Maritime Centres of 2025

Maritime Business Centres of 2025

Anuraj Pillai099159216 MAR8029 COURSEWORK


Anuraj Pillai

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Table of ContentsIntroduction 3 3 4 Definition of a Maritime Centre

Factors affecting the success of a Maritime Centre 3 Analysis of the Current Maritime Centres Where would the World be in 2025? Maritime Centres of 2025 10 9

Anuraj Pillai

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1.

Anuraj Pillai

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2. Introduction Predicting the future maritime business centres is no mean task.Catalysed by the umbrella term Globalisation,goods have been procured from farther distances at lower costs in ever larger vessels.Economic volatility ,geopolitic shift and innovations in transport and logistics Verhetsel (2009) has added another dimension to this task . The development of shipyards,ship repair centres,ports,equipment manufacturers and easy finance would be of prime consideration.This report attempts to define a maritime business centre,analyse the current ones,factors behind their success and then lead on to where the maritime centres would be in 2025. 2.Definition of a Maritime Business Centre. Unlike a maritime cluster or a maritime city which are analogous terms ,a maritime business centre encompasses all aspects of shipping ,ship construction ,finance investment ,ports and world class education.The importance of maritime activity to developement is highlighted by the fact that 80% of the world cities are ports,Verhetsel (2009)and the observation that world city network is being increasingly global ,but also increasingly maritime in natureVerhetsel (2009).Shipping is a capital intensive business and evidently most of the maritime centres are also the financial capitals of the world. 3.Factors effecting the success of a maritime centre

Fig 1.Desirable features of a maritime city.Benito,

A study on the maritime sector in Norway Benito (2003) revealed that Access to qualified labour ,Infrastructure ,Access to suppliers and Access to risk capital were the most favoured.

Fig 2.Percieved competition in maritime Norway.Benito

Competition and Innovation were also found as the main characteristics of a maritime cluster ,the latter being most important for suppliers.Also shipyards attached relatively more importance to regional support services as compared to other sectors.The fact that Access to qualified labour scored high among the desirables is ample evidence that the maritime educational institutions will boost the favourability of one place to another.Anuraj Pillai Page 4


On further detail ,it is to be noted that shipping is an international business.Access to cheap labour to operate at effective global levels,proximity to regulatory authorities,legal support and a strong derivatives exchange market would drive down the advantage to the holder.

Fig 3.Maritime cities classified according to importance.Verhetsel.

All these factors would still not guarantee a maritime business centre of the fact that geographic location is a primary determinant of the result. In the case of maritime services companies, it is paramount to their commercial success that they should be present in certain nodes within the network of maritime flowsVerhetsel (2009) Also, America,Europe and Asia constitute a major share of world trade and each of these continents and have one or a number of maritime centres that are significant in the network.

Analysis of the Present Maritime Business Centres The analysis of ports in terms of containerized cargo would give us an idea of the important ports of the world.Anuraj Pillai Page 5


Fig 4.Container terminals and cargo handled,2008.UNCTAD(F4)

Though containerized cargo would not cover all the maritime trades ,it gives us a clue to the consuming nations and hence the purchasing power parity.It is also noted that the top ports in these list also handle most of the dry bulk cargo.Following the definition of an maritime business centre,an international environment is also essential to be qualified.Singapore,Hongkong, ,Los Angeles,New York/New Jersey,Hamburg would all qualify from the above list.Of these only Hamburg,Singapore,HongKong and New York/New Jersey have a truly encouraging maritime environment.

An Analysis Verhetsel (2009) listed the top 50 maritime cities of the world ,sorted in terms of connectivity to each other.

