Maritime Shipping Economics

Introduction

Maritime shipping has served the globe through its sophisticated method of transporting products. It is largely affected by the economic-political activities that occur internationally. The financial crisis that occurred in 2008 affected the shipping industry. In this assessment, we shall briefly discuss the three sub components of the maritime shipping industry: dry bulk, liner and tanker industries and shall further explore the tanker industry. We will focus on the recent behaviour and prospects of the level of demand for sea transport capacity, the supply prospects across appropriate vessels types. We shall later consider the unfolding of the demand-supply balance and the recent freight rate behaviour and rates prospects for 2012 and the future. Lastly, we will formulate an opinion on the overall profitability and the sustainable recovery prospects in the different shipping industries.

Global Financial Crisis

The financial crisis began in 2007 and was triggered by a subprime crisis. It was considered the most synchronized global recessions to hit. Global leaders had to come together and try to formulate a strategy that is common for them all to survive. It froze the financial markets and caused the demise in the global trade flows. This crisis originated in the USA thus trickling down to all other markets and boarders (Claessens, Kose, Terrones, 2008). The shipping industry was one of the economic sectors that was most affected as the demand for transportation was influenced greatly by the demand of global trade. In 2011, the globe is still faced with a weakness but it was not as severe as the 2008 crisis, where global leaders had been faced with a situation where they were at crossroads rather than trying to deal with the crisis. However, the situation is still as dangerous as in 2008 with this showing a double dip recession as a result that possible prices would take a wrong turn (Claessens, Kose, Terrones, 2008).

Dry Bulk Markets

The first dry bulk carrier was made roughly around 1852 and its main objective was to freight unpackaged bulk cargo such as iron ore, coal, grain and cement. Now, this mode of transport constitutes for roughly 40% of seaborne transport and range in sizes up to 400 000 metric tons of deadweight. Majority of these ships are owned by the Chinese, the Greek or the Japanese and more than a quarter is registered in Panama (Wikipedia, 2012).

The dry bulk industry collapsed considerably during the 2008/9 global financial crisis (R. Kelly, 2011). The Baltic Dry Index (BDI) is a measure that allows us to determine the daily average of prices to ship raw materials