international navigation market

8/8/2019 International Navigation Market

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The Annals of Dunarea de Jos University of GalatiFascicle I 2009. Economics and Applied Informatics. Years XV no 2 - ISSN 1584-0409

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International Navigation Market

Costel [email protected]

Mihaela-Carmen [email protected]

Dunarea de Jos University of Galati

AbstractEconomic record of human society in the last period has involved anunprecedented growth of world trade, trafficking of basic raw materials neededfor industry and agriculture, and trade in industrial products or food. To thehuge volume of movement of goods, shipping takes back the role of first orderboth quantitatively as well as efficiency. This situation is encouraged by factorssuch as diversification of trade, number of participants in this process and theincreasingly complex international trade.

Key words: world commercial fleet , mineral bulk carrier, conventional cargo,oil tankers, maritime transport market

Jel cod: F 19, L 91, N 70, R 41

1. Introduction

The present paper is structured into four chapters. The first chapter presents an introduction tointernational maritime transport market and the demand and supply mechanism depending on

the ship type and fleet ownership. Chapter two emphasizes maritime trade of crude oil andpetroleum products by Suezmax and Aframax ships then, Chapter three will determineRomanian Shipping Analysis and Perspectives. Chapter four presents conclusions of thispaper.

2. Supply and Demand in International Navigation

Modern maritime trade is an economic activity so vast and complex as the volume of traffic ingoods annually and that their material value. History of shipping activity in the construction ofthe first steam ship with more than a century ago, was one in which the successive periodsdominated by profits and fabulous period dominated by financial disasters. Maritime industry

is comprised of a group of companies - owners, brokers, ship builders and bankers - whichtogether carry more than annual 4 million tonnes of cargo at sea and see the sea as somethingmore than a business.

Shipping activity is one of the most internationalization activities and studying the economicsof shipping we have to take account of changing global economy. The first reaction of aownership or navlositor when hears about important events, such as a nuclear accident inRussia or an increase in oil prices, is to try to intuits what effect will this event on the maritimemarket. Most profitable business in the maritime transport were due to political conflicts, themost notable of these being resealing the Suez Canal in the years 1956 and 1967.

Besides the appearance of political or strategic importance of maritime transport activity can

not be neglected. As the shipping to internationalized new industrialized countries with theOECD countries have contributed to the development of maritime trade. To better understand


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the economic and political factors that have competed to develop the business of shippingneeded to take a look at the interactions between the dual development of the maritimetransport and economic development worldwide. One of the products of the industrialrevolution was to develop and consolidate a cheap and fast transport. Thus day by all thedistances shorter and countries for millennium have ignored each other were awakened at once

into contact or conflict. This progress in a world composed of isolated communities to a globalcommunity was possible, and with transportation and maritime commerce. On the other handincreasing maritime trade has forced the transport to reorganize and adapt to marketrequirements. The most representative example of recent years is the introduction of unilateralU.S. Congress by the U.S. Oil Pollution Act 1990 which imposes stringent rules for pollutionprevention for ships operating in U.S. territorial waters.

The idea that the shipping is a catalyst for economic development is not new. Adam Smith,often regarded as the father of the modern economy, has seen the sea like a stone test foreconomic development. In Chapter three of the century reference book its "Wealth of nations,"he argued that the economic strength of the central capitalist economy is the division of laborand the degree to which it can be applied depends on the size of a crucial market. A businessstarted in a provincial town with no connections with neighboring cities can not reach a certainlevel of efficiency because the very small will limit the degree of specialization of thecompany. Adam Smith saw the sea as a source of cheap transportation, transportation that openaccess to all markets wider, thus encouraging firms and specialty companies are offering somevery large distances can offer products at prices much lower than those produced locally. ntime it has been demonstrated that economic development has gone arm in arm with maritimetrade. With all the technological advances made since Adam Smith wrote these words in 1776,and although developed countries have today a highly developed internal infrastructure, theshipping was more than keep pace with these changes.

