the maritime economist | summer 2015

THEMARITIME EconomistConnecting Academia and Professionals

Summer 2015 | Issue2

I N T E R N AT I O N A L A S S O C I AT I O N O F M A R I T I M E E C O N O M I S T S

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ISSN 2408-0683

INPLAINThe carbon footprint by scopes applied to a PortIngrid Mateo-Mantecón and Pablo Coto-Millán

Maritime Governance in 3 DimensionsMichael Roe

FreshMINDSSome Insights on the Current Brazilian Seaports System in the Context of Global Trade Cassia Börner Galvão

Quality Governance in Shipping: Revising Problems in Search for SolutionsDaria Gritsenko

Editorial: Rolling the Snowball

Profession & PracticeAnecdotal Analysis of Interactions Between Istanbul Freight Index & Baltic Dry Index Engin Koçak

Introducing the ‘Planetary’ Representation of Merchant Fleets: the Oil Tankers SystemKonstantinos G. Gkonis

CHALLENGEEssentials of Maritime Theoretical Proposition ResearchWayne K. Talley

The Impact of Mega-ShipsOlaf Merk

MemoriesInterview: Message from the First President of IAME, Professor Richard GossPeter Marlow, Anthony Beresford, Wessam Abouarghoub and Stephen Pettit

Heaver’s Historical Perspective. Big Ships, Ports and Maritime Economics: Historical insights Trevor Heaver

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CONTENTSSummer 2015 | Issue2

President’s Message Jan Hoffmann, President of IAME 4Editorial: Rolling the Snowball Okan Duru, Editor-in-chief 6Editorial Board & Owner Declaration

InPlainThe Carbon Footprint by Scopes Apllied Ingrid Mateo-Mantecón,to a Port Pedro Pablo Coto-Millán 8Maritime Governance in 3 Dimensions Michael Roe 14

Profession & PracticeAnecdotal Analysis of Interactions Between Istanbul Freight Index & Baltic Dry Index Engin Koçak 20Introducing the ‘Planetary’ Representation of Merchant Fleets: the Oil Tankers System Konstantinos G. Gkonis 26

FreshMINDSSome Insights on the Current Brazilian Seaports System in the Context of Global Trade Cassia Börner Galvão 34Quality Governance in Shipping: Revising Problems in Search for Solutions Daria Gritsenko 40

ChallengeInvited Article: Essentials of Maritime Theoretical Proposition Research Wayne K. Talley 44The Impact of Mega-Ships Olaf Merk 48

MemoriesInterview: Message from the First President Peter Marlow, Anthony Beresford, of IAME, Professor Richard Goss Wessam Abouarghoub and Stephen Pettit 52Heaver’s Historical Perspective. Big Ships, Ports and Maritime Economics: Historical insights Trevor Heaver 56

Annual Conference: IAME 2015, Kuala Lumpur, Malaysia 60

Book Review 63

Editorial Board 2015–2016 65

Submission Guidelines 66

References 69

Cover Design & Photo: Okan Duru, Mariikka Whiteman, Jan Hoffmann

The Maritime Economist is a product of the International Association of Maritime Economists (IAME), from and (not only) for its members. In its second issue, the magazine has already established itself as a very useful tool, helping academic researchers share their findings with a wider audience from industry and policy makers. Articles are quotable thanks to The Maritime Economist’s ISSN number. We hope that readers who are not yet members will be encouraged to join IAME. For any doubts or suggestions, feel free to consult our Secretariat at any time - [email protected].

Many thanks and congratulations go to all those who have made this project possible, especially the editorial team and the authors of this issue. With kind regards from Geneva, Jan Hoffmann, [email protected]

President’s Message

Jan Hoffmann, [email protected]

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We have begun to learn more about another, relatively informal, side of sharing knowledge. It is a liberal approach to knowledge representation which emphasizes the core of knowledge while simplifying words and formats. That is also a nutshell form for busy people of our time. The first issue of ME Mag was a great leap as well as a difficult assignment for us. Editorial team needed to roll this small snowball a bit, and we are sure that it turns to be a huge initiative in the near future. Professionals have begun to learn more about ‘scholarly knowledge’ through a new interface of nutshells. Now it is an important turning point which hopefully becomes a tipping point for the growth of maritime business knowledge. However, we will certainly need an incubation period to get into the outbreak of wisdom, collaboration and great ties among scholars, professionals and policy makers as well.

“The fact that I can plant a seed and it becomes a flower, share a bit of knowledge and it becomes another’s, smile at someone and receive a smile in return, are to me continual spiritual exercises.”

Leo Buscaglia

Most of us agree on this fundamental principle while a common conflict arises about the fiscal perception of knowledge (e.g. role of patents) and the power of knowledge if knowledge really means power! As Israel M. Kirzner, the economist broadly follows Austrian School, frequently emphasized, there is a significant gap between information knowledge (knowledge itself) and action-knowledge.

In other words, knowledge is opportunity while action (on opportunities) is power. I believe that fundamental knowledge is already present and ready to use through the large literature of maritime business and economics. Most of core concepts are already reported and publicly shared.

In every financial crisis, we just discuss how things went wrong while we well knew what we must have done. The recipe has been always available, and the groundbreaking point is how and why people fail to recognize the existing knowledge and experience of centuries. When I mention these things, I usually recall the title of Carmen M. Reinhart and Kenneth Rogoff’s best seller book: “This Time Is Different: Eight Centuries of Financial Folly”. If there is nothing new to mankind, what we ignore which disconnect the link between fundamentals and the current phenomenon?

Recent President-elect of American Economic Association, Robert Shiller (Nobel 2013), is asked whether we learnt our lesson from the last crisis. He did not think twice to say “We have not” (Wall Street Journal). The maritime industry also needs to improve knowledge and even wisdom of collaborative and prudent growth instead of aggressive and over-competitive approach. When mentioning the knowledge, we must also highlight the knowledge of using and processing knowledge. Knowledge and experience may not pave the way to sustainable business success. How we use them has a great impact (That is what we call KNOW-WHY).

ME Mag sets the ball rolling on developing wisdom for everyone which increasingly cultivates the great progress of a vital industry of the globe. The 2015 Conference of IAME will roll another huge ball in Kuala Lumpur this year. I hope to see you all at this great event on maritime economics and business research. Please join us!

Editorial

Okan Duru, [email protected]

Rolling the Snowball“Knowledge ≠ Power”, but “Knowledge + Action = Power”


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express our congratulations to recipients of the 2015 Onassis Prize for Shipping, Professor Trevor Heaver and Dr. Martin Stopford. There is not the shadow of a doubt that these prizes are well deserved.

President of IAME Jan Hoffmann

Editor-in-Chief Okan Duru Associate Editor Adolf K.Y. Ng

INPLAIN Venus Lun (SE) Adolf K.Y. Ng (SAE) Joan P. Mileski (SAE) Lorena García Alonso (SAE) Profession & Practice Pierre Cariou (SE) Adrian Beharry (SAE) Assunta Di Vaio (SAE) Larissa M. van der Lugt (SAE) Thomas Vitsounis (SAE) FreshMINDS Alessio Tei (SE) Emrah Bulut (SAE) Vicky Kaselimi (SAE)

CHALLENGE Jasmine Siu Lee Lam (SE) Okan Duru (SAE) Rosa Guadalupe Gonzalez Ramirez (SAE)


EDITORIAL BOARD

MEMAGConnecting Academia and Professionals

Case StoriesPaul S. Szwed (SE)Ergun Gunes (SAE)Marcella Croes (SAE)Metin U. Aytekin (SAE)

Memories Paul Tae Woo Lee (SE) Zaili Yang (SAE)

SOCIETY NEWS Michele Acciaro (IAME Newsletter Editor) Verena Flitsch (IAME Newsletter Co-Editor) Indika Sigera (SAE)

BOOK REVIEWS Michele Acciaro (SE) Indika Sigera (SAE)

PR & MEDIA DIRECTOR Vicky Kaselimi

ART & DESIGN DIRECTORMariikka Whiteman

— OWNER & PUBLISHER —

INTERNATIONAL ASSOCIATION of MARITIME ECONOMISTS

President Jan Hoffmann Vice President Pierre CariouSecretary Thanos Pallis Emeritus President Theo Notteboom

Council MembersMichele AcciaroStephen CahoonPierre CariouAna Cristina Paixao Casaca

Ioannis LagoudisJasmine Siu Lee LamAdolf K.Y. NgTheo Notteboom

Francesco ParolaJean-Paul RodrigueDong-Wook SongGordon Wilmsmeier

Treasurer Maria Lekakou Webmaster Ioannis Theotokas


The Carbon Footprint by Scopes Applied to a PortDr. Ingrid Mateo-Mantecón and Prof. Dr. Pablo Coto-Millán. Department of Economics-University of Cantabria. Spain

INPLAIN

As a starting point, it is important to note that the European Union’s transportation policy seeks to create transportation systems that meet the needs of society from an economic, social and environmental point of view. Various studies reveal that the transportation sector generates around 5% of European GDP and more than 10 million jobs, but this economic development must be attached to an increase in technological development to achieve a more environmental friendly transport sector.

In particular it must incorporate the international environmental agreements such as the Kyoto Protocol. Taking into account

that the transportation sector accounts for 28 % of the EU’s energy consumption, achieving the objectives contracted regarding CO2 emissions becomes a major challenge (COM, 2011/114).

Since the implementation of the White Paper on European transportation policy in 2001, the aim has been to restore the balance between the various modes of transport as a strategy for achieving sustainable development. Therefore, readdressing the importance of the role that ports should play to support sustainability in the movement of both people and goods is needed.

To obtain CO2 emissions the Compound Method based on Financial

Accounts (MC3) methodology is used, and this method allows us to get the correcting

measures for reducing those emissions applied for the case of a port.

Conceptual izat ion

Human-induced climate change is now recognized as the greatest environmental threat of the 21st century. Climate forecasts issued by the Intergovernmental 8

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Panel on Climate Change (IPCC, 2014) have led to several initiatives designed to achieve regional, national and international agreements (Alvarez, 2014). In this context, corporate carbon footprint (CCF) offers a new scheme for reporting direct and indirect greenhouse gas emissions.

It is relevant to indicate that for ports, as for any other enterprises, the economic income statement is a necessary, but not sufficient, variable to guarantee their sustainability. To assure it, is essential as well, to take into account the environmental and social income statements. In response to this need, Port Authorities, in their role as managers of the port activity, establish standardized integral environmental management systems as a tool to establish an environmental protection and sustainability policy (eg:ISO14001 or EMAS).

The European Sea Port Organization (ESPO) highlights the relevance of the calculation of the Greenhouse Gases (GHG) for ports and continues developing the action lines designed in 2007. Alongside this, ESPO even urges ports to promote the reduction of these emissions also in transport from the port to its hinterland and foreland.

For example, the Port of Oslo determined its emissions on the basis of the ISO 14064-1 standard, by including direct emissions (456 t), indirect energetic emissions (49 t) and other indirect emissions related to subcontracts, business and trips from home to work (199 t). The total amounts to a 704 t CO2/year. Applying the same methodology, the Port of Rotterdam showed direct emissions of 8,960 t CO2/year, indirect energetic emissions of 7,230 tCO2 and other indirect emissions of 20,100 t (total: 36,290 tCO2/year).

However, CO2 accounting is not only a European trend, for example, the Port of New York has determined carbon direct emissions derived from their activities and operations that accounted for 298,000 Tons of CO2. So, they have developed a plan to reduce their emissions.

The communication is organized as follows. Section 2 shows a brief resume of the methodology employed. Section 3 presents the results of the application of the MC3 to a Spanish port. Finally the conclusions and main recommendations are offered.

CCF-Scopes-and MC3

The definition of the corporate carbon footprint (CCF) given by Carbon Trust states that “the total emission of greenhouse gases in carbon equivalents from a product across its life cycle from the production of raw material used in its manufacture, to disposal of the finished product”.

The CCF allows us to establish specific environmental sustainability objectives; it allows the incorporation of indicators, such as the lifecycle and eco-labelling, in a single tool and provides a new method to help port managers to fight climate change more accurately since it allows implementing the corrective measures to minimise CO2 emissions.

scholarly knowledge in plain language

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“ The European Sea Port Organization (ESPO) highlights the relevance of the calculation of the Greenhouse Gases (GHG) for ports and continues developing the action lines designed in 2007. Alongside this, ESPO even urges ports to promote the reduction of these emissions also in transport from the port to its hinterland and foreland.


INPLAIN

- Scope 1 accounts for direct emissions that are produced by sources owned or controlled by the organization as a result of burning fossil fuels directly when performing their economic activity.

- Scope 2 relates to indirect emissions from the generation of purchased electricity, heat or steam consumed by the organization.

- Scope 3 refers to all other indirect emissions that are consequence of the activities of the Company not included in scopes 1 and 2 (Alvarez, 2014).

Empirically, common methodologies for calculation of CCF include: 1) Input-output techniques; 2) PAS 2050; and 3) The Compound Method based on Financial Accounts (MC3). Next, we will describe briefly the method applied in this communication, the MC3.

The Compound Method based on Financial Accounts (MC3), is one of the most practical methodologies that correctly assesses the amount of direct and indirect greenhouse gas emissions (the three scopes). Also, MC3 was built under the premise of being

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The Greenhouse Gas Protocol Corporate Standard classifies emission sources in three ‘scopes’. See Figure 1:

Fig. 1. Emissions by Scope Source: Cagiao et al., 2012

SCOPE 2EMISSIONS FROM

ENERGY / UTILITIESSCOPE 1

EMISSIONS FROM DIRECTSOURCES “ON SITE”

SCOPE 3INDIRECT EMISSIONS OF THE

CHAIN SUPPLY OR SERVICE

fully consistent with ISO standards.

The original MC3 methodology, including guidelines for assessing the CCF of enterprises, was published by the Spanish Association for Standardisation and Certification (AENOR). This method has been improved through the co-operation with five Spanish universities, and the results of this work have been published in several journals. This methodology is supported by the

Technical Committee of the Carbonfeel Initiative, recognized by the Spanish Sustainability Observatory, and it is approved as a valid approach for assessing CCF within the framework of the Spanish Voluntary GHG Reduction Agreement (Alvarez, 2014).

The necessary information to determine the CCF though the MC3 is mainly obtained from accounting documents such as the balance sheet and the profit and loss account, so all activities linked to each organization are perfectly defined. The MC3 calculates the footprint for all goods and services included in the accounts. Additionally, waste derived from the acquisition of such goods and services, and the occupied space by the company which are included in the accounts.

