Chapter 1 PDF

Pendahuluan Ekonomi Maritim  Shipping is one of the world’s most international industries and in studying maritime economics we are drawn into a discussion of the world economy as a whole. Seaborne trade is, in a sense, at the apex of world economic activity If we are to understand the eco...

Pendahuluan Ekonomi Maritim  Shipping is one of the world’s most international industries and in studying maritime economics we are drawn into a discussion of the world economy as a whole. Seaborne trade is, in a sense, at the apex of world economic activity If we are to understand the economic and political forces that mould developments in the shipping market, we must appreciate the two-way interaction between developments in shipping and developments in the world economy. Fast and cheap transport has been one of the main products of the Industrial Revolution. Distances have been shortened at an astonishing pace. Day by day the world seems smaller and smaller and societies that for millennia practically ignored each other are suddenly put in contact or conflict. In our dealings, in politics as in economics, in health organisation as in military strategy, a new point of view is forced upon us. At some point in the past people had to move from an urban or regional point of view to a national one The role of seaborne trade In economic development Adam Smith, often regarded as the father of modern economics, saw shipping as one of the stepping stones to economic growth. The bulk shipping revolution was no less wide-ranging in its effects. Bulk transport of raw materials by sea was, for the first time, viewed as part of an integrated materials handling operation in which investment could improve productivity. By employing economies of scale, investing in high speed cargo handling systems and integrating the whole transport systems, bulk transport costs were reduced to such an extent that it is often cheaper for industries to import raw materials by sea from suppliers thousands of miles away than by land from suppliers only a few hundred miles away—for example the rail freight for a ton of coal from Virginia to Jacksonville, Florida, was almost three times the sea freight from Hampton Roads to Japan, a distance of 10,000 miles.8 Bigger ships played a central part in this process. Over a period of 50 years from 1945 to 1995 oil tankers became twenty times bigger and dry bulk vessels ten to fifteen times bigger. Improved cargo handling in ports and better integration with land transport completed the transformation. The cost of sea transport  Compared with other sectors of the economy, the bulk transport industry’s achievement is exceptional. Average dollar prices in 1990 were nine times higher than in 1960 (Table 1.1).10 A basic Ford motor car had increased in price from $1,385 to $11,115; the UK rail fare from London to Glasgow from $23.5 to $106; the price of a ton of domestic coal from $12 in the UK to $217; and the price of a barrel of crude oil increased from $1.5 to $20.5. The three products with the smallest increase in prices are air fares, seaborne oil freight and dry bulk freight all of which approximately doubled. The fact that air fares head the list provides an insight into why shipping lost the passenger transport business during this period. With this exception the shipping business has been very successful in maintaining costs during a period when the cost of most commodities increased by ten or twenty times. One consequence is that for many commodities freight is now a much smaller proportion of costs than it was thirty years ago The international transport system The nature of transport demand Price: The freight cost is always important, but the greater the proportion of freight in the overall cost equation, the more emphasis shippers are likely to place on it. For example, in the 1950s the cost of transporting a barrel of oil from the Middle East to Europe represented 49 per cent of the CIF cost. As aresult, oil companies devoted great effort to finding ways to reduce the cost of transport. By the 1990s the price of oil had increased and the cost of transport had fallen to just 2.5 per cent of the CIF price so transport cost became less important. Speed: Time in transit incurs an inventory cost, so shippers of high-value commodities value speed. The cost of holding high-value commodities in stock may make it cheaper to ship small quantities frequently even if the freight cost is greater. On a three-month journey a cargo worth $100,000 incurs an inventory cost of $2,500 if interest rates are 10 per cent per annum. If the journey time can be halved it is worth paying up to $1,250 extra in freight. Speed may also be important for commercial reasons. Reliability: With the growing importance of ‘just in time’ stock control systems, transport reliability has taken on a new significance. Some shippers may be prepared to pay more for a service which is guaranteed to operate to time and provide the services which it has promised. Security: Loss or damage in transit is an insurable risk, but raises many difficulties for the shipper, who may well be prepared to pay more for secure transportation of his product without risk of damage. What commodities are traded by sea? The parcel size distribution (PSD) function To explain how the shipping industry approaches the task of transporting this complex mix of cargoes, we need to introduce a concept that is central to the economic organization of the shipping market, the parcel size distribution (PSD) function. A ‘parcel’ is an individual consignment of cargo for shipment.