to Standard & Poor’s credit rating classification, 1992–2010 21.5   Descriptive statistics for shipping high-yield bonds ratings 22.1   Baltic FFA and Sale and Purchase assessments 22.2   Descriptive statistics of vessel values and 2nd nearest calendar FFA prices 22.3   Result of Johansen’s reduced-rank cointegration test of log-prices (p) and log calendar TC FFA (f) 22.4   Result of VECM for three sizes of dry bulk carrier 22.5   Estimates of OLS hedge ratios for three sizes of dry -bulk carriers 25.1   Responses and other sources 25.2   Current governance structure 25.3   US Port governance and management definitions 25.4   US public seaports governance and responsibilities 25.5   Entities operating container terminals in non-UK European seaports 25.6   Entities operating container terminals in North America 25.7   Board structure 25.8   Board composition 26.1   Dock labor schemes in Europe, North America and Australasia 27.1   Service attributes of the EU1 service of the Grand Alliance 27.2   ASC affected by inter-port competition in the Malacca Strait 27.3   ASC affected by inter-port competition in the Pearl River Delta 27.4   Comparison of container shipping statistics between Hong Kong and Shenzhen (2006) 27.5   ASC affected by inter-port competition in the Antwerp–Hamburg range 28.1   Summary statistics of variables for efficiency analysis 28.2   Efficiency estimates of the container terminals in the sample 28.3   Summary statistics for efficiency estimates 28.4   Average efficiency estimates for each country in the sample 28.5   Average efficiency estimates for each year in the sample 28.6   Summary statistics of variables for Tobit regression analysis 28.7   Summary output for Tobit regression analysis 28.8   Average technical efficiency in the Eastern Mediterranean region 28.9   Port governance and average efficiencies 28.10   Average technical efficiency in Turkey 28.11   Scale efficiency estimates of the container terminals in the sample 29.1   Shipping line port choice studies 29.2   Port selection criteria measures 29.3   The ranking of port selection criteria 31.1   Key characteristics of both port perspectives 31.2   Activities included in a port cluster 31.3   Cluster investments of PAs 31.4   Key total traffic figures of CMP (2001–2009) 32.1   Characteristics of vessels inspected (2002–2009) 32.2   Type of deficiency by year of inspection 32.3   Probability of detecting a deficiency: marginal effects 32.4   Probability of transition in deficiencies from t-1 to t: marginal effects 33.1   The composition of PASAC in 2009 33.2   The composition of the MSC and the PSA 34.1   An empirical analysis of port interchange versus port security service operating option responses 

Notes on Contributors

Amir H. Alizadeh is a Reader in Shipping Economics and Finance at Cass Business School, City University London, and a visiting professor at Copenhagen Business School and the University of Geneva. He has published in the areas of freight market models, markets for ships, and derivatives and risk management in financial and commodity markets. He has delivered Baltic Exchange courses in “Freight Derivatives and Shipping Risk Management” and “Advanced Freight Modeling and Trading” in maritime centers worldwide.

Mary R. Brooks is the William A. Black Chair of Commerce at Dalhousie University, Halifax, Canada. She has been actively engaged in the work of the US Transportation Research Board since 1993 and is a member of the Marine Board of the US National Academy of Sciences. She is the founder and chair of the Port Performance Research Network of more than 50 scholars interested in port governance and port performance issues.

Pierre Cariou is an Associate Professor at Euromed Management, Marseilles Business School, France. He held the French Chair in Maritime Affairs at the World Maritime University, Sweden from 2004 to 2009, where he was also in charge of the Shipping and Port Management MSc. From 2001 to 2004, he was Associate Professor in Economics at Nantes, France. He completed his PhD in 2000 on liner shipping strategies. His main research interests are in maritime economics, safety and security.

Kevin Cullinane is Director of the Transport Research Institute at Edinburgh Napier University. He is a Fellow of the Chartered Institute of Logistics and Transport, a Visiting Professor at the University of Gothenburg and an Honorary Professor at the University of Hong Kong. He has been a logistics advisor to the World Bank and a transport advisor to the governments of Scotland, Ireland, Hong Kong, Egypt, Chile, Korea and the UK.