Obtaining CCF using MC3 methodology is estimated on the basis of the calculation sheet, which works as a consumption land use matrix (CLUM) which



applies the consumption of goods and services needed by companies. The rows of the CLUM matrix show the footprints for each category of good/service consumed. Columns include, amongst several other elements, relevant categories of productive space, according to the Ecological Footprint analysis.

Figure 2 presents the outline for the calculation of the CCF applying MC3:

Applicat ion to obtain CO2 emissions of Gijón´s Port

Spanish port authorities have established standardised comprehensive environmental management systems as a tool for implementing environmental protection and sustainability policies (ISO 14001, EMAS, etc). This communication focuses on the particular case of Gijón Port Authority since it has been the pioneer in the use of CCF indicator within the Spanish port system.

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Fig. 2. Calculation of CCF applying MC3

In MC3 the consumption is obtained mainly from the company accountability. Then the TARIC classification is used to change monetary units into physical units (metric tons, Tm). Those consumptions units are multiplied by the energy intensity (the amount of energy/ton used to produce it in GJ/t), to obtain total energy used to produce each product category considering a standard life cycle. Once total energy is obtained, we divide it by the energy productivity, (where energy productivity shows how many tons of each fuel were needed to generate the CO2 volume which can be absorbed per hectare on an annual basis), to get ecological footprint of the company. Finally, CCF is obtained after multiplying the ecological footprint by an absorption rate per hectare/year.

We have calculated Gijon´s port CCF for the period from 2004 to 2008 using MC3. In other to accomplish this task, data provided from accountability documents such as the trial balance, the tangible fixed assets and the general ledger were requested from the Financial Department. Other data such as electricity, fuel, water, and paper consumption were obtained from those responsible for these services. The main results by good/service category (in tons of CO2 emitted) and scope are presented in Table1.

According to Table 1 we may identify two different patterns in the evolution of net CCF for Gijon’s Port. The first one, from 2005 to 2007, shows a decrease of around 7.5%, while in 2008 this trend was disrupted presenting an increase of 8.6%.


INPLAIN

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Focusing in 2008 the major contribution to CCF corresponds to materials footprint (70.2% of them being building materials and 11.6% the rest of the materials) followed by electricity footprint –scope 2–, with an 11.7%, and fuel –scope 1– with a 1.7% (Carballo-Penela et al., 2012). Since net CCF derived from direct emissions (those derived from fuel combustion, scope 1) are insignificant it is crucial to focus on indirect emissions in order to become a carbon neutral port. For the case of Gijón’s port, indirect emissions from electricity or scope 2, and other indirect emissions or scope 3 (materials, building materials, services, wastes, agricultural resources and forest resources, and water), reached 28,659 t CO2 in 2008 (98.3% of the CCF; where an 86.3% is due to scope 3). Several researchers have also commented on the importance of indirect CCF.Other methodologies proposed in the literature to account for the CCF focus only in scopes 1 and 2. However, as we have highlighted here, these scopes represent only an average of 13.43% of the CCF for 2008. In other words, carbon neutrality requires

Fig. 3. Total CO2 emissions in % by scope in 2008

measures beyond scopes 1 and 2, so measurement of scope 3 is vital (see Figure 3).

Table 1. Evolution of PAG’s CCF broken down by categories and scopes (tCO2/year and %)

The Port of Gijón should pay attention to reduce the CO2 emissions. Improving Efficiency in the use of materials, building materials, and replacing the electricity supplier for one producing renewable energy would contribute to the reduction of the CCF of the port.

Electricity-Scope 2-Indirect emissions

Fuels-Scope 1-Direct emissions Scope 3-Other indirect emissions:

Materials

Building materials

Services and contract services

Waste

Agricultural resources

Forest resources and water

Gross CCFCounter FootprintNet CCF

Category 2004 2005 2006 2007 2008

5,040(16.5%)

676(2.2%)24,769

(81.21%)4,036

(13.2%)16,281(53.4%)

786(2.6%)1.143(3.7%)

410(1.3%)2,113(6.9%)30,485

5930,426

3,909(12.2%)

705(2.2%)8,554

(85.63%)3,916

(12.2%)19,000(59.1%)1,447(4.5%)1.250(3.9%)

521(1.6%)1,401(4.4%)32,148

5132,097

3,893(12.9%)

839(2.8%)25,514

(84.33%)3,795

(12.5%)19,113(63.2%)1,197(4.0%)

10(0.0%)

449(1.5%)

950(3.1%)30,245

5130,194

3,815(12.8%)

578(1.9%)25,504

(85.28%)3,728

(12.5%)19,411(64.9%)1,247(4.2%)

59(0.2%)

490(1.6%)

569(1.9%)29,896

5129,845

3,801(11.7%)

550(1.7%)28,109

(86.57%)3,756

(11.6%)22,772(70.2%)

863(2.7%)

27(0.1%)

159(0.5%)

532(1.6%)32,460

5232,408



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Conclusions

An eco-efficient port must aim to achieve the zero carbon goal, reducing its energy consumption, investing in self-produced renewable energies, purchasing green materials, subcontracting ecological civil works or even investing in natural capital (carbon sinks, protection of the biodiversity, etc.); this aim should be compatible with an increase in cargo handling at port facilities.Nowadays, control of greenhouse emissions is a key tool in order to measure the environmental impact of organizations and freight. The application of this measure to all ports and for every logistic agent involved in the supply chain would make possible to plan the reduction of emissions, aiming to minimize emissions in the whole network.

Pedro Pablo Coto-Millán. Professor and Dean of the Faculty of Economics and Business at the University of Cantabria.

Pedro Pablo Coto-Millán is the Dean of the Faculty of Economics and Business at the University of Cantabria. He holds a degree and Ph.D. in Economics. He is currently Professor of Foundations of Economic Analysis. He has written 21 books, 27 papers in journals with scientific impact in Journal Citation Report of ISI and over 50 articles in other journals. He is part of the editorial board of the scientific journals: International Journal of Transport Economics; International Journal of Shipping and Transport Logistics; Maritime Economics and Logistics (International Journal of Maritime Economics) and Principios. His areas of specialization are: microeconomics, transport economics and Port Infrastructures, and environmental economics.

Ingrid Mateo-Mantecón. Department of Economics. University of Cantabria

Ingrid Mateo-Mantecón is a researcher and lecturer Professor of the Department of Economics at the University of Cantabria since 2005. She obtained her PhD in Economics from Cantabria’s University and has a Postgraduate Degree in Trade, Transport and International Communications.Previously, from 2003 to 2005 he worked at Santander’s Port Authority.Her research has focused on: Transport Economics and Port Infrastructure: Regulations, Industrial economy, microeconomics, economic Impact of Port Authorities, and environmental economics.She is also a co-author of book chapters, books, and articles in national and international journals.

Sharing responsibility for emissions among producers and consumers could facilitate international agreements on global climate policy. These agreements should be reached with the most possible consensus.

References are given on page 69.

Acknowledgements

The authors acknowledge contributions from Adolfo Carballo-Penela and José Luis Doménech, and comments from Valeriano Martínez-San Román.

Cite this art ic le: Mateo-Mantec´n, I. and Coto- Millán, P. (2015). The Carbon Footprint by Scopes Apllied to a Port. The Maritime Economist Magazine, Vol. 2 (July), pp. 8–13.


Maritime Governance in 3 DimensionsProfessor Michael Roe, Plymouth University

INPLAIN

To suggest that there is any need to consider maritime governance and to propose changes in its approach and organisation there needs to be a case made that something at present could be improved and that maritime governance itself is a significant issue. This is not difficult. Firstly however, what is maritime governance?

Maritime governance is fundamental to all activities in the maritime sector and manifests itself in many ways. Through legislation and policy documents; through interaction with stakeholders, politicians and the public; through discussions through and with the media; through lobbying and sponsorship by the private and public sectors; through authority and

respect (or otherwise) of the institutions and individuals who play a major part. Its role is to act as the guiding force which lies behind policy-making and operationalistion and as such it determines the degree and success of its effectiveness. Without effective maritime governance and policy-making there can be no stability, no control, no predictability, no reliability and perhaps most importantly as a result there results indeath and injury, pollution, insecurity and inefficiency. No manner of well intended policies will achieve much at all unless the governance of the maritime sector is effective. Currently it displays serious inadequacies and the results in terms of safety, security, efficiency and the environment are everywhere clear.

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The range of failure that maritime policy initiatives continue to display is both substantial and widespread and includes almost all aspects of the industry – all sectors (liner, bulk, ferry); all activities (safety, the environment, security and efficiency); all locations (from the European Union to the USA, and from the Far East and China to the developing countries of Africa); and in particular every part of the jurisdiction and functioning of policy-making and its underlying govern-ance from the international and global (eg the United Nations, OECD and WTO) down to the local and regional passing on the way through the supranational (eg the European Union, ASEAN and Nafta) and national (eg all number of nation-states from Greece to the UK; China to India; USA to Russia). Perhaps the most notable are the continued problems exhibited by the inadequate functioning of the United Nations International Maritime Organisation (IMO) and its strained relationships with both its supranational (in particular the EU) partners and even with its own national members. This is well documented and covers issues from climate change, environmental policy and safety to issues that stem from the organisational relationship between the IMO and its constituent members (see for example the debate over maritime safety in Tradewinds, 2008a, b, c; Lloyd’s List 2008, 2009a, b, 2010). In the words of Jordan (2001: 204) in his discussion of the failure of institutions to agree how to approach the problems of governance; ‘to all intents and purposes, the dialogue between the two paradigms is essentially one of the deaf’.

There has been considerable commentary on the importance of maritime governance, the problems it exhibits, and over many years. See for example Sletmo (2001, 2002a, 2002b); Selkou and Roe (2004, 2005); Bloor et al. (2006); Kovats (2006); Roe (2007a, 2007b, 2007c, 2007d, 2007e, 2008a, 2008b, 2009a, 2009b, 2009c, 2009d, 2010a, 2010b, 2013); Roe


and Selkou (2006); Van Tatenhove (2008); Sampson and Bloor (2007); De Vivero and Mateos (2010); Van Leeuwen and Van Tatenhove (2010); Baindur and Vegas (2011); Vanelslander (2011); Campanelli (2012); and Wirth (2012: 224, 239); and whilst this does not provide indisputable evidence that these governance problems are severe it is indicative that things are not perhaps straightforward and simple. It also a trend that can be seen across wider disciplines in the consideration of governance failure. Examples include those analysing the broadest global implications (for example Held [1991], Ruggie [1993], Crosby [1996], Stoker [1998], OECD [2000], Jessop [2004], Ramachandran et al. [2009], and Borzel and Risse [2010]).The maritime sector is not alone. This in turn raises the issue as to why there has been so little debate about the inadequacies of maritime policy-making and operationalisation and its underlying governance problems. If policy-making is problematic then perhaps something needs to be done (or at least considered). In effect the structure of maritime governance remains the same as it has been since the 1940s, in essence based upon an hierarchical, institutional framework that was developed from the 1920s and which can be traced back as far as the Treaty of Westphalia signed in 1648. Is it not time that change is considered? 15

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One way to do this and to understand the problems faced is to take them as represented by three dimensions.

Dimension 1: Now

The present framework for maritime governance has a number of fundamental characteristics that define its operation and structure and which in turn have a major effect upon what can (and cannot) be achieved and by whom. It is these characteristics that are central to the problems faced by the sector and can be summarised as follows:

• Nation based• Institutionally determined• Conservatively defined stakeholders• Shipowner dominated• A focus on form rather than process

Each of these issues needs to be addressed if maritime governance is to be appropriate for today’s and the future’s shipping marketplace. Currently none are considered effectively. The nation-state retains its jurisdictional pre-eminence whilst maritime governance remains essentially institutionally driven with alternative frameworks for policy-making neglected. The role of extended stakeholder involvement is at least understood (see for example recent commentary by the EU on maritime stakeholders). Meanwhile the ambitions of over- influential shipowners and associated maritime stakeholders is unlikely to change whatever developments in governance occur – these undesirable effects need to be understood and measures taken to produce policies that balance the desires generated. Major governance revision is not going to remove the significance of shipowners in maritime policy-making but their ambitions could be accommodated more successfully in policies that address all sides of the environmental, safety, security and efficiency arguments.

At the same time, globalisation centres upon flows – of information, materials, money etc – and yet maritime policies are essentially static – designed

at one point in time, for a defined situation with an inability to be flexible to accommodate change. Processes characterised by the movement of money, people, information, materials, dominate the maritime sector and effective governance structures need to accommodate this dynamism, to regulate, stimulate and provide for an industry which takes little account of national borders and acts as an antithesis to the existing static policies.

This dimension is characterised by a framework of maritime governance dominated by spatial considerations, driven by the territorial ambitions of nation-states, shipowners and entrenched institutional policy-makers. Despite this spatial focus there is little recognition of the impact of globalisation upon maritime governance and the relationships between the jurisdictional levels around which the current policy-making process is centred. Nation-states in particular remain central to policy-making and yet inadequate to enforce them upon an industry freed from national constraints.

Dimension 2: Next

All the problems of maritime governance could presumably be resolved by a thorough redesign of institutions, structures and communications which addresses the inadequacies of static uni-dimensionality and in particular the need to recognise the relationship between governance and globalisation, making steady progress to accommodate something beyond one-dimensional spatiality in policy-making. Unfortunately no; there remains much more to decide let alone accomplish because there is clearly very little understanding of the significance of

“ One essential issue that needs to be addressed is that of dynamism. A static approach to governance is inadequate and a more dynamic framework is the only way to reflect the way the industry operates – constantly changing, adapting to market needs, attempting to avoid the rigours of legislation and policy-making that can be so inconvenient.



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globalisation and consequently dynamic governance still remains a dream. And yet in addition to this there is even more to do. Clearly more than just the spatial dimensional problems need to be addressed.

One essential issue that needs to be addressed is that of dynamism. A static approach to governance is inadequate and a more dynamic framework is the only way to reflect the way the industry operates – constantly changing, adapting to market needs, attempting to avoid the rigours of legislation and policy-making that can be so inconvenient. Issues of form, processes, time and flows are essential temporal elements of a new governance framework that not only recognises the role of globalisation but also the dynamic way the industry operates. It is only when this temporal dimension is combined with spatial considerations of policy-making that effective maritime governance might emerge. There is currently no evidence that the fluid characteristics of the industry are being recognised by policy-makers or in the plans for future governance change.

Dimension 3: And then?