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Fig 5.Maritime cities and level of connectivity to each other.Verhetsel.2009

Although many new ports not listed in the top container ports were listed in this table,the significance of geography is valid here.For ex:Singapore handled the greatest amount of TEUs in 2008,but still is a major transshipment port.London without a major port features in the list and is 8th in terms of connectivity to other maritime nodes in the network.(Fig 6) It is also to be noted that certain centres are very strong in certain sectors of the maritime business such as equipments , legal or access to finance but very poor or nonexistent in other desirable constituents. For example most of the European countries have a strong presence in the marine equipment market. The export value of products from Norwegian industries was NOK 310 billion in 2008 of which more than 100 billion NOK came from the maritime industry Nortrade (2010).Norway also has the Imarex,the International Maritime Exchange which has been established as a dominant shipping derivatives market.Denmark meanwhile acquired 13.3 million DKK in marine exports. BDM (2010).

Hamburg is dominant in most maritime affairs , it is an important port ,handled more than 9.7 millions in TEUs ,but legal and financial facilities are nonexistent .Rotterdam has a similar stature as Hamburg, and again does not score on other aspects. It is worth noting that Dubai is fast rising as a port , it is adding almost 2 million tonnes to its trade every year.

Meanwhile,The port of London , handled 53 million tonnes in port operations of which 15 million was containerized cargo in 2008.POLA (2009).The TEU equivalent of this would beAnuraj Pillai Page 7


less than 5 million which is comparable to the volume of cargo handled at New York /New Jersey. Without a port that ranks in the top ten, both of these places are financial and legal centres of the maritime industry. London has a great tradition in shipping and the IMO, the International Maritime Organisation that gives shape to maritime policy and regulations is located in London. The Baltic Exchange also in London allows shipbrokers charterers and ship owners to trade in Forward Freight Agreements (FFAs) and provides daily market prices ,shipping cost indicesVerhetsel (2009).The geography and the neutral time zone makes London an important node in the maritime network. New York scores on the being a world class city, its strong financial and legal presence and proximity to the large derivatives market, the Chicago Mercantile Exchange (CME) which trades a major chunk of the $163 billion freight derivatives market, primarily in FFAs. Maritime companies deem it importance to have their offices in New York , London or Tokyo( Verhetsel,2009) The access to quality labour stems from education.Many of the maritime centres have world class institutions like NewYork State university of Maritime College, Singapore Maritime Academy, HongKong Seamens Training Centre.Russia and Japan is also strong in maritime education. A number of world class universities have set foot in HongKong and Singapore as well with maritime courses. The largest shipyards in the world are concentrated in China and Korea.These shipyards still have orders till 2014.

Fig 6.Major nodes in the maritime city network

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Fig 7.Logistics Performance Index,2010.IMF.(F7)

Following our analysis ,the present maritime centres would be New York,London and HongKong.Referring to figure 6 it is apparent that rather than the cargo volume ,the geography plays an crucial role in creation of a major maritime business centre. NewYork The New York city ranks as a alpha world city,(Verhetsel,2009) ranks 6th in connectivity to other maritime cities and ranks in the top 20 in the Logistics Performance Index.The port of New York /New Jersey handled 5.26 million tonnes in 2008.But what adds to its stature as a maritime centre is the presence of availability of low risk finance ,a large shipping derivatives market,and presence of legal services. London London is similar to the Newyork as a maritime centre.It has regulatory bodies such as the IMO,classification society as the LRS in addition to the Baltic Index and marine legal and insurance services offered.It ranks eighth in connectivity to other maritime cities and the Logistics Performance Index.The Port of London handled 53 million tonnes in 2008. HongKong Hongkong has to be a unanimous choice.It ranks first in connectivity to other maritime cities,ranks in the top 15 in the LPI,and is closer to the consumer centre ,China than Singapore.It has excellent maritime educational facilities and has always been a low risk capital source.The port of HongKong handled 24 million TEUs in 2008.

Where would the world be in 2025?

Anuraj Pillai

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Much has been talked about the geopolitic shift to the east ,the importance of the BRIC(Brazil ,Russia,India,China) to the economic growth.But is 15 years enough for a complete global shift?.A GDP projectionMCDonald (2007) is listed below.