Sander Dekker is presently a senior consultant of Ports and Waterways at Grontmij N.V. in the Netherlands. He is involved in port development projects in the Netherlands and elsewhere, and specializes in feasibility studies and asset management. He graduated from Delft University of Technology (MSc, PhD) in the field of Strategic Port Planning. Since graduation (2005), he has worked as a consultant.

Baris Demirel is a senior customs expert at the Turkish Customs Administration. He received his BS in Business Administration in 2001 from the Middle East Technical University (in Ankara, Turkey), and his MS in Maritime Economics and Logistics (MEL) in 2009 from Erasmus University Rotterdam as a government scholar. His dissertation on the impact of private involvement on port efficiency won the MAERSK Line Best Thesis Award at the MEL Center of Erasmus University in 2009.

Lixian Fan is currently a PhD student in the Department of Logistics and Maritime Studies at the Hong Kong Polytechnic University. She received her Bachelors and Masters degrees in Statistics from universities in mainland China. Her research interests include shipping economics and policy, ship investment and marine logistics.

Øystein D. Fjeldstad is the Telenor Professor of International Strategy and Management at BI-Norwegian School of Management. He holds a PhD in Business Administration and a Master of Science in Management Information Systems from the University of Arizona, and the Siviløkonom degree from the Norwegian School of Economics and Business Administration. His research interests include strategy, innovation and organizational design, with empirical contexts in telecommunications, financial services, shipping and technology.

Costas Th. Grammenos is Professor of Shipping, Trade and Finance at City University London. In 1977, he introduced a bank shipping finance credit analysis and policy that is utilized by most international banks. He has drawn the attention of the shipping world to equity and debt markets. He was awarded a DSc for creating the new academic discipline “Shipping Finance” and appointed OBE (Hon) and CBE (Hon) by HM Queen Elizabeth for “services to teaching and research.”

George A. Gratsos is the President of the Hellenic Chamber of Shipping, Vice President of HELMEPA and a board member of the Union of Greek Shipowners. He is a naval architect with a degree from the Massachusetts Institute of Technology and a PhD in Shipping Markets from the University of the Aegean. He holds and has held various national and international shipping industry positions and is the President of Standard Bulk Transport Corp., which manages bulk carriers.

Elvira Haezendonck is an Associate Professor at the University of Brussels (VUB) and Visiting Professor at the University of Antwerp, Erasmus University Rotterdam and Euromed Marseille. Her research covers (environmental) strategy, competition analysis, corporate social responsibility (CSR), and stakeholder management applied to ports. She has been involved in over 30 national and EU research projects, for example long-term strategy analyses, strategic projects, multinational strategies and impact assessments. Since 2010 she has held a research chair in Public–Private Partnerships at VUB.

Hercules Haralambides is Professor of Maritime Economics at the Erasmus School of Economics and Director of the Erasmus Center for Maritime Economics and Logistics (MEL). He is the founder and editor-in-chief of the quarterly Maritime Economics and Logistics, the founder of the Special Interest Group on Maritime Transport and Ports of the World Conference of Transport Research (WCTR), and one of the three founders (1990) of the International Association of Maritime Economists.

Trevor Heaver is Professor Emeritus, University of British Columbia. In recent years, he has been Visiting Professor at the Universities of Antwerp, Sydney and Stellenbosch. He is a founding member and a past president of the International Association of Maritime Economists and a past chairman of the World Conference on Transport Research. He has published widely on transportation, logistics and transportation policy and has consulted for corporations and governments internationally.

Ingo Heidbrink is a German maritime historian currently working as a Professor of History at Old Dominion University in Norfolk, Virginia. His research interests are methodology of maritime history, fisheries history and interdisciplinary projects in the context of maritime history. He is Secretary General of the International Commission of Maritime History and Co-President of the North Atlantic Fisheries History Association.

Di Jin is a Senior Scientist at the Marine Policy Center of the Woods Hole Oceanographic Institution. He holds a PhD in Economics–Marine Resources from the University of Rhode Island. He specializes in the economics of marine resources management and marine industries and has substantial research experience in the commercial fishing and aquaculture industries, the offshore oil and gas industry, the marine transportation industry and coastal management problems.

Hauke L. Kite-Powell is a Research Specialist at the Marine Policy Center of the Woods Hole Oceanographic Institution. He received his PhD in ocean systems management and a degree in naval architecture, technology and policy from the Massachusetts Institute of Technology. His research focuses on public and private sector management issues for marine resources and the economic activities that depend on them, and on the integration of economic and physical/biological models.

