Maritime Business Centres of 2025

Anuraj Pillai
099159216
MAR8029 COURSEWORK

Maritime Business Centres

of 2025

Anuraj Pillai Page 1

 Maritime Business Centres of 2025

Table of Contents
Introduction 3
Definition of a Maritime Centre 3
Factors affecting the success of a Maritime Centre 3
Analysis of the Current Maritime Centres 4
Where would the World be in 2025? 9
Maritime Centres of 2025 10

Anuraj Pillai Page 2

 Maritime Business Centres of 2025

1.

Anuraj Pillai Page 3

 Maritime Business Centres of 2025

2. Introduction

Predicting the future maritime business centres is no mean task.Catalysed by the

umbrella term ‘Globalisation’,goods have been procured from farther distances at lower costs
in ever larger vessels.Economic volatility ,geopolitic shift and innovations in transport and
logistics Verhetsel (2009) has added another dimension to this task . The development of
shipyards,ship repair centres,ports,equipment manufacturers and easy finance would be of
prime consideration.This report attempts to define a maritime business centre,analyse the
current ones,factors behind their success and then lead on to where the maritime centres
would be in 2025.

2.Definition of a Maritime Business Centre.

Unlike a maritime cluster or a maritime city which are analogous terms ,a

maritime business centre encompasses all aspects of shipping ,ship construction ,finance
investment ,ports and world class education.The importance of maritime activity to
developement is highlighted by the fact that 80% of the world cities are ports,Verhetsel
(2009)and the observation that world city network is being increasingly global ,but also
increasingly maritime in natureVerhetsel (2009).Shipping is a capital intensive business and
evidently most of the maritime centres are also the financial capitals of the world.

3.Factors effecting the success of a maritime centre

Fig 1.Desirable features of a maritime city.Benito,

A study on the maritime sector in Norway Benito (2003) revealed that Access to qualified
labour ,Infrastructure ,Access to suppliers and Access to risk capital were the most favoured.

Fig 2.Percieved competition in maritime Norway.Benito

Competition and Innovation were also found as the main characteristics of a maritime
cluster ,the latter being most important for suppliers.Also shipyards attached relatively more
importance to regional support services as compared to other sectors.The fact that Access to
qualified labour scored high among the desirables is ample evidence that the maritime
educational institutions will boost the favourability of one place to another.

Anuraj Pillai Page 4

 Maritime Business Centres of 2025

On further detail ,it is to be noted that shipping is an international business.Access to cheap

labour to operate at effective global levels,proximity to regulatory authorities,legal support
and a strong derivatives exchange market would drive down the advantage to the holder.

Fig 3.Maritime cities classified according to importance.Verhetsel.

All these factors would still not guarantee a maritime business centre of the fact that
geographic location is a primary determinant of the result.

‘In the case of maritime services companies, it is paramount to their commercial success that
they should be present in certain nodes within the network of maritime flows’Verhetsel
(2009)

Also, America,Europe and Asia constitute a major share of world trade and each of these
continents and have one or a number of maritime centres that are significant in the network.

Analysis of the Present Maritime Business Centres

The analysis of ports in terms of containerized cargo would give us an idea of the important
ports of the world.

Anuraj Pillai Page 5

 Maritime Business Centres of 2025

Fig 4.Container terminals and cargo handled,2008.UNCTAD(F4)

Though containerized cargo would not cover all the maritime trades ,it gives us a clue to the
consuming nations and hence the purchasing power parity.It is also noted that the top ports in
these list also handle most of the dry bulk cargo.Following the definition of an maritime
business centre,an international environment is also essential to be
qualified.Singapore,Hongkong, ,Los Angeles,New York/New Jersey,Hamburg would all
qualify from the above list.Of these only Hamburg,Singapore,HongKong and New York/New
Jersey have a truly encouraging maritime environment.

An Analysis Verhetsel (2009) listed the top 50 maritime cities of the world ,sorted in terms
of connectivity to each other.

