Advertisement

Abstract

This chapter analyses the freight rate mechanism in the shipping market. Sea transport is a derived demand where shipping demand occurs as a result of seaborne trade. The demand determinants affecting sea transport include government and political factors, the world economy, seaborne commodity trade, average haul, and transport costs. On the other hand, determinants for shipping supply are fleet size and operational efficiency. The shipping supply function shows the quantity of shipping services by sea transport carriers that would be offered at each level of the freight rate, whereas the shipping demand function shows how shippers adjust their demand requirements to changes in freight rates. In the shipping market, the supply and demand curves intersect at the equilibrium price, where both carriers and shippers have reached a mutually acceptable freight rate. Furthermore, the concept of the “shipping cycle” is introduced in this chapter. A shipping cycle starts with a shortage of ships and increases in freight rates, which in turn stimulates excessive ordering of new ships. The delivery of new ships leads to more supply in shipping capacity. The shipping cycle is a competitive process in which supply and demand interact to determine freight rates.

Keywords

Transport Cost Demand Curve Shipping Service Freight Transport Freight Rate 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

References

  1. Branch EA (1998) Maritime economics. Thornes, CheltenhamGoogle Scholar
  2. Christensen EB (2004) Bright outlook for Hong Kong as PRD manufacturing base continues growth. Hong Kong Shippers’ Council, Hong KongGoogle Scholar
  3. Clarkson Research Limited (2006) Shipping Intelligence Weekly 3 February 2006Google Scholar
  4. Coyle JJ, Bardi EJ, Novack RA (2000) Transportation. South-Western, CincinnatiGoogle Scholar
  5. Evans JJ (1988) The elasticity of supply of sea transport. Marit Policy Manag 15(4):309–313CrossRefGoogle Scholar
  6. Fayle EC (1933) A short history of the world’s shipping industry. Allen & Unwin, LondonGoogle Scholar
  7. Fusillo M (2004) Is liner shipping supply fixed? Marit Econ Logist 6(3):220–235CrossRefGoogle Scholar
  8. Kirkaldy AW (1914) British shipping. Kegan Paul, Trench, Trübner, LondonGoogle Scholar
  9. Leach P (2005) Bulking up. J Commer 6(12):34–37MathSciNetGoogle Scholar
  10. Metaxas BN (1971) The economics of tramp shipping. Athlone Press of the University of London, LondonGoogle Scholar
  11. Mongelluzzo B, Leach P (2006) Flexibility. J Commer 7(2):10–13Google Scholar
  12. Ocean Shipping Consultants Ltd (2004) Shipping profitability to 2015 – the outlook for vessel costs and revenue. Ocean Shipping Consultants, ChertseyGoogle Scholar
  13. Samuelson AP, Nordhaus DW (1992) Economics. McGraw-Hill, New YorkGoogle Scholar
  14. Stopford M (2004) Maritime economics. Routledge, New YorkGoogle Scholar
  15. Tirschwell P (2006) The Suez alternative. J Commer 7(5):54Google Scholar
  16. Traffic World (2005) Bigger ships, bigger lines. Traffic World 19 December 2005Google Scholar
  17. Truett L, Truett D (1998) Managerial economics. South-Western, CincinnatiGoogle Scholar
  18. UNCTAD (2002) Review of maritime transport. United Nations Conference on Trade and Development, GenevaGoogle Scholar
  19. UNCTAD (2005) Review of maritime transport. United Nations Conference on Trade and Development, GenevaGoogle Scholar
  20. Wright R (2005) Size is not everything; growing ships: container vessels grow longer, wider, deeper. Where will it end? Financial Times 23 May 2005Google Scholar
  21. Xinhua Financial Network News (2004) China’s wave of commodity buying fuels cargo shipping prices. Xinhua Financial Network News 6 December 2004Google Scholar

Copyright information

© Springer-Verlag London Limited 2010

Personalised recommendations