Mohan Koehler graduated magna cum laude from the University of Oregon with majors in Finance and Economics with departmental honors in economics. His research has focused on intermodal transportation and the dollar–euro spot exchange rate. He served on the Duck Store’s board of directors as Chairman and Treasurer from 2008 to 2010.

Christos A. Kontovas holds a diploma in Naval Architecture and Marine Engineering from the National Technical of Athens (NTUA) (2005). He is currently a doctoral researcher at the Laboratory for Maritime Transport of the NTUA. His PhD studies focus on quantitative methods for risk assessment and decision making that can be used in investigating threats to human life, property and the environment (oilspills and air emissions).

Peter W. de Langen works at the Port of Rotterdam Authority, Department of Corporate Strategy, as senior advisor and is involved in various strategic renewal projects. He also holds a part-time position as Professor of Cargo Transport and Logistics at Eindhoven University of Technology. He publishes articles on port selection, port policy, and international transport and logistics chains in academic journals and co-directs a dissemination platform for port studies at www.porteconomics.eu.

Peter Lorange holds a DBA degree from Harvard University. He is a former President of the Lorange Institute of Business Zurich and of the Norwegian School of Management. He has taught at the Wharton School, University of Pennsylvania, and the MIT Sloan School of Management. He holds numerous honorary doctorates, and has published 18 books and 120 articles. His areas of special interest are strategic management, strategic planning and entrepreneurship for growth.

Venus Y. H. Lun is a Lecturer in Shipping Logistics in the Department of Logistics and Maritime Studies, Hong Kong Polytechnic University. She is the founding editor of the International Journal of Shipping and Transport Logistics. Her research papers appear in such journals as Expert Systems with Applications, the International Journal of Production Economics, the International Journal of Production Research, Resources, Conservation and Recycling and Transport Reviews. She has also published five books.

Dimitrios V. Lyridis is an Assistant Professor of Maritime Transport in the School of Naval Architecture and Marine Engineering (NA&ME) at the National Technical University of Athens (NTUA). His scientific interests include shipping finance, maritime transport and logistics, safety, security, and environmental protection. He has a diploma in NA&ME, an MS in Marine Systems Management, an MSE in Industrial and Operations Engineering, and a PhD (from the University of Michigan) in NA&ME.

Peter Marlow is Professor of Maritime Economics and Logistics at Cardiff University. He has more than thirty years’ experience in academia and research work and is the author of more than one hundred published works. He is President Emeritus of the International Association of Maritime Economists and Visiting Professor at Dalian Maritime University. His research interests include the fiscal treatment of shipping and the choice of flag in international shipping.

Heather Leggate McLaughlin has published widely in both industrial and academic journals. She was a Specialist Advisor on Maritime Affairs to the House of Commons Select Committee for Transport, and more recently has been engaged in European Commission projects to promote water freight transport. She is editor of the international journal Maritime Policy and Management and is currently a member of the Faculty of Business and Management at Canterbury Christ Church University.

Maximo Q. Mejia, Jr. is Associate Professor of Maritime Law and Policy at the World Maritime University (WMU), Malmö, Sweden. Before joining WMU, he saw duty on board various navy and coastguard vessels and in shore-based facilities in the Philippines. He teaches and writes on maritime policy, law, human factors, safety, and security issues. He is Associate Editor of the WMU Journal of Maritime Affairs.

Kyriaki Mitroussi is a Senior Lecturer at the Cardiff Business School, Cardiff University. Before her current post she served as a Lecturer at the University of Piraeus, Department of Maritime Studies. She has worked with shipping companies and has also been involved in consultancy services. Her broad research interests include shipping management, third-party ship management, safety and quality in shipping, and shipping policy. She is a member of the International Association of Maritime Economists.

Stanley Mutenga is Director of Starz Risk Solutions, Senior Lecturer at Cass Business School, Visiting Lecturer at the Copenhagen Business School and the University of Oslo, a chief examiner for the Institute of Financial Services (IFS) School of Finance and the Chartered Insurance Institute (CII), and an exemptions advisory board member for the Institute of Risk Management (IRM). His research has won him awards. He has served on a number of UK boards and holds a PhD in risk and insurance from City University London.