Anuraj Pillai Page 6

 Maritime Business Centres of 2025

Fig 5.Maritime cities and level of connectivity to each other.Verhetsel.2009

Although many new ports not listed in the top container ports were listed in this table,the
significance of geography is valid here.For ex:Singapore handled the greatest amount of
TEUs in 2008,but still is a major transshipment port.London without a major port features in
the list and is 8th in terms of connectivity to other maritime nodes in the network.(Fig 6)

It is also to be noted that certain centres are very strong in certain sectors of the maritime
business such as equipments , legal or access to finance but very poor or nonexistent in other
desirable constituents. For example most of the European countries have a strong presence in
the marine equipment market. The export value of products from Norwegian industries was
NOK 310 billion in 2008 of which more than 100 billion NOK came from the maritime
industry Nortrade (2010).Norway also has the Imarex,the International Maritime Exchange
which has been established as a dominant shipping derivatives market.Denmark meanwhile
acquired 13.3 million DKK in marine exports. BDM (2010).

Hamburg is dominant in most maritime affairs , it is an important port ,handled more than
9.7 millions in TEU’s ,but legal and financial facilities are nonexistent .Rotterdam has a
similar stature as Hamburg, and again does not score on other aspects. It is worth noting that
Dubai is fast rising as a port , it is adding almost 2 million tonnes to its trade every year.

Meanwhile,The port of London , handled 53 million tonnes in port operations of which 15

million was containerized cargo in 2008.POLA (2009).The TEU equivalent of this would be

Anuraj Pillai Page 7

 Maritime Business Centres of 2025

less than 5 million which is comparable to the volume of cargo handled at New York /New
Jersey. Without a port that ranks in the top ten, both of these places are financial and legal
centres of the maritime industry. London has a great tradition in shipping and the IMO, the
International Maritime Organisation that gives shape to maritime policy and regulations is
located in London. The Baltic Exchange also in London allows shipbrokers charterers and
ship owners to trade in Forward Freight Agreements (FFA’s) and provides daily market
prices ,shipping cost indicesVerhetsel (2009).The geography and the neutral time zone makes
London an important node in the maritime network.

New York scores on the being a world class city, it’s strong financial and legal presence and
proximity to the large derivatives market, the Chicago Mercantile Exchange (CME) which
trades a major chunk of the $163 billion freight derivatives market, primarily in FFA’s.
Maritime companies deem it importance to have their offices in New York , London or
Tokyo( Verhetsel,2009)

The access to quality labour stems from education.Many of the maritime centres have world
class institutions like NewYork State university of Maritime College, Singapore Maritime
Academy, HongKong Seamens Training Centre.Russia and Japan is also strong in maritime
education. A number of world class universities have set foot in HongKong and Singapore as
well with maritime courses.

The largest shipyards in the world are concentrated in China and Korea.These shipyards still
have orders till 2014.

Fig 6.Major nodes in the maritime city network

Anuraj Pillai Page 8

 Maritime Business Centres of 2025

Fig 7.Logistics Performance Index,2010.IMF.(F7)

Following our analysis ,the present maritime centres would be New York,London and
HongKong.Referring to figure 6 it is apparent that rather than the cargo volume ,the
geography plays an crucial role in creation of a major maritime business centre.

NewYork

The New York city ranks as a alpha world city,(Verhetsel,2009) ranks 6th in connectivity to
other maritime cities and ranks in the top 20 in the Logistics Performance Index.The port of
New York /New Jersey handled 5.26 million tonnes in 2008.But what adds to its stature as a
maritime centre is the presence of availability of low risk finance ,a large shipping derivatives
market,and presence of legal services.

London

London is similar to the Newyork as a maritime centre.It has regulatory bodies such as the
IMO,classification society as the LRS in addition to the Baltic Index and marine legal and
insurance services offered.It ranks eighth in connectivity to other maritime cities and the
Logistics Performance Index.The Port of London handled 53 million tonnes in 2008.

HongKong

Hongkong has to be a unanimous choice.It ranks first in connectivity to other maritime

cities,ranks in the top 15 in the LPI,and is closer to the consumer centre ,China than
Singapore.It has excellent maritime educational facilities and has always been a low risk
capital source.The port of HongKong handled 24 million TEUs in 2008.

Where would the world be in 2025?

Anuraj Pillai Page 9

 Maritime Business Centres of 2025

Much has been talked about the geopolitic shift to the east ,the importance of the
BRIC(Brazil ,Russia,India,China) to the economic growth.But is 15 years enough for a
complete global shift?.A GDP projectionMCDonald (2007) is listed below.

