Shipping Industry, Shipping Sector

By: EconomyWatch   Date: 30 June 2010

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The shipping industry transports cargo through designated sea routes. The global shipping industry is regulated by the International Maritime Organization. It can be broadly classified into:

  • Wet bulk: This includes the transportation of crude oil and other petroleum products.
  • Dry bulk: It involves the shipment of iron ore and coal.
  • Liners: They carry small shipments of general commercial freight.

History of the Shipping Industry

Commercial shipping can be traced back to the Phoenician merchants who transported goods across the Mediterranean. The Venetians owned huge merchant fleets from 1300 AD to 1500 AD. The Dutch held the largest shipping fleet from 1600 AD to 1650 AD. Till the nineteenth century, the shipping industry was dominated by merchants. The common freight carrier service started in 1818 with the launch of ‘James Monroe.’

The shipping industry boomed after the opening of the Suez Canal (1869), which facilitated faster trade between Europe and Asia. In 1960, the first nuclear powered cargo and passenger ship ‘Savannah’ was launched. From the 1970s to the 1980s, the container shipping sector grew exponentially. The industry continued its growth, especially in Asia, with Hong Kong inaugurating the world’s largest container port in 1989.

Demand and Supply Drivers of the Shipping Industry

The primary demand and supply driver in the shipping industry is freight rates, which determines the revenue of shipping companies.

Other drivers of the shipping industry are:

  • Trade growth

  • Geographical concentration of trade

  • Threat of wars, piracy, storms and hurricanes

  • Government sanctions on shipment

  • Access to and suitability of other modes of shipment

The supply drivers of the industry include:

  • Demand for oil and dry bulk

  • Climatic conditions (rains, storms and tides)

  • Government restrictions on shipment

Shipping Industry: Major Players

The top shipping company of the world is APM Maersk, with a TEU capacity of 2,031,886. It has a market share of 15.50%. Other major players of the industry are Mediterranean Shipping Company and CMA CGM Group, with TEU capacities of 1,469,865 and 988,141, respectively. The top three players collectively own 1,342 container ships.

The shipping industry is considered to be a catalyst for economic development, as it facilitates 90% of world trade. Adam Smith propounded the economic significance of the shipping sector saying that it offers a cheap mode of transportation, helping to open up larger markets.


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