The third dimension considers the relationship between policies within a spatial and dynamic governance framework and how they affect each other in a globalised world. How consideration of one policy approach has to consider its impact upon

others and how adaptations of policy and policy timing will be important in improving their effectiveness. This process of policy juxtaposition would allow a governance framework to be designed specifically for any particular situation. Contextual issues can provide the basis for this process – contexts first identified in the shipping sector by Ledger and Roe (1996: 66) and including operational, organisational, political, economic, spatial, legal, environmental, managerial and social and summarised in Table 1.

Consideration of a much wider range of governance stakeholders can then be accommodated (media, public, politicians, interest groups etc) as they work with and against each other to achieve their maritime ambitions. Meanwhile two further and highly significant issues can be considered in the light of governance redesign and the adoption of juxtaposition as a central theme. Polycentricity and metagovernance. Both are highlighted by Gritsenko and Yliskylä-Peuralahti (2013) who suggest that maritime governance is essentially polycentric with a multitude of ever-changing foci that need to be accommodated within governance design if it is to be meaningful. These foci can be considered wholly within a traditional hierarchical context – global, supranational, national, regional, local - or preferably within a newly designed governance framework that accommodates the spatial and dynamic

Context ExampleOperational Technical impact of change in ship and port operations.Organisational Organisational changes within the shipping industry including ownership.Spatial The specific geographical context for the shipping sector and activity. For example, port location, supply chain routes, sea lanes, weather etc.Legal Legislative impacts across jurisdictions.Environmental Impacts of climate change.Political The political context for shipping at global (eg IMO), supra-national (eg EU), national, regional and local levels.Managerial Levels of management skills and types of managerial designs.Economic Methods of business, material prosperity and broad economic change in the maritime sector and elsewhere.Social Changes in market desires, conditions of employment, training.

Table 1. Contexts and the Maritime Sector

Source: Adapted from Ledger and Roe (1996).


INPLAIN

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considerations clearly important to effective policy- making. They provide a polycentric structure for the industry, driving policy-making to understand the multi-focal nature of the maritime sector. Whilst the traditional maritime governance hierarchy is largely one composed of dominantly spatial and legal characteristics (for example legislation derived from nation-states, the EU and IMO), the environmental context (for example) features a range of other foci, constantly changing and highly polycentric and certainly not dominantly spatial or legal. The same might be said of the management, organisation and operation of the industry where alternative operational, organisational, social or economic foci may well be more important (Aligica and Tarko, 2012).

Polycentricism leads on to metagovernance, referring to the need to have a governance framework that oversees the governance of the industry itself – rather in the way that Juvenal in his Satires saw the need for guards to be guarded - quis custodiet ipsos custodes? Much has been written on metagovernance – see for example Bell and Park (2006), Kooiman and Jentoft (2009) and Meuleman (2010) and its significance to effective governance and policy-making should not be overlooked.

Much remains to be done in maritime governance before policymaking can make any effective claim to success. No doubt much has been achieved but time and circumstances move on especially in a highly competitive industry operating within an intensely globalised marketplace. What is most surprising is that there is little evidence of change or a desire for change from the industry itself or its guardians.


Cite this art ic le: Roe, M. (2015). Maritime Governance in 3 Dimensions. The Maritime Economist Magazine, Vol. 2 (July), pp. 14–18.

Professor Michael Roe, Plymouth University

Michael Roe holds the Chair of Maritime and Logistics Policy at the University of Plymouth. He previously worked with the Greater London Council and the Universities of Aston, Coventry, London Metropolitan and City. The author of over 70 refereed journal papers and 14 books, he specialises in Eastern European maritime policy and the wider governance of maritime affairs. His wife, Liz, provides moral and intellectual support whilst his children, Joe and Siân, provide entertainment and expenses. He has active interests in modern European art and literature, restoring VW Beetles, the work of Patti Smith and New Order and the exploits of Charlton Athletic FC.



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Anecdotal Analysis of Interactions Between Istanbul Freight Index & Baltic Dry IndexEngin Kocak, Head of Research, ISTFIX

Profession & Practice

ISTFIX (Istanbul Freight Index) is an independent Turkish freight analyst mainly focusing on Black Sea and Mediterranean short-sea trade, typically carried out by coaster type vessel of 1,000 to 10,000 dwt. Similar to BDI (Baltic Dry Index), ISTFIX regularly collects data from market sources, analyzes them un-der a standard algorithmic process and presents the results on a weekly basis, keeping a regular index value as well as monitoring daily time-charter equivalent (TCE) potential of different coaster segments.

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ISTFIX has been monitoring the market since 2008, with its data set dating back to beginning 2008, just ahead of the U.S. financial crisis, which eventually and rapidly triggered a massive downturn in financial markets as well as shipping markets. ISTFIX collects data from different segments: 1,000 to 2,000 dwt small coaster segment, 2,000 to 4,000 medium scale coaster segment, 4,000 to 6,000 dwt traditional segment followed by the 6,000 to 8,000 and 8,000 to 10,000 larger segments. All of the data is thereafter

Profession & Practice voice of professionals

incorporated into a composite index and presented as weekly time series. Due to transparency problems and difficulty of obtaining sufficient data on daily basis, data is collected throughout a week. ISTFIX, as mentioned prior, focuses on Mediterranean and Black Sea trades and analyses Black Sea – East Mediterranean, Black Sea – Continent, Intra- Mediterranean routes as well as returns from such routes.

Although ISTFIX and BDI adhere to completely different trade patterns and vessel types, it has become a usual practice to compare ISTFIX with BDI, as even the owners of smallest coasters in the Black Sea and Mediterranean tended to observe BDI to gauge the overall shipping activity, despite the fact that

and Black Sea economic factor influence ISTFIX obviously more than global factors, but ISTFIX, focusing on a region where trade was present for ages, is not immune to the larger global trends.

Meanwhile, the movement patterns also point out that trying to employ BDI alone to explain world trade progression can be deceiving and sometimes even irrelevant. BDI features, “New World Trade” by means of which large batches of commodities of relatively younger and vast resources being fed to the “New Machine in the East” whereas ISTFIX pays all its attention to the “Old Continent” where the finance and know-how has developed and flourished despite the fact that it plays a very little part in global trade nowadays.

The purpose of this article is to track the movement orientation of both indices, under the influence of economic milestones and emphasize the periods where the two indices move synchronously or counter-cyclically.

Below is a non-scalar chart whereby both BDI and ISTFIX time series are overlapped, for the sole purpose of comparing the chronological movement patterns with respect to each other (Fig. 1).

At an initial glance seasonal tendencies of both indices manifest themselves clearly. BDI’s reaction to Christmas, Chinese New Year and monsoon seasons can be easily traced on a yearly basis, being December, February and post-May periods. ISTFIX also responds to seasonal dynamics such as Christmas, summer season in the Mediterranean and Ramadan.

BDI’s scope weighs towards larger tonnages and intercontinental shipping, i.e. the capesize trade.

Co-Movement

Nevertheless, comparison between the two indices reveals that the general trend patterns are tightly correlated however the two indices might be seasonally countercyclical. The main reason for this lies with the fact that shipping is strongly correlated to global economy, but this variation also proves that regional economic factors have influence on regional trade. European, Mediterranean

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Distinction between ISTFIX and BDI: Summer of 2009

Yet, beginning with the 2008 crisis, non-seasonal factors that have significant impact on trends, started to have prolonged effects over the indices. For instance, first spike in BDI following the 2008 plunge was observed between April-June 2009 which coincided with 2009 second quarter record Chinese GDP boom hitting 7.9 percent owing to economic stimulus measures. During precisely the same period, ISTFIX had seen its historical bottom as European economies started posting massive contractions, and as a result EU posted a 4.4 percent GDP shrinkage.

Another opposite movement was observed when Russia banned its grain exports due to record low harvest. Although the move coincided with regular summer slowdown in June-July season at first, one

can easily observe that after August BDI recovered as Black Sea grain exports were replaced by other regions supporting handysize freight rates while ISTFIX plunged deeper.

Arab Spring had similar effects on both indices yet again, ISTFIX was more adversely affected as BDI sustained a lateral trend but recovered rapidly in July as new harvest in Russia was strong enough for the government to lift the previous year’s ban. Thereafter both indices saw the impact of Greek Crisis that gave a wide shock to the markets as it brought together the question as to whether the Euro was sustainable at all.

Interestingly through 2013 and 2014, until the month of September, both indices did not register a strong surge and remained rather sluggish. Again interestingly both indices posted gains between September and December 2013, when a new order spree of Handysize and Ultramax vessels were observed.

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Fig. 1. BDI and ISTFIX comparison, non-scalar basis.

voice of professionals


Finally during the Russian-Ukrainian tension ISTFIX registered a serious slump whilst the less region- sensitive BDI sustained a horizontal trend.

As of January 2015, both indices once again started to move in the same manner however the reason behind both are completely different. As of 2015 due to new Emission Control Area measures in Northwest Europe, many short-sea trading vessels had to relocate to the closest non-ECA region, being the Mediterranean and thus creating a massive oversupply of tonnage, sending ISTFIX to historical lows. The situation was further exacerbated by sluggish Russian growth and difficulties that EU recovery faces.

On the other hand the BDI suffered from slowing Chinese economy and remained depressed due to heavy dry cargo order-book backlog1.

What wil l happen next?

One can expect further opposite trending between the two indices over the short-medium term as economic evidence suggest that China will continue to cool-down its economy in a controlled manner and orderbook growth will only be effectively nullified in 2016, according to recent statistics. On the other hand, with new liquidity measures introduced by the ECB (European Central Bank), relative normalcy in Black Sea and East Mediterranean, ISTFIX might be poised for a gradual recovery.

ECB has recently initiated2 a quantitative easing approach, resembling U.S. Federal Reserve (Fed), towards solving the deadlock state in Europe in order to promote consumer spending and boost economy. It is now believed that with Fed now trying to reverse the flow of liquidity with an interest rate hike, planned within the year, ECB might partially offset the effects of a monetary tightening with its own liquidity programme. Leaving the global effects thereof aside, if the move succeeds in stimulating the regional economy, coaster trade will definitely be positively influenced by the developments. The effect can be

further enhanced in the event of a Ukraine-Russia accord.

Alternating between ISTFIX & BDI as “regional” and “global” indicators

It is obvious that professionals (chartering brokers, owners, insurance underwriters and even banks) cannot and probably should not focus only on BDI in order to assess the economic environment for dry bulkers smaller than 20.000 dwt as BDI focuses on tonnages beyond that. Although there is reasonable evidence that BDI trends can be used to determine the overall circumstances, in any given short-to- medium term period, ISTFIX or any other indicator maintained within a similar index methodology should provide better insight into regional trade.

“ BDI features, “New World Trade” by means of which large batches of commodities of relatively younger and vast resources being fed to the “New Machine in the East”whereas ISTFIX pays all its attention to the “Old Continent” where the finance and know-how has developed and flourished despite the fact that it plays a very little part in global trade nowadays.

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As set forth in this article, ISTFIX has been weathering through regional turmoil as well as a major financial disarray in the region to which it is serving. Thus, it can be useto more accurately address the sensitivities and responses of short-sea and coaster shipping within the described region, which could prove valuable for owners, charterers and lenders who require a reference point for business analysis. BDI will always remain the main shipping indicator and without doubt is one of the few leading gauges of global commercial activity.



Engin KoçakHead of ResearchIstanbul Freight Index (Istanbul Shipping Co.)

Engin Koçak is current Head of Research at Istanbul Freight Index (Istanbul Shipping Co.) He holds a bachelor’s degree in Naval Architecture and Marine Engineering from Yildiz Technical University and an MBA degree on Finance from Istanbul Technical University. Engin Koçak joined Istanbul branch of Rotterdam based boutique ship finance brokers FinShip in 2006 and became a Senior Associate in due course, specializing in financial analysis, wet & dry short sea shipping markets, debt and equity financing as well as restructuring and distressed loans. In early 2011 he joined ISTFIX, (Istanbul Freight Index) and has been leading the short sea research since then.

References:

ISTFIX, http://www.istfix.comBDI, http://www.balticexchange.com/, for evaluations on this article, data from Bloom-berg was employed, publicly available at: http://www.bloomberg.com/quote/BDIY:IND1. Maersk Broker’s Dry Bulk Fleet Update2. ECB, https://www.ecb.europa.eu/press/pr/ date/2015/html/pr150122_1.en.html3. The Global Economic & Financial Crisis: A Time line, Guillén, Mauro F., University of Pennsylvania, Lauder Institute

Cite this art ic le: Koçak, E. (2015). Anecdotal Analysis of Interactions Between Istanbul Freight Index & Baltic Dry Index. The Maritime Economist Magazine, Vol. 2 (July), pp. 20–24.

Lori Ann LaRoccoAuthor, “Opportunity Knock-

ing”, “Dynasties of the Sea”,

“Thriving in the New Economy”

Senior Talent Producer on the

CNBC and one of producers of

“Squawk Box”

“The Maritime Economist has the opportunity to break down and analyze the problems facing the shipping industry and provide the economic analysis so desperately needed.”

comments and praises


Introducing the ‘Planetary’ Representation of Merchant Fleets: the Oil Tankers SystemKonstantinos G. Gkonis


A ‘planetary’ presentation approach of shipping fleets (tankers in this article, for a given past time period as a demonstration example) is an innovative way of providing a snapshot of the supply side picture. It is based on the parameters of orderbook/fleet ratio (x axis), average age of fleet (y axis), and proportional

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Moreover studying the evolution of a planet’s position over time can be instructive for the underlying market dynamics and the combined effect of supply and demand forces on its fate.

Profession & Practice voice of professionals

The tankers’ system within the shipping universe

Within the shipping universe exists the tankers’ system, visually represented in Figure 1.

Each “planet” is a tanker segment (segments defined here by tonnage size ranges1), and its visible side surface proportionally corresponds to its aggregate tonnage size (in deadweight terms). Each planet is positioned in the system according to two coordinates: the “average age of the existing fleet” (y axis) and the “orderbook to existing fleet ratio” (x axis).

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Fig. 1. The Tankers’ planetary system

1 Small product: 3,000-24,999 dwt t; Handy product: 25,000-39,999 dwt t; MR product: 40,000-52,999 dwt t; Panamax: 53,000- 79,999 dwt t; Aframax: 80,000-199,999 dwt t; Suezmax: 120,000-199,999 dwt t; VLCC: 200,000+ dwt t.