Fig 8.World GDP Projections.McDonald,2007

From the table we can see that the GDP of China is poised to overtake North America by 2025.Also, India is forecasted to maintain a continous GDP growth till 2050.There have been some recent port developementsin India including a huge container terminal planned in the southern tip,but there has been no infrastructure projects launched like in China,which is the heart of door to door transportation. A neo-navalism is predicted due the BRIC countriesVivero.J (2010) ,and ocean governance from these emerging maritime powers.Russia has a coastlength of 37,653 sq.km. and by 2025 the North East Passage would be a major maritime route.Such a scenario would create maritime activity what Roger Howard in his book termed The Hunt for Arctic Gold Rush The Panama Canal would be fully functional by 2025,and this would have the effect of reassigning California and Long Beach as more important ports.The Suez canal Route from New York to Shanghai is about 12000 nm while the Panama Canal route which can allow even the 18000 TEU vessels to pass through is only 11000 nm.It would also take less time to traverse this route because of a lesser canal transit as compared to Suez.

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The highlights of 2025 could be a heightened Offshore exploration due energy shortage,China at its peek growth ,and more adavancements in information technology.Newyork could lose cargo volume with a staggered trade across America with a enlarged Panama Canal.OTC FFAs are already traded in exchanges and IT developements could further displace the need for physical proximity to legal and insurance services.This could place the South China Sea and the North Sea right on the spotlight.In such a scenario Norway ,Singapore and Hongkong are better poised to take advantage of this . Norway With a strong maritime sector that contributes more than 40% of the total exports,the International Maritime Exchange and DNV in place,Norway would be the new London.Norway has a passion for the maritime sector ,is the fifth largest maritime nation and has the second largest offshore Industry.Though it have to would compete with London ,with the London gateway in place,it gains points in strategically located with respect to the North East Passage.It has already launched initiatives such as the creation of a global maritime knowledge ,Springboard-a venture that accelerates growth of young companies with the help of experts in th field.Nortrade (2010) Singapore New York will lose its importance in 2025 and be displaced by Singapore.A lot of shipping companies and classification societies have set foot in Singapore.It is recently highlighted by the fact that Maersk Shipping relocated its headquarters from London to Singapore.The country has a strong offshore design and installation talent and could attract more low risk capital by then.Also Singapore has access to cheap well qualified labour.Singapore already tops the ports in TEU terms and by 2025,the Singapore Derivatives exchange(SGX) would be at full swing. HongKong Hongkong would easily retain its status in 2025 ,being the gateway to China.

Fig 9.World trade projections.2024.ISL,2005(F9)

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Fig 10.Container export projections.2024.ISL,2005(F10)

Containerized export and import from China would atleast be five times more than other nations considering the projection from Fig.10 was made at the boom time.With its cosmopolitan outlook,easy availability of finance and a world class port,Hongkong is better placed to take advantage.

References:Anuraj Pillai Page 12


BDM (2010). In. http://www.danishmaritime.org/uk/.Accessed 12 April Benito, G. (2003). A cluster analysis of the maritime sector in Norway. (F4)UNCTAD.Review of Maritime Transport. http://www.unctad.org/en/docs/rmt2009_en.pdf. Accessed 20 April (F7)IMF,Logistics Performance Index ,2010 (F9)(F10)ISL Shipping Market Analysis.2005. http://www.isl.org/products_services/publications/ssmr.shtml.en.Accessed 12 April MCDonald, I. (2007). Global GDP shares in the 21st century An equilibrium approach. Nortrade (2010). In. http://www.nortrade.com/index? cmd=show_article&id=497.Accessed 11 April POLA(2009).ln.http://www.pla.co.uk/pdfs/pp/POLA_Reveiw_Final_design_C_11.pdf.Acces sed 10 April Verhetsel, A. (2009). World maritime cities:From which cities do container shipping companies make decisions? Vivero.J (2010). Ocean governance in a competitive world.The BRIC countries as emerging maritime powersbuilding new geopolitical scenarios.

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Maritime Centres of 2025

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