Adolf K. Y. Ng is an Assistant Professor in the Department of Logistics and Maritime Studies, The Hong Kong Polytechnic University. His doctorate is from Oxford University, UK and his research interests include port management, transport geography, maritime security and education. He has published a book on port competition and over 60 articles in leading maritime, transport and geography books, journals and conference proceedings. He is currently serving as a Council Member of the International Association of Maritime Economists (IAME), and is a Chartered Member of the Chartered Institute of Logistics and Transport (CMILT).

Nikos Nomikos is Professor of Shipping Risk Management and Director of the MSc degree in Shipping, Trade and Finance at Cass Business School, City University London. Before joining Cass he was a Senior Analyst at the Baltic Exchange in charge of the freight indices and risk management divisions. He has published numerous papers, articles and book chapters, and a leading book on Shipping Derivatives and Risk Management.

Theo Notteboom is a Professor at the University of Antwerp, President of ITMMA (Institute of Transport and Maritime Management Antwerp) and part-time Professor at the Antwerp Maritime Academy. He has published widely on port and maritime economics. He is President of the International Association of Maritime Economists (IAME) and President of the Belgian Institute of Transport Organizers (BITO). He is a fellow of the Belgian Royal Academy of Overseas Sciences and on the editorial boards of several journals.

Athanasios A. Pallis is Assistant Professor (Jean Monnet in European Port Policy) in the Department of Shipping, Trade and Transport, University of the Aegean. He has held visiting positions at the Center for Energy, Marine Transportation and Public Policy, Columbia University, New York, the Centre for International Trade and Transportation, Dalhousie University, Canada, and the Institute of Transport and Maritime Management, University of Antwerp, Belgium. He is a regular contributor to UNCTAD, OECD and European Sea Ports Organisation (ESPO) discussions on port governance, economics and policy.

Photis Panayides is an Associate Professor in Shipping Economics at the Cyprus University of Technology. He holds a PhD in shipping economics/management. He has authored three books and over 30 scientific journal papers in the fields of shipping economics and transportation. He serves on the editorial boards of Maritime Policy and Management and the Journal of Business Logistics and is also a member of the Board of Directors of the Cyprus Ports Authority.

Nikos C. Papapostolou has worked at the Costas Grammenos International Centre for Shipping, Trade and Finance at Cass Business School since 2002. He holds a BSc in Money, Banking and Finance from the University of Birmingham, and an MSc in Shipping, Trade and Finance and a PhD in finance, both from Cass Business School. His research interests include the utilization of capital markets as a source of finance for shipping companies, shipping syndicated loans, and technical analysis.

Christopher Parsons is Professor of Insurance at Cass Business School, London, and recipient of the Chartered Insurance Institute Morgan Owen Medal and Prize for the best research paper by a CII member. He has published two books on insurance law, contributes regularly to insurance and legal journals and lectures widely in the UK and elsewhere. In 2010 he received (with Stanley Mutenga) the International Association for the Study of Insurance Economics/International Insurance Society Research Awards Prize.

Harilaos N. Psaraftis is Professor of Maritime Transport at the School of Naval Architecture and Marine Engineering at the National Technical University of Athens. He holds a PhD from the Massachusetts Institute of Technology (MIT), where he taught from 1979 to 1989. He has published two books and over 80 refereed articles. He is the former CEO of the Piraeus Port Authority and a current member of the Greek delegation to the International Maritime Organization.

Jacques Roy is a Professor of Logistics and Operations Management at HEC Montreal where he is also Director of the Carrefour Logistique, a university–industry forum on Supply Chain Management, and Director of the research group Chaine, which conducts research activities in the field of supply chain management. He has served for many years as a management consultant with several large Canadian corporations and governmental organizations.

Dong-Wook Song is a Reader in Maritime Logistics at the Logistics Research Centre, Heriot-Watt University, Edinburgh. His recent visiting positions include the Bordeaux Management School, France, and Nanyang Technological University, Singapore. He is a co-editor of the International Journal of Logistics and was recently invited to become an Associate Editor of Maritime Policy and Management. His more than one hundred refereed publications are a product of his interest in managerial and strategic aspects of global maritime logistics.

Siri Pettersen Strandenes is a professor in the Department of Economics, Norwegian School of Economics and Business Administration (NHH), and honorary visiting professor in the Costas Grammenos International Centre for Shipping, Trade and Finance at Cass Business School, London. She has published in international research journals and is a member of the editorial board of Maritime Economics and Logistics. Also, she is member of the IAME council, and has been a board member for several companies and institutions.