Planets in the bottom-right neighborhood of the system are suffering from the “high temperatures” of oversupply: a combination of their young age, which does not favor a reduction in their size by natural demolition causes, and a dynamic growth (high orderbook). The arrows on the axes show the direction to this dangerous area. The contrary

happens in the upper-left “cold” neighborhood: over there reside older fleets renewed by a natural scrapping process and having low energy / rate of regeneration (low orderbook/existing fleet ratios). As of April 2013, in the extremes of our system reside the old and calm smaller planets of Small and Handy product tankers (average age: 13.7 & 11.6 yrs; regeneration rates 7% & 4%; masses: 26 & 19 m.dwt t respectively). Closer to the burning sun of oversupply (bottom right) are the big, young, and high energy (getting red-hot in color) MR (Medium-Range) product tanker, Suezmax and VLCC (Very Large Crude Carrier) tanker planets (ages: 8.0, 7.8 & 7.8 yrs; regeneration rates: 18%, 13% & 12%; masses: 60, 75 & 191 m.dwt t

respectively). These planets are prone to size reduction/destruction e.g. by forced demolition of material, or otherwise lay-up, low utilization etc. The Aframax and Panamax planets are in a moderately cold state (age: 8.5 & 8.0 yrs; regeneration: 7% both; mass: 99 & 32 m.dwt t).




Of course the above is a snapshot of a dynamic system. The orbits of the planets are not predefined (only their past is known); natural forces tend to slow them down (push them left/down + size reduction), when they approach the destructive sun of oversupply. What is more, their fate also depends on another dimension: demand. These aspects are discussed next.

Examples of how the sys-tem evolves

Figure 2 shows as an example certain product tanker planets as of end-2012 against end-2011.

Small product tankers: end-2012, compared to end-2011, found them closer to the upper left “cold state” area of the system — which is generally a good thing given the low

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Fig. 2. Product tanker planets end-2012 vs. end-2011

energy/rate of regeneration (low orderbook/ existing fleet ratio). So for this segment, this ratio dropped from 9.7% to 7.3%, while the average age changed slightly (14.1 from 14.0 yrs). Its size increased by 2.6% (to 26.86m.dwt t).

Handy product tankers: end-2012, compared to end-2011, found this segment also closer to the upper-left “cold” extremes of the system. The orderbook-to-existing fleet ratio dropped from 3.0% to 2.6%, while the average age increased (11.7 yrs from 11.3 yrs). Its size moreover decreased by -1.0% (to 18.82m.dwt t).

MR product tankers: this planet has on the contrary resided closer to the bottom-right neighborhood suffering from the “high temperatures” of oversupply (arrows on the axes show the

direction to this dangerous area). This segment’s end-2012 characteristics were mass: 58.47m.dwt t (+3.5% yoy); age: 7.9yrs (was 7.5yrs end-2011); regeneration: as high as 15.4% (was 12.3% end-2011).

As explained, planets close to the bottom-right area, if not supported by sufficient demand, are prone to size reduction/destruction e.g. by forced demolition of material, or otherwise lay-up, low utilization etc. In meeting increased demand, MR product tankers would be facing more competition from LRs (Long-Range Product tankers) (LR1s: the coated sub-segment of the Panamax size range & LR2s: the coated sub-segment of the Aframax size range), and so it was interesting to see the state of these planets as well in the product tankers’ system.



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Fig. 3. Product tanker planets end-2012 vs. end-2011 (part II)

Figure 3 displays the state of LR1 and LR2 vis-à-vis MR product tankers for end-2012 vs. end-2011. These segments crowded themselves close to the bottom-right neighborhood suffering from the “high temperatures” of oversupply.

LR1 product tankers: this (silver-colored) planet has also moved even closer to the hot area in 2012. Its regeneration (orderbook-to-existing fleet) ratio increased to 12.1% from 11% and its (average) age decreased to 6.4 from 7.3yrs. Its mass at 25.82 m.dwt t decreased slightly (-0.1% yoy), although the number of tankers is the same as a year ago (the 13 demolitions in 2012 corresponded to slightly higher tonnage compared to the recorded 13 new deliveries).

LR2 product tankers: the blue-colored (and smaller of the three) planet also remained in the same neighborhood, but moving somehow differently. In 2012, its mass increased by as much as 9% to 21.76 m. dwt t and its age fell to only 5.9 from 6.7 yrs, yet decelerating, in a balancing / protective move, regeneration to 10% from 14.6% a year ago.

In conclusion, these 3 segments have been swarming bottom-right, and one can see this as the result of (current or expected) demand increase.



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Fig. 4. Tanker planets shift from mid-2011 to 04-2013

Figure 4 provides the April 2013 snapshot of the tank-er (size) segments’ state. Moreover, an arrow shows each planet’s relative position in mid-2012: the tip of the arrow points to the planet’s current position, while its tail-end corresponds to its position in June 2012 (the straight-arrow line connects the two points, showing the distance travelled by each planet in the elapsed time period rather than its actual path).

All segments have been swarming away from the hot zone to more ‘cold’ states with the striking exception of MR product tankers.

Starting from up-left, Small product and Handy product tankers have remained the coldest planets and moreover they have moved to even colder states. What is more, their size/mass has decreased by -0.3% and -1.7% respectively. In

the middle-zone, as we are approaching the bottom-right hot area, have remained Aframaxes and Panamaxes. They have also moved further away from the oversupply sun, however their masses slightly increased by +0.6% and +0.2% respectively.

In the hot zone now, Suezmaxes and VLCCs were the hottest planets in mid-2012 as the tails of their arrows depict. MR product tankers were the third hottest planet. Since then, the first two have moved away with the most drastic change of state among all planets (longest arrows – distances travelled). Also their mass has increased by +4.7% for each. On the other hand, MR product tankers moved in a rather opposite direction over

a significant distance. They are now the red-hottest planet (with mass increase +4.1% at the same time).

Of course this graph shows only the supply-side dynamics. As it has already been suggested, these should be evaluated against the demand pros-pects.

Getting to orbits under the influence of demand forces

In order to give a more complete picture of how the tankers’ system works, the dimension of DEMAND is added as an extra force governing planets, and our analysis examines as an example the recent orbit of the MR product tankers’ planet.



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Fig. 5. MR product tankers’ planet example

We see in Figure 5 how this planet moved annually from end-2008 to end-2012, and on to mid- 2013. Its size has increased from ~42.4 m.dwt t to ~60.2 m.dwt t. The growing size of the planet is the combined outcome of supply (new deliveries vs. demolition) in face of demand forces. The planet has been subjected to the forces against oversupply pushing it left and initially down (indicative/unscaled orange arrows shown on planet as of end-2009). But demand also exercised on it opposite forces.

One can think of demand as a “black hole” located where the oversupply sun is (bottom-right) and over-shadowing it by exercising opposite demand-driven “gravitational” effects. When demand expands (e.g. in required ton-miles shipping terms), it tends to push the planet right and initially up, then down when deliveries start (see unscaled black arrows shown on planet as of end-2009), and to increase its size. The

push to the right is because new orders are placed in face of a growing (or expected to grow) demand side. Older vessels remain afloat (upwards force), before new ones are delivered, with a downwards balancing effect on the fleet’s average age.

The orbit of a planet is expected to look like the shown closed or open white loops, because of the combined forces exercised on it. The result since end-2008 has been an orbit resembling to an open loop. From end-2008 to end-2010 apparently the demand-driven forces were not strong enough to neutralize the forces against oversupply. Then in 2011, stronger demand (actual or expected)-driven forces pushed the planet up and then up-right in 2012. In 2013, the planet has moved further right (orderbook-to- existing fleet ratio has increased to ~19% from ~15% end-2012) and down as the result of strong deliveries in 2013 rather than heavy demolition, which has brought the average age of the fleet down.



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Conclusion

The above ‘planetary’ presentation approach of ship-ping fleets (tankers in the above as example) is an in-novative way of providing a snapshot of the supply side picture. It is based on the parameters of order-book/fleet ratio (x axis), average age of fleet (y axis), and proportional fleet size (surface of ‘planets’). The planet’s position against the bottom-right area where the oversupply sun is located gives an immediate feel-ing of their oversupply propensity. Moreover study-ing the evolution of a planet’s position over time (we called it orbit) can be instructive for the underlying market dynamics and the combined effect of supply and demand forces. The latter were identified as opposite “gravitational” forces exercised by a ‘black hole’ overshadowing the oversupply sun (in the far bottom-right location). These forces that feed and at-tract the planets in the down-right direction can in the end lead them to burning and destruction, if the sup-ply-demand balance gets unsettled—especially given their potential interaction (competitive behavior). Of course it should be kept in mind that those deter-mining the planets’ fates are not “natural forces”. Be-hind them are human decision makers who operate in a turbulent environment, and based on sentiment, expectations, available information, and perceived market understanding, may act irregularly and accen-tuate market cyclicalities (result: open orbit loops, even more irregular movements of planets, etc.). It is through such observation lenses that one should examine the paths followed by the tanker planets — and, what may be more interesting, attempt to pre-dict their future course...

Acknowledgments

Graphs based on historic fleet data of BRS. The article builds upon analyses undertaken by the author for industry audience with examples from the said time period, developed here to demonstrate the approach and its objectives, rather than provide latest market intelligence.

Glossary

Dwt t Deadweight tons (tanker capacity measure)LR Long-Range product tankerMR Medium-Range product tankerOrderbook the ships on orderVLCC Very Large Crude Carrier

Cite this art ic le: Konstantinos, G. (2015). Introducing the ‘Planetary’ Representation of Merchant Fleets: the Oil Tankers System. The Maritime Economist Magazine, Vol. 2 (July), pp. 20–24.

Konstantinos G. GkonisPhD

Konstantinos G. Gkonis holds a PhD in Maritime Transport from the National Technical University of Athens - NTUA (Laboratory for Maritime Transport, School of Naval Architecture & Marine Engineering), an M.Sc. in International Business (Manchester School of Management, UMIST) and a M.Eng. in Mechanical Engineering with specialisation in energy (NTUA). He has 15 years of experience in industry and academia in the area of energy shipping, and has been since 2011 in charge of Tankers & LNG shipping research at BRS shipbrokers in Paris. E-mail: [email protected]

Introducing the ‘Planetary’ Representation of Merchant Fleets: the Oil Tank-ers System

Some Insights on the Current Brazilian Seaports System in the Context of Global TradeCassia Bömer Galvão

FreshMINDS

The phenomenon of acceleration of trade and financial flows between countries, driven by the opening of trade and general capital liberalization, is an important dimension the so-called globalization. Regardless the different political and business theoretical orientations, the bottom line for all these theories are the however the same: the spectacular increase of

trade volume growth in relation to the GDP (Gross Domestic Product) growth. The data provided by UNCTAD/OECD (2014) confirms this fact trade is growing in the average two time more than the GDP in the 1990-2013 period of time and two thirds of this is seaborne trade (see figure 1). 34

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voice of young generation

In this context, it makes sense that maritime transportation plays a key role in the process of moving goods. Thus, ports and shipping logistics are not mere linkages, but determinants in the merchandise trade (Stopford, 2009) and value chains (Robinson, 2002). In fact, the increasing volumes require massive amounts of and new investments for expanding the port infrastructure and system sophistication that work as backbone for the increasing complex logistics chains. (Brooks et all, 2014).

Following the logic of global capitalism (of profit maximization), ports are found interlaced in the process of value generation: at the same time that they are expected to provide effectiveness to logistic supply chain they are part of, as lump assets ports also planned to be efficient from the investor point of view. The challenge of moving goods faster, cheaper

and dependable is very much determined by the role of seaports and how effective they are for their users (international trade players) and efficient for their investors. The port effectiveness and efficiency debate is extensive and certainly desire a deeper investigation1. However, for the purpose of the issues we are raising in this reflection about the role of seaport in the national development, we highlight that it is not mere coincidence that the discussions on port efficiency are becoming more cherish when several changes in the port governance and legal framework took place (Brooks & Cullinane, 2007 and Brooks & Pallis, 2013).

Moreover, the issues on port efficiency are aggravated by situations that confront investors and governments’ perspectives: ifthe capital owners are making decisions based on short-term logic and

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1 Aiming to fill the gap of port performance indicators among countries the World Economic Forum (WEF) has started in the year 2007 to publish indexes such as the Logistics Performance Index (LPI) and the Quality of Port Infrastructure to enable the comparative and rank among countries. Brazilian position in LPI has dropped from 41st (2010) to 45th (2012) to 65th (2014). As for the port quality infrastruc-ture, Brazilian score has oscillated from 2.9 to 2.6, which is considered poor in a scale from 1 to 7.

Figure 1. The OECD Industrial Production Index and indices for the world: Gross domestic product, merchandise trade and seaborne shipments, 1975–2013 (1990 = 100)

Source: UNCTAD Review of Maritime Transport (2014).

the ports are essentially long-term projects, who is deciding and on which projects should the resources be allocated? How are these decisions affecting the port sector effectiveness? What are the consequences of not expanding the port infrastructure bearing in mind that the trade volumes are increasing anyhow? These are challenging port issues around the world, especially those that have experienced boosting volumes of international trade, like Brazil. The Brazi l ian seaport system: background and present chal lenges

The Brazilian seaport system plays a fundamental role in the national economic development considering the country’s dimension and population density alongside its extensive coast (7367 kilometer as per IBGE/Brazilian Statistics and Geography Institute, 2013). Since the early 1990’s, as consequence of trade liberalization, the port system is being challenged to handle the increasing volume and complexity of cargo. According to the Ministry of Development, Industry and Trade (MDIC,2013)

the Brazilian trade balance in the 2001-2007 period has surpassed its own historical records for six consecutive years and even falling in relative terms, has still kept positive trade balances in the 2008-2013 period. Considering the overall trade flow (i.e., the sum of imports and exports) is the growth is even more expressive, as it has jumped from US$78,3 billion in 1994 to US$481,8 in 2013.

Still according to MDIC, 90 to 95% (depending on certain seasonal products) of the trade volume is transported on waterborne basis. In the period from 1990 to 2013, the overall volume moved in Brazilian ports jumped from 360 in 1993 to 931 millions of tons in 2013, whose evolution in on Figure 2. In fact, the Terminals of Private Use (TUP) concentrated two thirds of these volumes, as their main cargo type is bulk (dry, like iron ore and liquid as oil), but the public ports have presented a higher growth rate as consequence of cargo containerization. Public ports here are used as per the Brazilian National Agency of Waterborne Transportation/ANTAQ, which would correspond to the landlord port model as per World Bank (2001).


FreshMINDS

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Figure 2: Evolution of volume in Public Port & Private Terminals (millions of tons 1990-2013)

Source: ANTAQ (2013).



“ What would be the correlation of political forces that intervene directly in the operationalization of port activities? How are ports supposed to support a national economic development policy? We have clear that transportation does not represent an end in itself, but its malfunctioning implies significant losses (not only efficiencies) to the whole system of productive forces and relations of production.