Fig 8.World GDP Projections.McDonald,2007

From the table we can see that the GDP of China is poised to overtake North America by
2025.Also, India is forecasted to maintain a continous GDP growth till 2050.There have been
some recent port developementsin India including a huge container terminal planned in the
southern tip,but there has been no infrastructure projects launched like in China,which is the
heart of door to door transportation.

A neo-navalism is predicted due the BRIC countriesVivero.J (2010) ,and ocean governance
from these emerging maritime powers.Russia has a coastlength of 37,653 sq.km. and by 2025
the North East Passage would be a major maritime route.Such a scenario would create
maritime activity what Roger Howard in his book termed ‘The Hunt for Arctic Gold Rush’

The Panama Canal would be fully functional by 2025,and this would have the effect of
reassigning California and Long Beach as more important ports.The Suez canal Route from
New York to Shanghai is about 12000 nm while the Panama Canal route which can allow
even the 18000 TEU vessels to pass through is only 11000 nm.It would also take less time to
traverse this route because of a lesser canal transit as compared to Suez.

Conclusion

Anuraj Pillai Page 10

 Maritime Business Centres of 2025

The highlights of 2025 could be a heightened Offshore exploration due energy

shortage,China at its peek growth ,and more adavancements in information
technology.Newyork could lose cargo volume with a staggered trade across America with a
enlarged Panama Canal.OTC FFA’s are already traded in exchanges and IT developements
could further displace the need for physical proximity to legal and insurance services.This
could place the South China Sea and the North Sea right on the spotlight.In such a scenario
Norway ,Singapore and Hongkong are better poised to take advantage of this .

Norway

With a strong maritime sector that contributes more than 40% of the total exports,the
International Maritime Exchange and DNV in place,Norway would be the new
London.Norway has a passion for the maritime sector ,is the fifth largest maritime nation and
has the second largest offshore Industry.Though it have to would compete with London ,with
the London gateway in place,it gains points in strategically located with respect to the North
East Passage.It has already launched initiatives such as the creation of a global maritime
knowledge ,’Springboard’-a venture that accelerates growth of young companies with the
help of experts in th field.Nortrade (2010)

Singapore

New York will lose its importance in 2025 and be displaced by Singapore.A lot of shipping
companies and classification societies have set foot in Singapore.It is recently highlighted by
the fact that Maersk Shipping relocated its headquarters from London to Singapore.The
country has a strong offshore design and installation talent and could attract more low risk
capital by then.Also Singapore has access to cheap well qualified labour.Singapore already
tops the ports in TEU terms and by 2025,the Singapore Derivatives exchange(SGX) would be
at full swing.

HongKong

Hongkong would easily retain its status in 2025 ,being the gateway to China.

Fig 9.World trade projections.2024.ISL,2005(F9)

Anuraj Pillai Page 11

 Maritime Business Centres of 2025

Fig 10.Container export projections.2024.ISL,2005(F10)

Containerized export and import from China would atleast be five times more than other
nations considering the projection from Fig.10 was made at the boom time.With its
cosmopolitan outlook,easy availability of finance and a world class port,Hongkong is better
placed to take advantage.

References:

Anuraj Pillai Page 12

 Maritime Business Centres of 2025

BDM (2010). In. http://www.danishmaritime.org/uk/.Accessed 12 April

Benito, G. (2003). A cluster analysis of the maritime sector in Norway.

(F4)UNCTAD.Review of Maritime Transport.

http://www.unctad.org/en/docs/rmt2009_en.pdf. Accessed 20 April

(F7)IMF,Logistics Performance Index ,2010

(F9)(F10)ISL Shipping Market Analysis.2005.

http://www.isl.org/products_services/publications/ssmr.shtml.en.Accessed 12 April

MCDonald, I. (2007). Global GDP shares in the 21st century — An

equilibrium approach.

Nortrade (2010). In. http://www.nortrade.com/index?

cmd=show_article&id=497.Accessed 11 April

POLA(2009).ln.http://www.pla.co.uk/pdfs/pp/POLA_Reveiw_Final_design_C_11.pdf.Acces
sed 10 April

Verhetsel, A. (2009). World maritime cities:From which cities do container shipping

companies make decisions?

Vivero.J (2010). Ocean governance in a competitive world.The BRIC countries as emerging

maritime powers—building new geopolitical scenarios.

Anuraj Pillai Page 13