Wayne K. Talley is the Frederick W. Beazley Professor of Economics, Eminent Scholar and Executive Director of the Maritime Institute at Old Dominion University, Norfolk, Virginia, U.S.A. He is an internationally recognized transportation economist, holding honorary visiting professorships at City University (London, U.K.), National Chiao Tung University (Taiwan) and Shanghai Maritime University (China). He has published numerous academic books and papers and serves as Editor-in-Chief of Transportation Research Part E and Deputy Editor-in-Chief of the Asian Journal of Shipping and Logistics. His 2009 book, Port Economics, is the first textbook in the area.

Michael Tamvakis is a Professor of Commodity Economics and Finance at Cass Business School, City University London. He teaches economic and financial aspects of all main commodity groups (energy, metals and agriculture) as well as in shipping economics. His research interests are in the areas of commodity economics and finance in general and energy derivatives markets in particular.

Helen A. Thanopoulou is an Associate Professor in Operations Management of Shipping Companies. She has studied Economics (University of Athens) and Development Economics (Paris 1 Panthéon–Sorbonne). She holds a doctorate in maritime studies from the University of Piraeus where she taught briefly. In 1995 she joined Cardiff University. She returned to Greece in 2004 to join the University of the Aegean, in the Department of Shipping, Trade and Transport on Chios Island where she lives.

Peter Turnbull is Professor of Human Resource Management and Labour Relations at Cardiff Business School, Cardiff University. He has published widely in leading international journals on labor relations in the port transport industry. He is currently working with the European Commission and the ILO on social dialogue in ports and is the author of the ILO’s Guidelines on Training in the Ports Sector.

George K. Vaggelas is an advisor to the President and CEO of Thessaloniki Port Authority SA and a Research Fellow at the Jean Monnet program in European Port Policy at the University of the Aegean (UoA). He received a PhD in port economics and management from the Department of Shipping, Trade and Transport (UoA). He has authored or co-authored several journal and conference papers on port and maritime economics and management and has participated in several EU projects.

Albert W. Veenstra is a senior research scientist at the Dutch research organization TNO and an assistant professor at the Rotterdam School of Management. His research interests are shipping, port development and operations, and global logistics. He has published papers and book chapters about topics in maritime economics and has lectured around the world on logistics, shipping and ports.

Robert J. Verhaeghe is an Associate Professor in the Civil Engineering Department at Delft University of Technology (DUT). He is involved in teaching and research in the field of infrastructure development. He graduated from MIT (MSc, PhD) in the field of civil engineering systems (transport, water). After graduation (1977) he joined Delft Hydraulics and worked for 18 years as a consultant in the field of water resources development. He joined DUT in 1994.

Simon Véronneau is an Assistant Professor of Operations Management at Quinnipiac University and an Associate Researcher both in the Supply Chain Research Group at HEC Montreal and at the CIRRELT. He holds a PhD in operations management from HEC Montreal. His research focuses on global supply chains, transport management, and real-time critical operations management. He is a licensed senior navigation officer with work experience in the Canadian Coast Guard and on cruise ships and merchant ships.

Tor Wergeland is an independent consultant and senior advisor to MARINTEK, Trondheim. For more than 20 years, he was a Professor of Shipping Economics at the Norwegian School of Economics and Business Administration. He has been a professor at Copenhagen Business School, where in 2001 he started an MBA in Shipping and Logistics. He has also been involved in a Maritime MBA at Euromed Management, Marseille. He is co-author of two MBA-targeted textbooks – Shipping (1997) and Shipping Innovation (2008).

Wesley Wilson is a Professor of Economics at the University of Oregon (darkwing.uoregon.edu/∼wwilson). He is a former president of the Transportation and Public Utilities Group (TPUG) of the American Economic Association and holds a variety of positions in organizations, editorial boards, etc. Over the last decade, he has been actively involved in assessing waterway investment benefits for the Army Corps (www.corpsnets.us), and in estimating shipment-specific costs for the Surface Transportation Board.

François-Charles Wolff is Professor of Economics at the University of Nantes. He is also an associate researcher at the Institut National des Études Démographiques. He received a PhD in economics from the University of Nantes in 1998. He received the Jacques Tymen Prize in 1999 and the Novatlante Prize in 2000. He is author or co-author of more than 70 peer-reviewed papers.