The results of this formidable growth have undoubtedly positive impact on Brazilian economy as expansion of GDP. However, there are implications on infrastructure such as ports to handle all the additional volumes of cargo. In the year 2006, the Federal Government has set a new investment plan for infrastructures, the PAC (acceleration growth program), which has estimated investments of 503,9 billion of Brazilian Reais (approximately US$235 billion) for the three main macro sectors (energy, logistics and urban) during the 2007-2010 period. Still according to this investment plan, the seaports were contemplated with 5% of the total amount, which corresponded to 2.6 billion (approximately US$1.2 billion (DEC/CENTRAN, 2007). This amount was far below the US$16 billion2 estimation done by ILOS (2011). In the 2011-2014 period, Federal Government has announced a second round of the PAC with additional US$80 billion3 per year. According to The Economist (2012), this amount would represent 1% of its GDP, which was considered not enough for the Brazilian economy according to Morgan Stanley (2010) estimations. These estimations said that Brazil should be investing around 4% of GDP for 20 consecutive years in or-der to catch up with Chile (the benchmark in Latin America) or 6 to 8% of GDP per year to catch up with South Korea (the Asian benchmark).

The result of such gap of investment in infrastructure and increasing exports volumes was a collapse of the port system reported as the “logistic blackout” by industry leaders (like ABTP/Brazilian Association of Port Terminals and CNI/National Confederation of Manufacturing Industry and CNA/National Confederation of Agriculture). The “logistic black-out” was the expression used to define the heavy congestions at port access (both waterways and road) with standing lines of trucks that have reached 45 kilometers at port of Paranagua and 25 kilometers at the port of Santos. It was clear that the required investments to expand and modernize the port were indeed missing. In one hand, the system was losing efficiency and effectiveness in the trade global chains while on the other hand the port investor (present operators and new comers) were claiming some changes in the legal framework in order eliminate some of the system uncertainties, as typically happens in long term investments like ports.

In the sense, President Dilma Rousseff has announced major changes in port sector regulation in the year 2012. This news were taken as good, as it has addressed some of the new investors requirements, like more flexibilization in the workers hiring (not obliged to use OGMO) and volume of third part cargo in the TUPs4. However, on the side of present private operators, this new bill proposal (called as the “new port reform law”) has caused several uncertainties, as it has would bring some different competition rules for players in the same market. After the 650 vetoes were re-discussed in the federal congress, the new port reform law has passed in June 20135. Like any new legislation that is approved in the Brazilian legal system, it has to have its correspondent decrees to be operationalized. Another legal struggle has started, as some of the concession agreements were about

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2 Corresponds to R$40.5 billion in the year 2011. 3 Corresponds to R$163 billion in the year 2012. 4 As per port law 8630/1993 the TUPs were dedicated terminals to one specialized cargo handling, usually integrated in the manufacturing process (typically liquid or dry bulk) and therefore were limited to handle third part cargo, such as containers. 5 The “Medida provisoria” (Executive Order) MP595 was actually published in December 2012 and later on in June 2013 passed as law nr. 12815/2013.

seaport development over the last 3 decades shows that the port functions as trade facilitator is negatively impacted by three key factors: the low investment level; an overlapping regulatory framework; and disputing elites in the governance because of power and political disputes inside the Brazilian political system. Question that remains open now is how far this mismatch can go without majorly affecting country national development strategy (if any!).


Cite this art ic le: Galvão, C. B. (2015). Some Insights on the Current Brazilian Seaports System in the Context of Global Trade. The Maritime Economist Magazine, Vol. 2 (July), pp. 34–38.


to be expired in the year 2014. Moreover, being year 2014 an election year, any decision process was (intentionally or not) delayed. The system remained under several uncertainties and facing multiple challenges every day to get the cargo handled.

This situation instigated to two main questions: What would be the correlation of political forces that intervene directly in the operationalization of their activities? How are ports supposed to support a national economic development policy? We have clear that transportation does not represent an end in itself, but its malfunctioning implies significant losses (not only efficiencies) to the whole system of productive forces and relations of production. As the economy develops and grows, the port system plays a different role. In this short essay, we call attention to an approach that resists the easy temptation of purely economic analysis of ports and deepen the discussion related to the role of the State, the correlation of political forces and its deployment in the debate on economic development. The background to this discussion is undoubtedly the problem of economic growth and development. In the Brazilian case, the debate on the developmentalism has encouraged a growing investigation of multiple theoretical nuances and Almeida (2012) presents a critical presentation of this debate. The Brazilian

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Cassia Bömer Galvão

Cassia is Brazilian and holds an Economist Bachelor degree from FAAP-SP (2005). In 2009 she has completed her MSc Degree in Political Economics at Catholic University of Sao Paulo (PUC-SP). In her maritime career in the shipping business she has worked in different of Marketing & Sales departments of international container liners and freight forwarders. In 2012 she has started her PhD in Social Science at PUC-SP. Her dissertation is about the port development in the context of economic development. Currently she is a Fulbright Visiting Scholar at Maritime Administration Department of Texas A&M University. Contact, please use: [email protected]



FreshMINDS

Quality shipping for safety of people and cleaner oceans

Today, the adverse effects of shipping upon ecosystems and human health are seldom contested.1 Still, emissions and discharges from ships into water, air, and shores often constitute external

cost of shipping that is not accounted for in the current price system.2 Since maritime vessels offer a comparatively cost-efficient way of transporting commodities on a large scale, the problem of improving quality in shipping can be seen as a quintessence of the ambiguity of the relationship between the environment and global economy.

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Quality Governance in Shipping: Revising Problems in Search for SolutionsDaria Gritsenko


The recently approved 3d IMO Greenhouse Gas Study estimated that international shipping represented 2.2% of the global emissions of CO2 in 2012, against 2.8% in 2007. To put this number in perspective, the average contribution of road freight transport to CO2 emissions constitutes ca. 27%.3 Comparative studies on other types of air pollutants (in particular, SOx, NOx, PM, VOC) also show how shipping outperforms many other means of transportation in emission per cargo/ton ratio.4 Finally, solid and liquid hazardous and noxious substances released into water from shores (e.g., waste and agricultural runoff) on average exceed the vessel-based pollution resulting from operational negligence or maritime accidents.5

The relatively moderate contribution of shipping to global environmental pollution can be used to justify “business as usual” – no other means of transportation can move so many goods with such a small amount of emissions. Yet, current technology has moved forwards towards concepts of sustainable transportation; the electric car is there, as well a prototype of a ‘zero-waste zero-emission’ ship. Still, quality in shipping is perceived as a challenge – to some extent in terms of technology, but mostly in terms of governance.6

“Everybody ’s business is nobody ’s business”

Quality shipping can be defined as maritime transportation activities with a special focus on safety and environmental protection, aiming at a high standard of operational performance and economic sustainability throughout the vessel’s lifecycle. In the view of the IMO, higher shipping quality means fewer accidents and less pollution.7 Despite shared understanding in the shipping sector that quality improvements pay off in the medium and long terms, the challenge of balancing safety, environmental protection, and economic sustainability when trying to preserve competitive advantage often reduce

shipping companies’ motivation to quality improvement in the short-term. Quality governance in shipping is thus a type of collective action problem – an assurance problem – that requires improved coordination and credible future commitments to avoid net losses.

Over the decades the IMO, among other international organizations, has created a solid legal basis for marine environmental protection. However, the consensus-based decision-making process has often resulted in adopting regulatory measures that institutionalized the status quo.8 Retrospective instead of prospective policymaking was unable to create a self-reinforcing global governance framework with rules that would be universally adopted and universally implemented. International organizations, with the IMO being no exception, became battlefields for image, roles, and resources.9 Additionally, the activities of the IMO have proven to suffer a problem of implementation deficit as enforcement capacities vary significantly among and within the states.10

A polycentric governance perspective

The central role allocated to the public authority in matters of mitigating the negative environmental and health impacts of accelerated economic development was justified by “self-evident”11 assertions stating that fragmented authority and overlapping jurisdictions are the source of institutional failure to deliver higher quality. This attempt to conceptualize quality shipping governance as a product of hierarchically organized levels (global, national, and local), essentially limited the scope of scholarly investigation to two topics: how to improve enforcement tools, and how to increase compliance rates. At the same time, rather little attention has been paid to the multiple contexts in which quality shipping is conceptualized, operationalized, and practiced.


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A re-assessment of quality shipping governance can be done by employing alternative analytical frameworks, such as polycentricity12, an analytical tool that emphasizes the (co-)existence of many decision-making centers as an inherent characteristic of the shipping sector. Polycentricity offers a novel lens to re-think the disputes around agency (how the ambiguity of actors’ positions vis-a-vis each other and rules can be diminished), the global/local divide (under the conditions of which contextual drivers local solutions of global problems can be enabled), and democratic governance (how transparency and access to information affect potential choices among decision-makers and consumers).

Revising qual ity shipping governance with premises of polycentricity

Agency: Inclusive rules for effective interaction

Old problem A variety of actors involved in any act of maritime transportation (including ship owners, classification societies, authorities, cargo owners, charterers, insurers, and consumers) and their interdependence makes the pursuit of quality in shipping dependent on the ability of maritime actors to work together to find a common language for defining and implementing high quality standards. Revised problem Yet, it is not the mere existence of multiple actors engaged de facto in quality shipping governance, but the ambivalence of their position vis-à-vis each other and formal rules, which may affect their readiness to contribute to solving collective action problems.

Towards a solution Ports, cargo-owners, maritime technology manufactures and suppliers gained a prominent role in the quality governance process,13 and major international companies, such as Maersk, can be compared to nation states in their scale of influence.14 Yet the formal system of rules lags behind and fails to recognize these actors’ rights and responsibilities to the full extent. Instead of tightening up rules for the ship owners, a broader

range of actors shall be empowered to craft their own rules and benefit from their proactive position, e.g., by acknowledging private certification in the public inspection systems.

Global vs. Local: Openings for quality governance

Old problem Quality shipping governance is undermined by the tensions between global and local scales, thus sharpening the nature of implementation deficits in global shipping governance.

Revised problem Inter-organizational (horizontal) exchanges, spontaneous and ad hoc solving of daily routines, rather than top-down enforcement of legal rules, constitute the larger part of interactions within the shipping sector. Thus, interactions ‘here and now’ rather than ‘there and then’ play a central role in shipping quality governance15.

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“ Despite shared understanding in the shipping sector that quality improvements pay off in the medium and long terms, the challenge of balancing safety, environmental protection, and economic sustainability when trying to preserve competitive advantage often reduce shipping companies’ motivation to quality improvement in the short-term.

Towards a solution The mechanisms of quality governance in shipping can rely on a simple principle: to link actors within supply chains based on proximity, thereby exposing them to scrutiny from immediately- engaged partners rather than from top-down assigned authority. Industry inspections (vetting), private certification, cargo-owners commitment to choices of quality vessels, and ports incentive schemes to improve environmental performance are examples of how actors locally engage in governance of their

Daria GritsenkoUniversity of Helsinki

Daria Gritsenko (PhD) is specialised in the fields of Maritime Policy and Governance, Quality Shipping, Corporate Social Responsibility in Shipping and Energy Transition. She studied in St. Petersburg, Hamburg, Turku and Helsinki and holds a doctoral degree in Social Sciences. She worked as a researcher at the Center for Maritime tudies, University of Turku in a project “CHIP - Clean Shipping Economics - Shipping under New Paradigm”. Currently she is a postdoctoral fellow at the University of Helsinki conducting research on environmental dimensions of the Arctic energy development and transportation. In her latest academic work she focuses on governance challenges of complex socio-technological systems.



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(global) business and locally address the global ‘market for lemons’,16 or situations with information asymmetries that occur when the seller knows more about a product than the buyer.

Democratic governance: Quality, transparency and sustainable choices

Old problem Even though up to 90% of all world trade is performed by sea transport, shipping remains a “black box” for the majority of consumers. Due to transboundary and complex nature of shipping, global authority is called upon to regulate it on behalf of the international community.

Revised problem Decisions regarding the quality of commercial transportation have largely remained beyond daily considerations of end-consumers due to absence of relevant information (unlike fair-trade or organic labelling, information on quality of shipping cannot be obtained from product information).

Towards a solution Improving the governance of quality shipping will mean opening up the “black box” of global shipping industry for stakeholder scrutiny through the maintenance of interactive spaces contained with information that will enable informed choices. As long as information on quality of shipping cannot be freely accessed by all members in the value chain (from cargo owners to end consumers), demand for quality in shipping will remain limited. By means of labelling or other transparent certification quality shipping can be translated from a B2B tool into a B2C tool. That will sustain the logic of continuous improvement by allowing consumers to realize the responsibility for their lifestyle choices, ultimately greening the global value chains.


Cite this art ic le: Gritsenko, D. (2015). Quality Governance in Shipping: Revising Problems in Search for Solutions. The Maritime Economist Magazine, Vol. 2 (July), pp. 40–43.

Invited Article

Essentials of Maritime Theoretical Proposition ResearchEmpirical Boundary and Significance of the Theoretical

Approach

Wayne K. Talley

CHALLENGE

The majority of the articles published in Maritime Policy and Management (MPM) and Maritime Economics & Logistics (MEL) during the period 2008 to 2012 utilized the following two research methodologies: 1) the descriptive, legalistic and historical research approach (DLHRA) methodology and 2) the statistical inference (SI) methodology that makes use of sample data and probability in testing whether statistical hypotheses are statistically significant. For MPM, the percentages of articles using the DLHRA and SI methodologies for the period were 53.1% and 20.0%, respectively and for MEL, the percentages were 33.0% and 18.9%, respectively (Talley, 2013, pp. 716-717). Since statistical tests of statistical hypotheses may incur Type I errors (rejecting the null hypothesis when it is true)

or Type II errors (failing to reject the null hypothesis when it is not true), one cannot infer that a statistically significant hypothesis is true or false. However, a theory (e.g., maritime theory) derived via the theoretical proposition research methodology is true if the assumptions used to derive the theory are true.