From mid-'60 were two technical revolutions have played an important role in developing a

global market for finished products and for raw materials. During 1960 the traditionaltransportation of goods (packaged or unpackaged goods with different shapes and sizes andoffered to transport small quantities) in the shipping line has become increasingly unable tokeep pace with the volume of freight. To overcome these problems was introduced usedpallets and containers to fluidized flows of goods. Work for the release of goods in generalstandard unit load has been higher than anticipated by most enthusiastic supporters of thissystem. If in the early'60 goods shipped from Europe to the U.S. had several months to reachits destination in the early'80 just days after a container leaves the production plant can reachyour destination with cargo intact and ready to be transferred to a barge or in a car withminimum effort and without delays. In short maritime industry has used the organization toresolve a fundamental problem, and solving the gates opened wide for the development of

global economy.

Revolution generated by the development of freight transport in bulk was not less importantthrough the effects it has generated. Bulk transport of raw materials was first seen as part of anintegrated process for handling of goods in which investments can improve productivity. Usinglarge vessels, through investment in means of handling and rapid integration of the entiretransport chain, transport costs of goods in bulk have been brought to such a level that itbecame cheaper to import raw materials from suppliers at the thousands of miles away fromthe domestic suppliers are a few hundred miles away. Ships with capacities increasingly largeplayed a central role in this process, during 1945-1995 the capacity of transport ships oilincreased 20 times, and the mineral bulk carriers15 times. Improvement of the handling of

goods in port and a better integration of maritime transport with land transport completed thistransformation.


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How was the shipping industry in the XXI century, ship owners have met with a number ofnew issues will evolve as the shipping industry. The issues are essentially the same now as 10years ago:

1. Replacing the fleet of 702. Production capacity - will be sufficient?

3. Prices - will increase or decrease?Table no. 1 presents a summary of the demand and supply balance of 1990 tonnage as well asthe tonnage from 2000 and 2008. The tonnage total surplus in 2008 was higher than in theprevious year, working out at 12.1 million dwt. This was mainly due to a high level of vesselscommissioned over the last year. The excess weight percentage in the world commercial fleetalso grew to 1.1 percent.

Tonnagetotal surplus of the world commercial fleet, 1990 - 2008Table no. 1

1990 2000 2004 2005 2006 2008

Million tdw

World commercial fleet 658.4 808.4 895.8 960.0 1042.3 1117.8

Tonnage surplus 63.7 18.4 6.2 7.2 10.1 12.1

Active fleet 594.7 790.0 889.6 952.8 1032.2 1105.7

Percent

Percent of tonnage surplus of the world

commercial fleet9.7 2.3 0.7 0.7 1.0 1.1

Source: Review of Maritime Transport, 2006-2009

Mechanism of supply and demand depending on the shiptype

The supplyof tonnage in oil tankers increased in 2008 to 393.53 million dwt since the newlydelivered ships were overweight (exceeded the required weight) due to the scrap, out of service

or lost tonnage (see tables no. 2 and Figure no. 1). This aspect combined with the reducedtransport, increased to the 7.8 million dwt overcapacity or to 1.98 percent of global oilshipping.

Analysis of the surplus tonnage depending on the ship type, 1990 - 2008

Table no. 21990 2000 2004 2005 2006 2008

Oil tankers fleet world 266.2 279.4 298.3 312.9 367.37 393.53

Tonnage surplus total of oil tankers 40.9 13.5 3.4 4.5 6.08 7.80

Percent of tonnage surplus of oil tankers fleetworld

15.4 4.8 1.1 1.4 1.66 1.98

Mineral bulk carriers fleet world 228.7 247.7 325.1 340.0 361.81 393.45

Tonnage surplus total of mineral bulk carriers 19.4 3.8 2.1 2.0 3.4 3.61

Percent of tonnage surplus of mineral bulkcarriers

8.2 1.5 0.6 0.6 0.94 0.92

General conventional cargo fleet world 63.6 59.3 43.6 45.0 44.68 43.75

Tonnage surplus total of general conventionalcargo

2.1 1.1 0.7 0.7 0.65 0.7

Percent of tonnage surplus of generalconventional cargo fleet world

3.3 1.8 1.6 1.6 1.44 1.6


In 2008, the total supply of mineral bulk carriers increased to 393.45 million dwt. The constantincrease in the main dry goods transport brought about the over tonnage reduction to 3.61million dwt, the equivalent of 0.92 percent of the bulk carrier fleet. For general conventionalcargo fleet (ships carrying general conventional cargo), the overcapacity remained stable in


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2008 with a supply exceeding the demand by only 0.7 million dwt, or 1.6 percent of theinternational fleet in this particular sector.