Paul G. Wright has been involved in international shipping for many years, having experience at sea on a variety of ship types before embarking on an academic career at the Plymouth University, UK. Before taking up his present position as Associate Director of the Marine Institute, he was Head of the International Shipping and Logistics Group at the University of Plymouth. His key interests lie in ship and port operations, including their legislative environment.

Wei Yim Yap is a former head of research and strategic planning for the Maritime and Port Authority of Singapore. On the academic side, he has publications in international refereed journals and vast experience in lecturing on BSc and executive training courses in maritime and port economics. He has worked closely with industry and government agencies to complete numerous projects to the benefit of both industry and academia.

Panayotis Zacharioudakis is the co-founder and R&D Director of Ocean Finance and a Senior Researcher in the School of Naval Architecture and Marine Engineering at the National Technical University of Athens (NTUA). His scientific and professional areas of interest are risk assessment and management, market modeling and forecast, operational research, and logistics. He holds an Engineering Diploma (NTUA), an MSc in Marine Science and Technology (NTUA), an MSc in Shipping, Trade and Transportation (University of the Aegean), and a PhD (NTUA).

Preface

Maritime economics is the economics of maritime transportation, i.e., an economic analysis 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., labor, infrastructure and mobile capital such as ships). As a field of study, maritime economics consists of shipping economics, ship economics and port economics. 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. Port economics is concerned with the economics of ports, i.e., the provision of port services and the users of these services.

This book has benefited from my numerous maritime- and transportation-related activities over the years: presentations and discussions with colleagues at conferences, in particular the annual conferences of the International Association of Maritime Economists; visiting positions at the University of Oxford (England), University of Sydney (Australia), University of Antwerp (Belgium), City University London (England) and the University of Wollongong (Australia); Senior Research Fellow at the Marine Policy Center, Woods Hole Oceanographic Institution; Editor-in-Chief, Transportation Research Part E: Logistics and Transportation Review; and Executive Director, Maritime Institute, Old Dominion University. The outline of the chapters of this book greatly benefited from discussions with Amir Alizadeh, Faculty of Finance, Cass Business School, City University London, while he was a Visiting Professor of Maritime and Supply Chain Management during the 2008–9 academic year at Old Dominion University.

WAYNE K. TALLEY

Norfolk, Virginia

Part I: Introduction

1

General Introduction

Wayne K. Talley

This chapter provides a general introduction to the contents of the book. Specifically, a two-paragraph synopsis of each of the chapters, 2 through 34, is provided.

In Chapter2 the evolution of maritime economics as a field of study is discussed. Maritime economics as an explicit field of study is less than fifty years old. Before 1960 there were publications on the subject, but they did not have a separate identity. The field has evolved from the study of the history of shipping, e.g., trade-offs among alternate ship designs, contractual arrangements for shipping and trade, and managing port infrastructure and services to efficiently serve the needs of trade.

Research in maritime economics has become more complex and its quantity and quality are higher than ever. Improved availability of data, methods to analyze these data and theories have contributed to this growth. University programs in maritime studies worldwide have been established and a greater number of journals are publishing research in maritime economics.

An historical perspective of shipping – evolving worldwide from primitive to developed societies – is presented in Chapter3. The ancient cultures of Egypt, Greece, Mesopotamia and Rome were involved in the early stages of the development of shipping. Shipping is the oldest mode of transportation for moving large quantities of cargo.

The business of shipping has been impacted over time by a number of factors: (1) geopolitical factors that affect the demand for transportation, (2) development of maritime technology, (3) development of ship types to transport certain types of cargoes, e.g., such bulk cargoes as oil, ore and grains, and (4) intra-modal (among shipping companies) competition and intermodal (e.g., from land routes to and from ports by railways and trucks) competition. Without shipping the development of the modern industrialized world would have been impossible.

Chapter4 considers commodity trade flows in shipping. The commodity-trade classification system of the United Nations includes one hundred major categories of commodities, each containing several subcategories. Given this granularity of information, the chapter restricts itself to providing an overview of the major worldwide commodity trade flows – the main export and import flows in recent years, in the context of the underlying factors driving each commodity. The chapter is divided into two main sections – major bulk commodities, and general cargo and containerized trade flows.