The theoretical proposition research methodology uses mathematics to derive propositions or theories that are necessarily true under certain assumptions that are assumed to be true. That is to say, a maritime proposition is a maritime theory that is necessarily true if certain assumptions are true. One of the most well-known maritime theories is the Zannetos’ (1966) theory – tankship market freight rates are cyclical. Zannetos’ proof (or the


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mathematical derivation) of his theory is based upon the assumption that the tankship market is a perfectly competitive market, since a tankship: 1) behaves as a firm by being under the jurisdiction of its captain most of the time and its operation requires flexible decision-making (as for a firm in a perfectly competitive market) and 2) is mobile and therefore its exit cost from a particular market is low (as for a firm in a perfectly competitive market). A mathematical proof of the Zannetos theory is found in Talley (2013), utilizing shifting tankship market demand and supply curves to demonstrate (and thus provide proof of) the cyclical nature of tankship market freight rates. “The notion that the perfect competition model is appropriate for analyzing shipping markets is still at the heart of market analysis today” (Veenstra and De La Fosse, 2006, p.

carrier, PFl is the chain profit of the lth land carrier, THp is the chain throughput of the pth government- owned port and LGs is the chain logistics cost of the sth shipper. The mathematical language, the total differential (as found in calculus), is used to obtain the dMTC total differential function which is then divided individually by dPFw, dPFl , dTHp and dLGs to obtain the dMTC/dPFw, dMTC/dPFl, dMTC/dTHp and dMTC/dLGs functions. Propositions and proofs related to these functions are then derived. Assumed signs for relationships found in the proofs are supported by anecdotal evidence. The derived proposition related to the dMTC/dLGs function, for example, is: A shipper’s chain logistics cost will have 45

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65). Mathematics (i.e., the “mathematical” language) is used to derive proofs of propositions. Just as there are different “spoken” languages (e.g., English, French, German, Japanese, etc.), there are different “mathematical” languages (e.g., algebra, geometry, calculus, real analysis, etc.). An illustration of how maritime theoretical propositions (or theories) can be derived using the theoretical proposition research methodology is found in Talley (2014). Propositions are derived with respect to carrier, port and shipper choice effects on maritime transport chains. A maritime transport chain (MTC) choice function is assumed to exist, i.e., MTC =f(PFw, PFl, THp, LGs), where PFw is the chain profit of the wth water


CHALLENGE

a greater negative effect on a shipper’s choice of a maritime transport chain than its negative direct effect on this choice, since the indirect effects of a shipper’s chain logistics cost on this choice are also negative. See Talley (2014) for further discussion of this proposition and others.

Although theoretical proposition research and operations research are both mathematical in nature, they differ in that the former derives general theories or propositions, i.e., proposition functions are general in nature and thus without specification to the type of function such as, for example, being linear or quadratic. Alternatively, operations research is utilized in optimizing functions of specific types in order to derive maximization and minimization results, i.e., deriving maximum or minimum values of the dependent variables of the functions. Among the research methodologies utilized in articles published in Maritime Policy and Management during the period 2008 to 2012, 1.1% of the articles utilized the theoretical proposition research methodology and 9.2% utilized the operations research methodology (Talley, 2013, p. 716). Among the research methodologies utilized in articles published in Maritime Economics & Logistics during the period 2008 to 2012, 2.8% of the articles utilized the theoretical proposition research methodology and 24.5% utilized the operations-research methodology (Talley, 2013, p. 717).

Benefits of using the theoretical proposition research methodology in maritime research include: 1) deriving maritime theories that are necessarily true under certain assumptions that are assumed to be true (unlike statistically significant hypothesized theories that are not necessarily true since the statistical tests of these hypothesized theories are subject to Type 1 and Type 2 errors), 2) when utilizing the statistical inference methodology in maritime research in problematic (e.g., data are not available, purchasing data is too expensive or collecting data is too time intensive) and the theoretical proposition research methodology is a

viable alternative to the statistical inference methodology, 3) deriving theories that, in turn, can be rewritten as statistical hypotheses that can be supported or not supported by statistical inference tests and 4) deriving maritime theories that denote the existence of maritime relationships that may not be observed in practice.

The vast majority of the recipients of the Nobel Prize in Economics have received the prize because of their significant theoretical contributions to their disciplines that have, in turn, resulted in new areas of inquiry in their disciplines. Similarly, the use of the theoretical proposition research methodology by maritime economists may also result in significant theoretical contributions to maritime economics and, in turn, new areas of inquiry in maritime economics. References

Talley, W. K. 2013. “Maritime Transportation Research: Topics and Methodologies.” Maritime Policy and Management, 40 (7): 709-725. Talley, W. K 2014. “Maritime Transport Chains: Carrier, Port and Shipper Choice Effects.”

“ The vast majority of the recipients of the Nobel Prize in Economics have received the prize because of their significant theoretical contributions to their disciplines that have, in turn, resulted in new areas of inquiry in their disciplines. Similarly, the use of the theoretical proposition research methodology by maritime economists may also result in significant theoretical contributions to maritime economics and, in turn, new areas of inquiry in maritime economics.

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Dr Wayne Talley

Dr. Wayne Talley is the Executive Director of the International Maritime, Ports and Logistics Management Institute at Old Dominion University, Norfolk, Virginia, U.S.A. His honorary positions include: 1) Honorary Chair Professor, National Chiao Tung University (Taiwan) and 2) Honorary Visiting Professor, Centre for Shipping, Trade and Finance, Cass Business School, City University London (United Kingdom). In 2014, he was President of the Transportation and Public Utilities Group of the American Economic Association and Conference Chair and Host of the Annual Conference of the International Association of Maritime Economists held in Norfolk, Virginia. His publications include 170 research journal papers and book chapters and 12 books. The latter include Port Economics (Routledge, 2009) and The Blackwell Companion to Maritime Economics (Wiley-Blackwell, 2012). During 2000-2012, he was Editor-in-Chief of Transportation Research Part E and is currently an Associate Editor of the Journal of Business Logistics.

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International Journal of Production Economics, 151: 174-179. Veenstra, A. W. and S. de la Foose. 2006. “Contributions to Maritime Economics – Zenon S. Zannetos, the Theory of Oil Tankship Rates.” Maritime Policy and Management 33: 61-73. Zannetos, Z. S. 1966. The Theory of Oil Tankship Rates. Cambridge, MA: MIT Press.

Cite this art ic le: Talley, W. (2015). Invited article: Essentials of Maritime Theoretical Proposition Research. Empirical Boundary and Significance of the Theoretical Approach The Maritime Economist Magazine, Vol. 2 (July), pp. 44–47.

Dr Cleopatra Doumbia-HenryPresident, World Maritime

University

“The maritime development of nations is increasingly complex. Policy makers should read The Maritime Economist to enhance their knowledge and understanding about the latest research on shipping and port development.”


The Impact of Mega-ShipsOlaf Merk, Administrator Ports and Shipping, International Transport Forum at the OECD

CHALLENGE

Container ships have grown bigger at a rapid pace over the last decades, faster than any other ship type. In one decade, the average capacity of a container ship has doubled. The largest container ship at this moment can carry 19,200 TEU, but ships with capacity of more than 21,000 TEUs have been ordered and will be operational in 2017. This development raises important questions: what are the impacts to the whole transport chain – and are these impacts still positive? Larger container ships have generated cost savings for carriers, decreased maritime transport costs and as such facilitated global trade in the past. However, larger ships require adaptations of infrastructure, equipment and cause larger peaks in container traffic in ports, which have increased the total transport costs. The OECD/

ITF just released a report, entitled “The Impact of Mega-Ships” that attempts to answer these questions. It assesses if the benefits of the current mega container ships still outweigh their costs to the whole transport chain. This article gives highlights from the report.

There are cost savings of mega-ships, but these are decreasing and might not even be real ized.

Doubling the maximum container ship size over the last decade has reduced total vessel costs per transported container by roughly a third. However, these cost savings are decreasing with size; the cost savings of the newest generation of containerships are four to six times smaller than the savings from the


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previous round of upsizing. Approximately 60% of the cost savings of the most recent container ships are related to more efficient engines and not to scale. In addition, mega-ship development and the related container fleet capacity growth has taken place despite sluggish growth of world containerized seaborne trade. The massive ordering of new mega-ships has resulted in oversupply of container ships, which will most likely dampen some of the cost savings due to larger ships, as low demand results in fewer savings per transported container.

and tentative estimations. Roughly a third of the additional costs might be related to equipment, a third to dredging and another third to port infrastructure and port hinterland costs. A substantial share of the dredging, infrastructure and hinterland connection costs are costs to the public sector in many countries.

Supply chain risks related to bigger container ships are ris ing.

There are concerns about insurability of mega-ships and the costs of potential salvage in case of accidents. Mega- ships also lead to service and cargo concentration, reduced choice and more limited supply chain resilience, especially since bigger ships have coincided with increased cooperation of the main shipping lines in four alliances. In addition,

Further increase of maximum container ship size would raise transport costs.

So one could wonder if such increases would be desirable. The potential cost savings to carriers appear to be fairly marginal, but infrastructure upsizing costs could be phenomenal. Introduction of one hundred 24,000 TEU ships in 2020 would require substantial investments in those places where these ships would be first introduced (Far East, North Europe, Mediterranean), but would also - via cascading effects - result in introduction of 19,000 TEU ships in North America and 14,000 TEU ships in South America and Africa. This would imply additional investment requirements there as well.

Publ ic pol icies need to better take account of this and act accordingly.

Key question is how the costs for the public sector imposed by mega-ships could be covered.

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“ Doubling the maximum container ship size over the last decade has reduced total vessel costs per transported container by roughly a third. However, these cost savings are decreasing with size; the cost savings of the newest generation of containerships are four to six times smaller than the savings from the previous round of upsizing.

The transport costs due to larger ships could be substantial.

There are size-related fixes to existing infrastructure, such as bridge height, river width/depth, quay wall strengthening, berth deepening, canals/locks and port equipment (crane height, outreach). Mega-ships also require expansion of infrastructure to cater to the higher peaks related to mega-ships; as a result, more physical yard and berth capacity is needed. These annualised transport costs related to mega-ships could amount to US$ 0.4 billion, according to our rough


CHALLENGE

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Many ports and countries have, either accidentally or on purpose, encouraged the development of mega-ships. More balanced decision-making would be needed, with clearer alignment of incentives to public interests, policy support to enhance supply chain productivity, more regional collaboration and the creation of an appropriate forum for a discussion between liner companies and all other relevant transport actors.

Make more balanced decisions on accommodating mega-ships

Countries and ports frequently make decisions that seem positive on an individual level, but could be detrimental at a collective level. Countries and ports need to consider the costs of accommodating bigger ships in comparison to the overall economic benefits, including port income, savings to local shippers/importers/exporters, and whether such savings will be sufficient to pay for such costs.

Align incentives and costs to public interests and recover costs of mega-ships

Correct any accidental subsidies or misaligned policies that encourage upsizing, or that provide public resources to container shipping without appropriate recovery of costs. Measures could include:• Design port dues in such a way that they do

not provide incentives for the largest ships. In addition, introduce mechanisms to recover dredging costs on users, for example via fairway dues and harbour maintenance fees related to ship size.

• Clarify application of state aid rules to the ports sector and increase financial transparency of the ports sector, to avoid that the public sector picks up the bill imposed by shipping lines.

• Link state aid to the shipping sector (such as the tonnage tax1) to commitments of the sector to contribute to covering costs related to mega-ships (such as additional dredging needs).

Provide policy support to ports to enhance supply chain productivity and innovation

Policymakers should work with ports and terminal operators to enhance productivity, so as to make best use of their assets. This could include: • Innovation, technical development, workforce

training and skills upgrading. Where possible, public policies could reform labour practices and procedures to enhance workforce flexibility.

• Optimise the use of infrastructure capacity, e.g. by truck appointment systems and incentives for port truck moves during night or at weekends.

• Release peaks at port terminals via dry ports, where space in ports is constrained.

• Consider upsizing of hinterland transport modes, such as allowing for larger trains, double stacking and larger trucks.

Consider col laboration at a regional and cross-port level

As container shipping lines increasingly consolidate and cooperate, so could countries, port authorities and regulators at a strategic planning level. This could help strengthen the collective bargaining position of the landside supply chain. Regional or cross-port alignment and coordination on policy could help ensure proper allocation of resources while protecting the interest of the supply chain users. Such collaboration could take place with respect to the following areas: • Regulation of competition and policy options,

which could include whether or how to regulate ship size.

1 A tonnage tax is a favourable tax regime for shipping companies, based on tonnage of the fleet of the company, which can be imposed on shipping companies instead of a regular corporate tax


Olaf MerkAdministrator Ports and Shipping, International Transport Forum (ITF) at OECD

Olaf Merk is Administrator Ports and Shipping at the International Transport Forum (ITF) of the Organisation for Economic Co-operation and Development (OECD), international organisation in Paris. As such, he directed studies on ports, shipping and port-cities. Olaf Merk is the author of various OECD publications including “The Impact of Mega-Ships” and “The Competitiveness of Global Port-Cities”. As Manager of the OECD Port-Cities Programme, his previous post at the OECD, he directed more than a dozen studies on port-cities, including on Hong Kong, Shanghai, Rotterdam and Hamburg. He is also lecturer on the Governance of Port-Cities at the Institute for Political Science (Sciences Po) in Paris. Prior to the OECD, he worked for the Netherlands Ministry of Finance. He holds a Master’s degree in Political Science from the University of [email protected]/regional/portcitieshttp://www.internationaltransportforum.org/jtrc/maritime/index.htmltwitter: @o_merk

skeptic & heterodox

• More coordination between port authorities on future port development and investment, which could include port mergers in fragmented port systems to increase bargaining power, where this is possible without compromising competition.

• More port and freight planning at national and supra-national level, to focus investment in port hinterland links on a limited number of ports. In the case of the European Union this could mean reducing the number of core ports in the TEN-T network.

Stimulate an appropriate forum for discussion between l iners and transport stakeholders

Container lines have typically not consulted anyone on new mega-ships, before they ordered these. A constructive discussion would need to take place with the relevant transport stakeholders, including governments, regulators, port authorities and all interested constituents. The objective could be to facilitate an exchange of views, an understanding of objectives and plans, and ultimately better coordination to ensure optimum supply chain configurations, including optimized use of mega-ships.

Link to the report: http://www.internationaltransport-forum.org/Pub/pdf/15CSPA_Mega-Ships.pdf

Cite this art ic le: Merk, O. (2015). The Impact of Mega-Ships. The Maritime Economist Magazine, Vol. 2 (July), pp. 48–51.

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Interview:Message from the First President of IAME, Professor Richard GossPeter Marlow, Anthony Beresford, Wessam Abouarghoub and Stephen Pettit

Memories

The establishment of the International Association of Maritime Economists goes back to 1990s. After several years of academic accumulation, two conferences are organized in London and Rotterdam (1991). These conferences developed the basis for the official start-up. In 1992, most of scholars in maritime economics research were attending to World Conference on Transport Research in Lyon, France. The first Inaugural Meeting of IAME is organized on 2nd July, 1992 and Professor Trevor Heaver made his presentation titled “The many facets of maritime economics, in association”. The initial governors of IAME are appointed as follows:

PresidentProfessor Richard O. Goss, Cardiff University, UK

SecretaryProfessor Henk Molenaar, Erasmus University,

Netherlands

The first president of IAME, Professor Richard Goss, was, in his words, “at the origin of something truly successful”. After 25 years, our distinguished colleagues from Cardiff Business School, Peter Marlow, Anthony Beresford, Wessam Abouarghoub and Stephen Pettit, visited Richard Goss at his home and asked some questions on behalf of us. The following interview is shared with members of IAME. We hope you find this historical record a guiding light for the future of IAME and maritime economics research. We would like to express our sincere thanks to Gillian Goss, Richard’s wife, for her hospitality and arrangements for this historic interview as well as Professor Mary R. Brooks for her exceptional support.

