The cost of freight shipping

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Description

The last 20 years has seen a dramatic increase in vessel size and average tonnage per ship. Vessel size increase is largely due to crude oil and containerized trade. Subsequently the price for shipping has dropped dramatically further accelerating the amount of material shipped. Due to the economy of scale shipping has been a profitable enterprise. For years the number of vessels was insufficient and many freighters have been built. Due to the economic decline we are now in a situation that the limited demand and growth of the fleet is generating an overcapacity.

Enablers

  1. Shipping fleet
  2. Economy of scale
  3. Standardization
  4. Economic crisis

Inhibitors

  1. The oil price
  2. Economic growth
  3. The Rise of BRIC Economies
  4. Deep water ports

Paradigms

Price has gone down due to standardization and economy of scale. For years both the fleet and tonnage shipped has grown. Currently the overcapacity in ships and decline in volume is further reducing price but for the first time also profitability. On the short term this creates low prices but with investment in new ships down. This could create a shortage and therefore a high price once the global trade of goods starts growing again (rapidly?)

Experts

  1. Economists
  2. Environmentalist

Web Resources

  1. http://en.wikipedia.org/wiki/Shipping
  2. http://en.wikipedia.org/wiki/Environmental_issues_with_shipping
  3. http://www.fcl-oceanfreightusa.com/FaqShippingOceanFreightUsa.aspx