A slowdown in world trade followed the financial crisis in 2008. The majority of trade flows are still growing, but at a slower pace; other flows have contracted. What does the future hold? Will the rate of worldwide oil depletion result in prohibitive energy prices for shipping, thus leading to a further slowdown? Will natural gas suffice as a bridge fuel?

Chapter5 describes a maritime carrier from a microeconomic theory perspective. A maritime carrier is a firm that provides for-hire transportation service by transporting goods and/or individuals in vessels over a waterway from one location to another. Maritime carriers are described by the type of vessel utilized – for example, ferry and cruise lines use ferry and cruise vessels respectively – and by the type of cargo transported – for example, LNG and container carriers transport liquefied natural gas and containers respectively.

If the amount of transportation service provided by a maritime carrier is the maximum amount that can be provided given the resources at the carrier’s disposal and the amounts of cargo (numbers of passengers) provided by shippers (individuals) to be transported, then the relationship may be described as the maritime carrier’s production function in the provision of transportation service. If so, the maritime carrier is technically efficient. A maritime carrier’s operating options are the means by which it can vary the quality of its service. A maritime carrier is cost-efficient if it minimizes cost in provision of its technically efficient services. The demand by passengers and shippers for maritime transportation services is a derived demand.

Maritime freight markets in which cargo is transported by water are discussed in Chapter6. These markets tend to be cyclical in nature because of the volatility in both the demand for and the supply of world shipping services. Variations in service demand reflect world economic activity and global trade and tend to be short-term in nature, while variations in service supply tend to be long-term in nature. Beyond vessel speed adjustments and lay-ups, adjustments in service supply tend to take longer. When shipbuilding capacity is scarce, it may take three to four years after a contract is signed for a new vessel to be built. Thus, prices for shipping services may fluctuate greatly because of adjustments to differences in demand and supply for these services, which results in volatile maritime freight markets.

Maritime freight markets are dominated by east–west trade flows. This dominance has been strengthened by the importance of Asia and the increasing importance of interregional Asian trades. The fragmentation of geographical production processes has added intermediary products to these trade flows, especially since many of the production processes are outsourced to emerging markets in Asia and transition economies in Eastern Europe.

Chapter7 discusses intermodalism and new trade flows. Intermodalism is the transportation of freight in an intermodal container or vehicle, using two or more modes of transportation. Before the 1950s, freight was packed in boxes, barrels and bags for transport by two or more modes from origin to destination. In the 1950s the introduction of containers provided for a more efficient intermodal transportation system, which, in turn, stimulated a significant growth in world trade – because of the lower rates and reduction in delivery times that ocean container transportation brought. Intermodal container transportation has also impacted trade routes; for example, rather than seaborne trade from Asia arriving at the US East Coast via the Panama Canal, an alternative land route to this all-water route came into being in April 1984, when container ships began calling at ports along the US West Coast to unload their containers for placement on double-stack trains for transport to the East Coast (a landbridge service).

Data for new trade (cargo) flows into the US from foreign ports without a history of flows to the US are also analyzed. The analysis suggests that new trade flows are greater for exporting foreign countries which have relatively large amounts of hinterland transport infrastructure and whose foreign ports handle container cargoes. Further, the more developed a foreign port is from an intermodal perspective in providing new trade flows to the US, the greater the likelihood that it will grow and the smaller the likelihood that it will fail.

Chapter8 discusses the evolution of the cruise industry – water carriers that provide transportation, leisure and tourism services. In the early days of the industry it was often stated that passengers aboard cruise vessels were either just married or nearly dead. However, this is no longer true. Cruise passengers now are of all ages. Cruise lines seek to tailor their services to accommodate the wishes of their customers.

Some old markets of cruise lines have reached saturation, e.g., the Alaska market. New markets in the Far East, the Middle East and Australia are experiencing explosive growth in new cruise business. Expedition tourism, targeting the affluent passenger, will continue to gain popularity. Remote destinations unspoiled by mass tourism that feature secluded and out-of-the-way places, such as Antarctica and the many historic islands dotting the Pacific Ocean, are drawing cruise passengers. The inland-waterway cruise market in Europe is another growing market and is expected to experience double-digit growth in coming years. Small river-cruise vessels offer amenities far surpassing those of the average hotel and restaurant associated with typical bus tours.

Chapter9