Okan Duru

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the story of IAME

Interview8th May 2015, Pershore,

Worcestershire, UK

Going back to 1992, how did IAME get started?

Richard Goss: As far as I can remember I was greeted by a communication saying that an International Association of Maritime Economists has been formed and I was appointed as the president. I was given no choice; there was no competition for presidency and I was not consulted on the matter.

The term maritime economist1 was first used by Eric Price. I remember that we wanted to form a discussion group to present what we do; I wanted to call it the shipping economist group, but Eric Price suggested maritime economist group pointing out the importance of ports economics and

that this is a subject people knew very little about. As maritime economists we sought answers for questions posed by practitioners. For example, a question that we worried about for years was: What should a port maximise?

What were the most challenging aspects of getting IAME established?

Richard Goss: The challenges that IAME faced at the start was the lack of funds and non-existence of members.

It was a difficult time, no funds, no resources and no supporting staff. We did not have any members and at that time networking was difficult, so we depended on the University of Wales Maritime Studies department in Cardiff. The reason it started at Cardiff is simply because I was a Cardiff professor and used the maritime studies department to carry out tasks because, this was the only way possible for me to manage IAME at the beginning. 53

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1 Goss, R., 2000. The Origins of the Term Maritime Economics. IJME, Vol. 2(4), pp. iii-iv. http://www.palgrave-journals.com/mel/journal/v2/n4/pdf/ijme200021a.pdf


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In your opinion what helped IAME develop and grow?

Richard Goss: : I am not sure, but I will assume having conferences that later developed into interna-tional conferences.

The first conference was part of a transport confer-ence in Lyon and I remember that it coincided with a transport strike, which was funny because people couldn’t get to the meeting and arrived days late.

Peter Marlow: But the conferences got better with more than 500 IAME members, these local based conferences became more international and very successful because people wanted to attend and participate in these events, creating a global network that developed into a community of academics and practitioners. Some of the conferences now are sponsored by corporations and hosted by universities.

Richard Goss: : I am delighted to know that there are so many IAME members and very pleased to learn of the success of IAME conferences.

“ “I feel proud of being at the origin of something truly successful”

Richard Goss

Peter Marlow: It is a mystery how IAME grew in what it is today, but you are right it is the international conferences that people wanted to attend and this created a global network that developed and there were the subject groups as well. For example your books such as, studies in maritime economics, advanced maritime economics, and your papers on the economics of ship size, cost benefit analysis, all of these were the genesis of what IAME stand for today.

Memories

“ “I am delighted to know that there are so many IAME members and very pleased to learn of the success of IAME conferences”

Richard Goss

Richard Goss: I feel proud of being at the origin of something truly successful.

Do you sti l l get the marit ime and academic journals?

Richard Goss: No, I have very little contact with the industry, but obtain some academic journals and always wondered why there is little research in shipping done on economic rent and rent seeking.

What message would you have for young researcher today?

Richard Goss: Find a good and interesting question and study this question to a good depth.

If we asked you to think about your career, what do you think is your legacy?

Richard Goss: I would like to think that my legacy is a small number of papers which are objective. I think this is good enough.

“ “Sorry I couldn’t be with you all in Kuala Lumpur (IAME 2015) but I want to wish you all a successful conference and the continued growth of IAME.”

Richard Goss


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Heaver’s Historical Perspective

Big Ships, Ports and Maritime Economics: Historical insightsTrevor Heaver, Professor Emeritus, University of British Columbia

Memories

This note reviews the history of the role of maritime economics in the process of matching port capability to the needs of vessels. It is prompted by an interview that I had recently with a member of the Canadian press about the economic effects of the new large container ships. During the discussion, I noted that the size of vessels ordered by ship owners is only constrained by sailing conditions on a few routes. The

consequence has been that owners order the largest ships that the route and trade volume can support. Ports and others in the logistics chain are expected to incur the costs to serve those ships. This reflects the general separation of ownership between vessels and port terminals. Exceptions exist in some bulk trades, particularly in tanker businesses.

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the story of IAME

The discussion caused me to reflect on the history of ship size and port economics. It goes back to the early days of the development of maritime economics.

My first foray into shipping research resulted from a lunch in the spring of 1967 at the University of British Columbia with the economist of the Canadian National Harbours Board (NHB), the federal body responsible for the major Canadian ports. I suggested that he was faced with building new port facilities for ever larger bulk ships without knowing the cost saving that would be enabled in shipping services. He agreed; so I volunteered to undertake that summer the task of visiting ship owners and brokers in Europe to determine the costs of bulk shipping, at the expense of the NHB, of course. My report was published by

in engineering economy noted about his education, completed in 1917, that “…in all my undergraduate days, nobody had ever mentioned to me that it made any difference how much anything cost.” The general lack of knowledge about ship costs was evident in 1969 in the request from the National Ports Council, London, to republish my major findings in a 1970 Research and Technical Bulletin.

The general lack of economic analysis is evident, also, in the work of Richard Goss, who as the first President of IAME needs no introduction. In his early publications he advocated the application of discounted cash flow analsis to the selection of ship design, inconceivably a subject for an article today. He also examined the structural effect of ship time in port on total sea transport costs. In 1970, his study with C.D. Jones of the economics of size for dry bulk carriers was published. Richard and I were filling a gap that no longer exists.

This points to a second feature of the time; the absence of a knowledge-based maritime consulting

industry. Major ship brokers had publications that summarised and reviewed developments in shipping

and trade but did not have data bases on which to provide economic analysis. It was in the 1962

that Clarksons published a tanker register having taken this over from Esso and subsequently published registers for other ships types and developed its research capabilities. Drewry recognised the value of data bases which it built up in the 1960s enabling H.P. Drewry Ltd. to be formed in 1970 as an independent and authoritative provider of information and analysis to the global maritime industry. Today there is a very well established knowledge-based maritime industry. This might be regarded as the first of the new industries that has evolved with growth of the maritime sector.

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the NHB in 1968.

Three features of that time are notable. First, it was general that port authorities were making investments in new facilities without knowledge of ship costs. The need for additional port facilities was an engineering challenge. Eugene Grant a twentieth century leader


Memories

The third feature of the time is that the pressure of increased ship size was in the bulk trades, not for general cargoes. Ship size was increasing in response to burgeoning demand. New terminals with handling rates and inland transport capacities were required and could be built to handle the bulk cargoes at a rate to support the economics of large ships. It was not until Fruehauf Trailer Company engineered the container to solve the port cargo handling problem of trucker and shipping innovator, Malcolm McLean, that the constraints of port time and costs on the size of liner vessels were lifted. This innovation in port technology has enabled the growth of containerised trade. In turn, this has supported ever larger container ships and resulted in the needed investment in berth and container handling equipment.

Greater attention is given now to the economics of port investments. However, has there been a change in the perceived dilemma of ports needing to invest as a result of the imposition of larger ships on them? The sentiment is still that ship owners lead by investing in larger ships and that ports need to respond. The response of ports has often been, and generally continues to be, frustration at the imposition of larger ships on them.

This leads to the question, what has been the economics of the separate decisions to invest in larger ships and to meet their needs in ports? What effects have increased ship size had on port costs? Do port costs impose a limit on ship size? Can consideration of these questions shed light on the current and future conditions?

I am not about to forecast the future size of ships. However, it is appropriate to note that optimism about continuously increasing ship sizes have been wrong in the past. The optimism that led to the construction of ultra large crude carriers in the 1970s at the height of the oil boom marked the largest size of tankers built. The 564,763 DWT Seawise Giant delivered in 1979 is the largest ship yet constructed. She was scrapped at the end on 2009 after 6 years

used for storage as the Knox Nevis. Such large ships, constrained in the routes they could sail and the terminals that could serve them, have limited markets because of the level of demand.

In the container business, progressively larger container vessels have necessitated investments in new terminals, berth side cranes, terminal handling equipment and inland transport services. Although faced as an imposition, the realities have been that the economies of scale in ships have been matched overall by innovations in other parts of the logistics chain. The subsequent change in land-based container handling technology has reduced costs there too. Sea cost savings have not been offset by land-based cost increase. The question is whether those economies can be replicated now or in the future? May the constraints faced in the land-based port operations result in those costs per container remaining constant or increasing in the future?

The trade off of sea and land costs will need to be considered more carefully by ship owners in the future. This leads to recognition of another comparison with the past. We no longer trade off port costs and sea costs. We have to trade off vessel costs and total land costs; always true but not always done.

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the story of IAME

Cite this art ic le: Heaver, T. (2015). Heaver’s Historical Perspective. Big Ships, Ports and Maritime Economics: Historical insights. The Maritime Economist Magazine, Vol. 2 (July), pp. 56–59.

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Trevor HeaverProfessor Emeritus, University of British Columbia

Trevor Heaver is Professor Emeritus, University of British Columbia where he was head of the transport economics and logistics programmes for many years. He was a founding member and a Past-President of the International Association of Maritime Economists and a founding member and Past-Chairman of the World Conference on Transport Research. He has published widely on ports, shipping and transport policy issues since the early 1970s. He is a co-recipient with Martin Stopford of the 2015 Onassis Prize for Shipping.


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In July 2013 the Malaysia Institute for Supply Chain Innovation (MISI) successfully bid in Marseille, France to host the prestigious 2015 International Association of Maritime Economists Conference.

The IAME 2015 conference theme of “Maritime 2025: The role of Maritime Clusters and Innovation in shaping future Global Trade” is part of a current research initiative launched at MISI aiming at understanding the future trends and practices in the different sectors of the maritime industry.

The conference will be held in the state of the art facility at the Central Bank of Malaysia in central Kuala Lumpur (KL). It is a superb venue with a multitude of break out rooms, and other facilities such as a restaurant, cafeteria, museum and art gallery.

The 2015 IAME conference is taking shape and will be held for the first time in Malaysia and South East Asia between 24th & 26th August - Kuala Lumpur.

IAME 2015 conference

“Maritime 2025:The role of Maritime Clusters

and Innovationin shaping future Global Trade

www.IAME2015.org



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This year there is a prize category for “Student Researcher Award” sponsored by STT – University of the Aegean, “The Best Conference Paper Award” sponsored by Palgrave-Macmillan and “The most Innovative Idea Award” sponsored by MISI, with prizes of 1,000 Euro, 250 GBP and 1,000 USD respectively.

We have now opened registration on the website and the initial signs are very reassuring. We have received 260 abstract submissions and our reviewers (two for each paper) are working very hard to validate those eligible for the conference. We plan to make the 2015 conference a high standard and very memorable event, the conference aims to ensure the most powerful line up of marine and educational speakers under one roof. The conference will be a great place to network with like-minded colleagues who want to expand their knowledge and connections in their field of expertise. This is the first time that the conference has ever been held in Malaysia, which is a truly amazing country that is just waiting to give a true Malaysian welcome to our participants, so I look forward to meeting everyone between 24th & 26th August 2015, here in Kuala Lumpur.

Conference Organizers

The conference will be organized and hosted by the MIT Global SCALE network member located in Malaysia, the Malaysia Institute for Supply Chain Innovation.

Malaysia Institute for Supply Chain Innovation (MISI) is a collaboration between the MIT Center for Transportation and Logistics (MIT CTL) and the Government of Malaysia. MISI is an independent degree-granting institute that focus’s on supply chain management. It is the newest member of the MIT Global Supply Chain And Logistics Excellence (SCALE) network that spans four continents, with plans to expand into other regions of the world. Currently, the SCALE network has four locations that include MIT CTL, USA; ZLC, Spain, CLI, Colombia and MISI, Malaysia.

Kuala Lumpur Attractions

There is plenty to see and do in Kuala Lumpur, with a high concentration of shopping malls entertainment spots and eateries. Shopaholic will not be disappointed as they can walk the streets or branch out into any of the five huge shopping malls in the city center alone. Malaysia is a food paradise, and there are more than 15,000 eateries located in every niche and crevice of the cities golden triangle, each restaurant having its own history and taste. For those who enjoy adventure, there are countless tourist attractions within the KL area such as: China Town, Merdeka Square, Lake Gardens, The Butterfly Park, The Bird Park, The Batu Caves, Sunway Lagoon, Little India, The National Museum, The National Mosque, The Giant Pandas at the National Zoo, Central Market for your souvenirs and not forget the famous Petronas Twin Towers.


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Dr. Ioannis N. LagoudisIAME 2015 International Scientific Steering CommitteeDirector of Applied ResearchMalaysia Institute for Supply Chain Innovation

Conference Organisers

Book Review

Branch’s Elements of shippingThe ninth edition

comparative freight rate calculations (chapter 9) indicated in the book, which enables the reader to make cost based decisions on different transport modes.The book discusses in depth the functions (chapter 12) and salient points of the Bill of Lading.

There is a chapter dedicated to characteristics of cargo (chapter 13), packaging and handling. The book goes on to explain the complex structure of liner

Branch’s Elements of shipping was first published in 1964. It has since become a market leader. The latest edition starts with a discussion of history and evolution of the shipping industry (chapter 1) and examines parts of a ship (chapter 2) and its machinery. In doing so, it enlightens the reader on how modern ships are designed to meet safety regulations and to minimize pollution.

The discussion on the demand for the different types of ships and the analysis of future trends in trade growth (chapter 3) should be interesting to all who follow the shipping industry trends.

From an operational view, Elements of Shipping emphasizes the need for minimizing costs while maintaining standards and developing skills of crew (chapter 5) members.

Those new to the industry will find the sections on customs procedures (chapter 6), taxes and import and export controls particularly useful.

The book also sheds light on the economic importance of international maritime canals (chapter 7) which have undergone changes in recent years to accommodate large modern vessels.

As another useful aspect, the book provides information (chapter 8) of the principle shipping organizations (I.e IMO). It is also worth noting the 63

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shipping organizations (chapter 14) and how they have been developed to meet business plans. The explanations on the roles of ship brokers and ship agents have taken into account noteworthy future trends.