The tonnage surplus of vessels transporting general goods continued to pursue a descendenttrend even since the beginning of the 90s remaining below 1 million dwt.

Comparison between the cargo traffic and fleet ownership

The correlation between the cargo volume generated by different groups of countries and theirfleet ownership is summarized in Table no. 3. The countries that have a developed marketeconomy generated 48.7 percent of the world water trade in 2008 compared to 53.7 percent in1980.

For the same period, the share of fleet tonnage of countries with a developed market economydecreased substantially from 51.3 percent in 1980 to approximately 26.9 percent in 2008.However, in addition to the tonnage under national flags, there is also a tonnage of the shipsowned by some countries but registered under foreign flags. The two categories mentionedbefore bring the share of the countries with a market economy developed to a rate of 60percent of the world fleet. The volume of developing countries shipping goods has remained atabout 40 percent.

Their tonnage owned and registered under national flags increased from 10 percent of worldfleet in 1980, to almost 22.7 percent in early 2005. The tonnage owned by the developingcountries increased to about one fifth of the total registered tonnage, thus raising the totaltonnage owned by developing countries to about 30 percent of world fleet. The volume ofinternational freight traffic generated by the Central and Eastern European countries remainedat around 3 percent in 2005 - unchanged compared with the levels in previous years but

significantly lower than the rate of 4.7 percent in 1980.

0

20

40

60

80

100

120

140

160

180

200

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Oil tankers Mineral bulk carriers General cargo

Figure no. 1 Surplus tonnage tendency depending on the ship type, 1990 - 2008


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The position of these countries fleets also decreased from 5,5% to about 2% in 2008. Thesocialist countries from Asia registered an increase of the international trade share to 8.9% in2008 whereas they improved the volume of world tonnage from 1.6 percent in 1980 to 3.9percent in 2008. Moreover, these countries have a smaller share of their fleet registered in openregistries.

Comparison between the cargo traffic and fleet ownership on groups of countriesTable no. 3

Country group Year

Total goods

loaded and

unloaded

(million tonnes)

Percentage

of total

world

Commercial

fleet (million

tonnes)

Percentage of

total world

1970 2812 54.8 282.2 86.5

1980 3965 53.7 350.1 51.3

1990 4529 55.7 219.0 33.3

2000 6391 52.1 203.2 25.1

Countries with

developed market

economy

2008 6890 48.7 258.4 26.91970 - - 70.3 21.6

1980 - - 212.6 31.1

1990 - - 224.6 34.1

2000 - - 384.7 47.6

Countries with

major open registry

2008 - - 431.9 45.0

1970 2075 40.4 20.5 6.3

1980 2926 39.6 68.4 10.0

1990 3065 37.7 139.7 21.2

2000 4834 39.4 157.0 19.4

Countries with

market economy

development

2008 5577 39.4 218.3 22.7

1970 264 4.8 21.7 6.71980 346 4.7 37.8 5.5

1990 236 2.9 44.3 6.7

2000 377 3.1 16.3 2.0

Countries of

Central and

Eastern Europe

(including the

former USSR) 2008 439 3.1 14.4 1.5

1970 44 0.9 1.2 0.4

1980 146 2.0 10.9 1.6

1990 168 2.1 22.1 3.4

2000 654 5.3 26.1 3.2

Socialist countries

of Asia

2008 1254 8.9 37.0 3.9

1970 5134 100.0 326.1 100.01980 7383 100.0 682.8 100.0

1990 8133 98.3 658.4 100.0

2000 12257 100.0 808.4 100.0

Total World

2008 14160 100.0 960.0 100.0


The information regarding the fleet ownership of most countries engaged in trade activities areprovided in Table no. 4.As it can be noted most countries engaged in commercial activities are at the same time majorholders (owners) of tonnage, which reflects an aspect of policies that support trade involving

the exploitation of maritime transport as an auxiliary to trade. Generally the maritime


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capabilities, in particular the substantial tonnage ownership, are considered to be essential forsupporting and promoting trade in that country.

