Unit 1.

7 Lessons from5000 years of shipping 12/01/2016

Updated May 2014

MARITIME LECTURE 1
Unit 1.7 Lessons from5000 years of shipping
So that brings us to the end of the Westline. From the
earliest sea trade in the Lebanon 5,000 years ago, the
line has now arrived at China, and is heading through SE
Asia to India, the Middle East, Central Asia, Russia and E.
Europe. The shipping industry has a unique opportunity
to study its commercial history, and there are many
lessons which we could draw, but three stand out….
Maritime Economics 3rd Ed page 45

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Unit 1.7: Lessons from 5000 years of shipping

Shipping has a special place

in the world economy. It’s
both a privilege and a
1. A quick resume of the 5000 years responsibility.
2. Five lessons from 5000 years

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Unit 1.7 Lessons from5000 years of shipping 12/01/2016

S1 Résumé of 5000 years sea trade history

 After 5000 years of gradual
development, in the 19th century the 9 In the 55 years sea imports
industrial revolution transformed sea
Russia
8 grew at 4.7% per annum, Oceania
M. East
transport 7 except for a major recession

Billiontonsofcargo
Steamships andShipping
the cableSystem
network between 1979 and 1987
 1. The Bottleneck
6
when trade fell
made global markets (e.g.
2. Economies Baltic
of Scale & Mechanical
5 Cargo Asia

Exchange) and liner services possible.

Handling 4 Africa
 In 19503.global
Newfree
Bulk, Specialized
trade opened & a Container
3 System N.America
4. Ships Got Much Bigger
new era of industrial shipping.
 5. tankers,
Dry bulk, Generalcontainer
Cargo Was andUnitized 2 S.America

6. shipping
specialist Specialized
made Ships Developed 1
shipping Europe
7. Offshore
even more efficient flagging of Ships
0
1950

1960

1970

1980

1990

2000

2010
 Ship registration transferred from
national flags to “open registries”. Source: United Nations Statistical Yearbooks

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S2 Shipping's extreme trade imbalance

Japan 6.42

Average 3.5 tonnes/capita

Europe 3.55 1 billion OECD import 3.5
billion tonnes of cargo
N. America 1.65

1.5
Average 1.0 tonne/capita
China
6 billion Non-OECD countries
ROW 0.90 import 6.4 billion tonnes of cargo

World 2015 1.37 World Average 1.4 tonne/capita

0 1 2 3 4 5 6 7 8 9 10 11 12
Sea imports per person a year in 2015
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Unit 1.7 Lessons from5000 years of shipping 12/01/2016

S3 Shipping’s next step - more cargo, 2015-2065

less carbon?
Sea imports - billion tonnes Scenarios based on
45 Non-OECD imports in
40 2065
1.1%-2.8% pa growth
35
30
25
20 1950-2014
15 1865-1935 4.8% pa growth
3.5% pa growth Bulk, specialized,
10
Liner & tramp shipping container shipping
5 (pushing out sailing
0 ships)
1865
1875
1885
1895
1905
1915
1925
1935
1945
1955
1965
1975
1985
1995
2005
2015
2025
2035
2045
2055
2065
Sea Trade Scenario 1 4 tonnes per capita in 2065 Scenario 2: 1.7 tonnes per capita in 2065
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S4: Freight cost no longer falling

MEFI Freight Index adjusted for inflation

real freight rates (i.e. adjusted for inflation) 1750-2015

4,000
4. 1987-2014
3,500 2. 1815 to 1914 Freight costs rise
Freight falls as steam with energy costs &
3,000 powered liners & tramps bigger ships face
use cheap coal, & bigger smaller returns
2,500 ships to reduce unit costs
2,000 1920-37 3. 1945-86
?? Freight cost falls as
1,500 big specialised ships
1. 1741 to 1814
1,000Freights rise as sailing replace liners &
ships face increasing tramps
500 costs and size
constraints
0
1750 1770 1790 1810 1830 1850 1870 1890 1910 1930 1950 1970 1990 2010
Source: Maritime Economics 3rd Edition Martin Stopford
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Unit 1.7 Lessons from5000 years of shipping 12/01/2016

S5 A closer look at real freight costs since 1950

1000 1945-86 MEFI Freight Index deflated by price index
900 Mechanized cargo handling & 1987-2014
bigger ships cut freight cost Higher fuel cost & diminishing
800
by 75% 1947-1987 economies of scale raise
700
freight costs by 66%
600
500
400
300
200
100
0
1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010
Source: Maritime Economics 3rd Edition Martin Stopford
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S6 Three Lessons from 5000 years of sea transport

1. The first is the central role of shipping in the global economy. At every
stage in its development, sea transport played a central role. It may be
the servant, but managing change is another key role
2. Secondly, the economics of the business have not changed much. The
Mesopotamian Maritime Code, the Roman Bill of Lading or even Captain
Uring's exploits in the 18th century all tell the story of a business driven
by supply and demand. The ships, technology and the customers change,
but the basic principals of maritime commerce seem immutable.
3. Thirdly the geo-political circumstances can change suddenly. The break-
up of the Roman Empire; the voyages of discovery in the 16th century;
the colonial system in the 19th century and globalization 20th century all
changed the world in which a ship owners operated. So we must never
lose sight of the long term evolution of the business
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Unit 1.7 Lessons from5000 years of shipping 12/01/2016

Updated May 2014

The End
Unit 1.7: Lessons from 5000 years of shipping

Well done – that’s the end of Lecture 1!!

1. Run through the quiz for unit 1.7
2. Read ME3 pages
3. Download the text and slides for Unit 1.7
4. Make a date to work on Unit 1.7

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