The voyage estimation calculations (chapter 15) and laytime calculations are key elements that will be useful to both students and operational people alike. New dimensions of shipping such as global supply chain management (chapter 18), international logistics, importance of information technology (chapter 20) and the changes it has caused in shipping such as documentation and e-commerce. Finally the book explains the political aspects of shipping such as flag discrimination (chapter 22), flag of convenience and subsidies.

Thus Branch’s Elements of shipping fills the gap for the discerning reader who wishes to have a complete understanding of all the elements of the global shipping scene together with the interface with seaports, international trade and logistics, and hence, it remains essential reading for shipping executives along with students and academics with an interest in the shipping industry.

Indika Sigera PhD

Branch’s Elements of Shipping9th Edition By Alan E. Branch and Michael RobertsPublished: 2014ISBN :978113878667Routledge

Book Review


Editorial board

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Editorial Board 2015–2016 (Updates)

New Section: Case StoriesPaul S. Szwed, Section Editor

Dr. Paul S. Szwed is a tenured Professor of International Maritime Business at the Massachusetts Maritime Academy (USA). He has taught maritime business and management since 2003 and specializes in the area of risk analysis and expert judgment. Retiring at the rank of Captain, he served in the U.S. Coast Guard for 26 years as ship inspector, operations manager, regulatory specialist, risk analyst, and shipboard engineer. Dr. Szwed holds D.Sc. in Engineering Management from George Washington University, M.Eng. in Naval Architecture and M.S. in Operations Research from University of California at Berkeley, M.S. in Environmental Management from University of San Francisco, and B.S. in Ocean Engineering from U.S.

Coast Guard Academy. He is active in many professional societies and is currently serving as the President of the Eastern Academy of Management. He is a certified Project Management Professional® and is a Senior Fellow of the Department of Homeland Security.

Ergun Gunes is a Chartered Shipbroker working for Essex Shipping Services Ltd., and a PhD candidate at N.Y. Vaptsarov Naval Academy. He graduated from the Technical University of Varna, Faculty of Marine Science. Following the graduation, he was admitted to the same Faculty as a master’s student. He started his professional life in a ship owning company and became a chartering and commercial manager. Simultaneously he completed courses in Tanker Chartering at The Cambridge Academy of Transport and a course for International Trade at the Central College of London. He also completed his Institute of Chartered Shipbroker’s exams, achieving his MICS and in 2010 has accredited as a Tutor. He became one

of the founding members of the Turkish Shipbrokers Association in 2010. Ergun is planning to complete his PhD dissertation whilst fixing day-to-day at Essex Shipping Services Ltd. He lives in Brentwood, Essex, and is married with two children.

Ergun Gunes, Section Associate Editor

Metin Ugur Aytekin is a lawyer at Ulgener LC/LO, where he deals with various types of commercial and maritime related disputes, advising some of the major shipowners, P&I clubs and trading companies. He graduated from Istanbul University in 2007, with bachelor degree in law. After graduation he lived in London for two years and attended flag state controls of the vessels. He attained his master’s degree with his thesis in competition law in 2010 and is currently working on his PhD dissertation in maritime law at Istanbul University. He was admitted to Istanbul Bar in 2008. He was the legal adviser to the Association of Turkish Shipbrokers between 2012 and 2014. He published several articles on maritime and data protection

law in bulletins and journals. His research interests involve the financial aspects of shipping business, insurance, commercial arbitration, competition, information technologies and company law.

Metin Ugur Aytekin, Section Associate Editor

Marcella Croes is a Maritime Scientist and attended the “Maritime Institute ‘de Ruyter’”, in Vlissingen from 1999 until 2004. After sailing as an apprentice for the Heavy Lift Company Dockwise, on board of the Dock Express 12 and the Mighty Servant 1. She then went to work for All Seas and worked on board the PLMV Solitaire, the worlds leading pipe laying vessel as a Dynamic Position Operator & Nautical Officer. In 2007 after the birth of her eldest son, she went back to college to receive her Bachelor in Maritime Operations. In 2011 she started lecturing the subjects International Law of the Sea, Environmental Care, Leadership, Ship Construction, Cargo Handling and Ship Stability. During that time Marcella went back

to University to study at Master of Maritime Sciences at the University of Ghent and Antwerp. Besides working as a lecturer Marcella is the founder of ‘Croes Shipping Services’, a company that offers several shipping services.

Marcella Croes, Section Associate Editor

Submission Guidelines

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The Maritime Economist (henceforth ME Mag) is a magazine edited by the International Association of Maritime Economists. The aim of ME Mag is to combine both theoretical and practical knowledge and promote collaborations among scholars and professionals in the maritime industry. ME Mag is interested in the following topics with maritime focus:• Economics of maritime transportation (theory,

models, practical controversies, etc.);• Port governance, port competition, port

utilization and other port related issues;• Finance, asset management and investments;• Management and leadership in the shipping

business;• Operations research, optimization and industrial

engineering for maritime problems;• Maritime policy and governance;• Maritime business strategy;• Maritime geography and spatial analysis;• Behavioral science and human factor;• Marketing;• Cruise and ferry industries;• Short sea shipping;• Environmental issues and sustainability;• Risk management;• Intermodal transport;• Other related topics.ME Mag has a particular focus on Maritime Economics and Business while covering many related fields.

ME Mag has five fundamental functions:1. Encouraging scholars to present their research

in plain language for wider audiences of the maritime industry;

2. Promoting and encouraging R&D partnerships with non-academic institutions (firms, governmental offices, among others) of the maritime industry;

3. Encouraging young scholars to conduct research in maritime topics;

4. Encouraging provocative and critical research;5. Support collaboration among academia and

professionals.Authors should keep in mind that, ME Mag is NOT only published for scholars, but it is also circulat-ed to large society of the maritime industry and policy

makers. Readers of ME Mag may not have a background on the presented topic, and authors are responsible for presenting the content of their article in a language that is clear to business and policy makers. ME Mag does not publish articles with many mathematical functions, long theoretical discussions and/or lack of practical value. Authors should always consider the perspective of professionals, business practitioners and policy makers and any other people who have general knowledge of maritime while have limited knowledge on the intended specific topic. ME Mag encourages narrative style, story-telling, metaphorical expressions and other methods of non-fiction authorship. On the other hand, each article should ensure at least one of the following dimensions:• Presenting a new topic, method, theory,

perspective or model;• Presenting an existing academic research (already

published in a scholarly-refereed journal);• Analyzing data, models, systems or a market with

novel interpretations;• Criticizing an existing approach, system or thought;• Challenging the conventional wisdom on a

particular topic of maritime;• Presenting a knowledge created in the business/

industry practice;• Introducing an innovative solution to a common

problem;• Presenting a policy or strategy;• Sharing information about available data and tools of

interest to maritime professionals.

Four major sections are established to perform some of functions of ME Mag, and each has its own concept. Authors should first review the concept of sections below and define which section fits for their (proposed) article.Note: Authors who are not sure about the selection of proper section may send an e-mail to either a section editor which is thought to be closer to the topic and purpose of article or Editor-in-Chief for consultation.

Contribute to The Maritime Economist



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Sect ion Specif ic Notes

Section 1: INPLAIN

InPlain section is dedicated to academic research performed by both scholars and professionals in the maritime economics and business research. Scholars can briefly present a research which will be published shortly in an academic journal or an already published one. In such case, author should refrain using same text and should rewrite in ME Mag’s concept of easy-to-read and concise style. Therefore, it should be a kind of executive summary of the upcoming/published academic paper.

Articles in this section should be written in plain language excluding jargons and using limited number of technical terms with brief and simple descriptions.Technical requirements on articles for submitting to this section are as follows:• Article should not exceed 2000 words plus a number

of figures or tables;• A bionote of 80 to maximum 100 words length should

be inserted at the end of the article.Each article submitted to InPlain will be reviewed in terms of its intellectual value, writing style and accordance with the policy and concept of ME Mag by the section editors.

A proposal for consideration can be sent to editors instead of full article. Proposals should address briefly the objective, motivation and background, main idea and major results.

Please submit your full article or a proposal electronically to [email protected]

Section 2: PROFESSION & PRACTICE

Profession and Practice section is dedicated to industry professionals for presenting innovative solutions, created knowledge and R&D results in the practice. Authors should refrain from telling success stories and focus on the drivers and requirements for successful results. This section promotes research activities at non-academic institutions and encourages to present research achievements as well as core concepts and created knowledge. Authors should present some evidences for supporting arguments.

Articles in this section should be written in plain language excluding jargons and using limited number of technical terms with brief and simple descriptions.

Technical requirements on articles for submitting to this section are as follows:• Article should not exceed 2000 words plus a number


be inserted at the end of the article;• Author’s affiliation (e.g. name of company) will nor-

mally be indicated in bionote. However, using brand names and/or company logo in the arti-cle may cause an advertisement conflict. In such case, author will be contacted about using these components by sales office if the article is accepted for publication.

Each article submitted to Profession & Practice will be re-viewed in terms of its intellectual value, writing style and accordance with the policy and concept of ME Mag by sec-tion editors.



Section 3: FRESHMINDS

FreshMINDS section is dedicated to young scholars and professionals (early in their [research] career) for presenting their research results, novel con-cepts and innovative findings or thoughts. This section promotes young scholars and professionals to express their opinions and/or criticism about the conventional concepts with proper theoretical and/or practical evidences to support their arguments.




be inserted at the end of the article;Each article submitted to FreshMINDS will be reviewed in terms of its intellectual value, writing style and accordance with the policy and concept of ME Mag by section editors.


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Section 4: CHALLENGE

CHALLENGE section is dedicated to draw attention to critical problems in the maritime industry as well as academic research. Both scholars and professionals can submit a short article dealing with the problem and draw attention of readers to that challenging topic.




be inserted at the end of the article;Each article submitted to CHALLENGE will be reviewed in terms of its intellectual value, writing style and accordance with the policy and concept of ME Mag by sec-tion editors.



Section 5: CASE STORIES

CASE STORIES section is dedicated to both maritime professionals and practice-oriented scholars for presenting case stories that draw readers’ attention to real world challenges and thought provok-ing situations and ideas. What is a case story? Without overly-specifying the content or the format, a good case story usually:• addresses a relevant topic that arouses the readers’

interest, • is about an actual event or situation that has recently

happened, • includes real characters, quotations, dilemmas, and

decisions, and• can be generalized to most organizations or

individuals, helping to learn from others experiences

Case stories should be written in plain language excluding jargon and using a limited number of technical terms with brief and simple descriptions.

Technical requirements on case stories for submitting to this section are as follows:• Case stories should not exceed 2000 words plus

illustrative images;• A bionote for each author of 80 to maximum 100

words length should be inserted at the end of the case story.

If the case story focuses on specific organizations or individuals, the names may be disguised to maintain anonymity. However, any information and quotations should be factually accurate and permission should be granted to the authors for using information that is not publically available.

Each article submitted to CASE STORY will be reviewed in terms of its practical value, storytelling effectiveness, writing style, and accordance with the policy and concept of ME Mag by the section editors.

A proposal for consideration can be sent to editors instead of full article. Proposals should address briefly the objective, motivation and background, main idea, and the story line.

Please submit your full article or a proposal electronically to: [email protected]

BOOK REVIEWS

ME Mag will review recently published books and article collections related broadly to maritime transport, maritime economics, ports, logistics and shipping that can appeal not only to an academic audience but also to industry.

If you would like a book to be considered for review in the magazine, please send two copies to:Michele Acciaro, Grosser Grassbrook 17, 20459 Hamburg, Germany.

For further information, please do not hesitate to write to [email protected]


References

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References for the art icle: The Carbon Foot-print by Scopes Applied to a Port

Main source:

Adolfo Carballo-Penela, Ingrid Mateo-Mantecón, Juan Luis Doménech and Pablo Coto-Millán (2012): From the motorways of the sea to the green corridors’ carbon footprint: the case of a port in Spain, Journal of Environmental Planning and Management.DOI:10.1080/09640568.2011.627 422.

Other references that are used (and that are not included in the main source):

Alvarez, S (2014): Huella de carbono de organización y producto con enfoque híbrido: Mejoras en el método compuesto de las cuentas contables. Phd Work. Universidad politécnica de Madrid.Juan Cagiao Villar, Sebastián Labella Hidalgo, Adolfo Carballo Penela and Breixo Gómez Meijide (2012): A New Perspective for Labeling the Carbon Footprint against Climate Change. Global Warming - Impacts and Future Perspective. Earth and Planetary Sciences. DOI: 10.5772/48609 COM 2011/114. European Commission (2011): White Paper: Roadmap to a Single European Transport Area-Towards a competitive and resource efficient transport system. COM 2011 (144) final, Bruselas. IPCC (2014): Climate Change 2014 Mitigation of Climate Change. Working Group III Contribution to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change.<http://www.ipcc.ch/pdf/assessment- report/ar5/wg3/ipcc_wg3_ar5_full.pdf>.pp. 1,452

References for the art icle: Marit ime Governance in 3 Dimensions:

Aligica, P.D. and Tarko, V. (2012) Polycentricity: from Polanyi to Ostrom and beyond, Governance, 25, 2, 237-262.Baindur, D. and Vegas, J. (2011) Challenges to implementing motorways of the sea concept -lessons from the past, Maritime Policy and Management, 38, 7, 673-690.Bell, S. and Park, A. (2006) The problematic metagovernance of networks: water reform in New South Wales, Journal of Public Policy, 26, 1, 63-83.Bloor, M., Datta, R., Gilinskiy, Y. and Horlick-Jones, T. (2006) Unicorn among the cedars: on the possibility of effective ‘smart regulation’ of the globalized shipping industry, Social and legal Studies, 15, 4, 534-551.Borzel, T.A. and Risse, T. (2010) Governance without a state. Can it work? Regulation and Governance, 4, 113-134.Campanelli, O. (2012) The global governance of maritime piracy, Journal of Global Policy Governance, 1, 73-84.Crosby, B.L. (1996) Policy implementation: the organizational challenge, World Development, 24, 9, 1403-1415.De Vivero, J.L.S. and Mateos, J.C.R. (2010) Ocean governance in a competitive world. The BRIC countries as emerging maritime powers – building new geopolitical scenarios, Marine Policy, 34, 967- 978.Gritsenko, D. and Yliskylä-Peuralahti, J. (2013) Governing shipping externalities: Baltic ports in the process of SOx emission reduction, Maritime Studies, 12, 10.Held, D. (1991) Democracy, the nation-state and the global system, Economy and Society, 20, 2, 138- 172.Jessop, B. (2004) Multilevel governance and multilevel metagovernance. Changes in the EU as integral moments in the transformation and reorientation of contemporary statehood, in I. Bache and M. Flinders (eds), Multi-level

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