The table shows the similarities and differences of transport/shipping of the countries with therichest trade activity. The countries with a significant commercial activity such as Japan, China

(including Hong Kong's), Republic of Korea, Denmark, Sweden and Norway are amongcountries with maritime services for alternative trade. Other countries with significant tradeactivity are major importers or users of shipping services at the same time maintaining animportant position regarding the property, and to a lesser extent, a position regarding thenational flag. United States, Germany, Britain and France fall into this category. In 2008, theUnited States generated approximately 12.5 percent of international trade, while holding 10.1percent of world tonnage, about one quarter of this tonnage being below the national flag.Similarly, France generated 4.0 percent of world trade compared with the position concerningthe tonnage property of 1.0 percent, the tonnage under national flag being half of thispercentage.

Fleet Property of the top 25 trade activity countriesTable no. 4

Country/TerritoryPercentage held of total

global value

Percentage held of world

fleet in dwt

United States 12.5 10.1

Germany 8.3 7.5

China 6.7 7.1

Japan 5.3 14.0

France 4.5 1.0

Great Britain 4.2 3.9

Holand 3.6 1.2

Italy 3.5 1.7

Canada 3.2 0.7Belgium 3.1 1.3

Hong Kong (China) 2.8 7.9

Republic of Korea 2.6 3.3

Spain 2.2 0.6

Mexic 2.1 0.1

Singapore 2.0 5.9

Taiwan (China) 1.8 2.5

Russian Federation 1.8 1.9

Malaysia 1.2 1.2

Austria 1.2 1.2

Swisse 1.2 1.2

Sweden 1.1 0.7

Australia 1.1 0.4

Thailand 1.1 0.5

India 1.0 1.5

Brazil 0.9 0.6

Total 78.9 76.9Source: Review of Maritime Transport, 2006-2009


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2. Maritime trade of crude oil and petroleum products

The freight market is not a uniform market having the same tendency of freight increase ordecrease in all market sectors. It is constituted of several independent under-markets and thatcan evolve in different ways. On a short-term the freight that oil tankers, bulk carriers and

container carrier ships get may evolve differently, but because on the market perform theactivity the same group of freight rentals the market becomes uniform. Also, because thevessels need time to get from one area to another we can speak regional markets that evolvedifferently on the short term.

On the freight market two main types of transactions can be conducted:

Freight contracts representing agreements such as voyage charter-through which theseller or the buyer pays a fixed price per tone or per cubic meter to perform the service oftransporting goods from one port to another. This variant is recommended to less-experiencedsea traders.

freight contracts representing agreements such as time charters according to which

the seller, buyer or an intermediary, in exchange for a daily rent, takes the responsibility oforganizing the shipment. This variant is recommended to experienced traders who are familiarwith the market and may thus realize substantial benefits.

In 2008, the ship tankers transport market decreased as a result of oil price increase from $ 56in early 2007 to $ 100, as a result of the geopolitical tensions increase, fear of oil resourcesdepletion, OPEC decisions to decrease production and the increasing oil demand. Let usremember that the price of the oil barrel was almost $ 11 in 1998, and another record price ofoil barrel was $ 102.81 in April 1980.

The most important factor that maintained tanker ship on the market was the increasing

demand for oil. While imports in the United States and Western Europe continued to increasemoderately, the demand on the expanding economies markets, particularly China, increasedexponentially. It appears that a sustained increase in oil prices over the past few years waslimited for the moment, the impact on demand. Another important factor that contributed to theincreasing oil price was the decrease of the Russian Federation oil production, the secondworld oil producer, combined with limiting supplies from OPEC.

In 2007, the Brazilian company Petrobras announced the largest discovery of oil since 2000,called "Tupi" which is supposed to have between 5 and 8 billion barrels of oil. The area issituated in very deep water, and therefore oil extraction costs would be high because thesurface is covered with a thick layer of salt.

Estimates for 2009 indicate a continuous increase in world oil demand, supply limitations fromOPEC, possible disruption of production in Nigeria, Iraq and Iran, increasing the fleet of tankervessels and uncertainties related to changing regulations regarding the tanker ships structure by2010.

The main loading areas are: the Persian Gulf, West Africa, Mediterranean, Caribbean andSingapore, while the main discharge areas are the Far East, South Africa, Northern Europe-Western Mediterranean, Caribbean and the East Coast of America North.

In early 2009 all sectors of tanker vessels transport, were characterized by persistent pricevolatility. The pressure of these decreases reflect, among other things, a reduced activity

mainly due to low demand in winter, the amount of freight in the loading areas of the Persian


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Gulf, disruptions in the refining, limitation of cargo transport imposed by OPEC and extend ofthe of refinery maintenance period.

Suezmax Ship-Tankers Type

A particular feature of Suezmax ship type is the advantage of their size, especially in ports withrestrictions regarding dimensions such as those in the United States. The Suezmax ship typerequires a smaller draft reduction compared with those of large vessels and therefore may carrya greater load when the destination ports present size limits. This type of vessel was especiallydesigned for commercial shipping on certain routes in West Africa North Western Europeand West Africa - Caribbean / East Coast of North America as well as for crossing theMediterranean Sea. The prices charged on these routes decreased in early 2008 and hadfluctuated significantly till the end of the year. Since the percentages decreased in the large andvery large vessels sector, the transport market values for Suezmax vessels were affected byseasonal variations, dropping in March and April, when the winter season peak demand ended,rising again in May when summer season demand was registered (air conditioning equipment,the driving season in the United States, etc.).

Unlike the transport that involves large and very large ship, the Suezmax transport is unlikelyto be seriously affected by the deadline in 2010 that prohibits single hull ships according toIMO. This is because there are few single hull Suezmax ships. Moreover this sector is lessinfluenced by Western markets (the United States and the European Union), where the singlehull ship-tankers had been already removed from the commercial circuit. The demand forSuezmax type ships is expected to increase, particularly in West Africa, Black Sea andMediterranean Sea. The average market rates on the West Africa - Europe routes attained inearly 2008 values of WS 130, they reached the minimum in November (WS 78) and at the endof the year were WS 237. On West Africa - Caribbean / East Coast of North America routes,the average annual earnings on same period were of $ 37,000 / day in 2007 compared to $

46,000 per day in 2006 and $ 64,800 per day in 2004. For the traffic between West Africa -Caribbean / East Coast of North America, the average values varied from WS 105 in Augustand WS 130 in December.

Excepting the North Sea, where production is declining, the future demand for Suezmax vesseltype could increase, particularly due to the oil exports increase from West Africa.

Aframax ship types and ship-tankers with tonnage between 20,000 and 30,000 tones dwt

(handy-size)

Aframax Ship type was especially designed for commercial traffic on the following routes:

NW Europe to other destinations in the region, and for the traffic in the Caribbean and theEast Coast of North America;from Caribbean to other destinations in the area, as well as for destinations on the EastCoast of North America;in and from the Mediterranean Sea to other destinations in NW Europe;from Indonesia to Far East destinations.

Handy-size ships are generally designed to Mediterranean trade, to the trade originating in theMediterranean Sea with destinations in the Caribbean and the East Coast of North America aswell as to the Caribbean trade in Gulf of Mexico and the East Coast of North America. Thefluctuations noticed in the large ships traffic, Suezmax and Aframax ship types can also be

noticed regarding the handy-size vessels.


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In 2008, the total charter transport worked out at 28.04 million tons dwt, with records under2.3 million dwt tons per month. While the November 2007 graphics showed the doubling ofactivity compared to November 2005, the graphics from June 2008 showed 4 times the levelattained June 2005.

Approximately 46% of the activity monitored in 2008 is part of a monitoring plan for 24 yearsor more.

32% of the monitoring activity is dedicated to large and very large tanker ships. 12% of themonitoring activity is dedicated to ships between 10,000 and 50,000 tonnes dwt. The activitymonitored in the first half of 2008 kept its pace. Levels varied over the year. For example, for a5year-old 280,000 dwt tons vessel, the activity graph for a year recorded values from $ 56,500

/ day in December 2005 to $ 55,000 per day in January 2006, fluctuating then in the followingmonths and reaching a maximum rate of $ 64,500 per day in September and completing theyear with values of $ 54,400 per day.

Commercial transport vessels with a bulk carrier

Down through the year 2008 market dried enjoyed a growth in trade with bulk carrier using thevessels for the various sizes. Increased steel production worldwide, especially in China, hasincreased the demand for Capesize vessel type, which in turn stimulated the growth of trade iniron ore. Demand for Panamax type vessel was supported increase shipments of grain and coalthat his line was stimulated by increased production of steel and energy demand from Chinaand India. Request for Handymax vessel type was caused of trade in steel products, Chinabecame the largest manufacturer and the United States and European Union - the largestimporters of products of the steel industry. Other industries that have stimulated the demandfor type Handymax vessels have been trading with soybean seed oil bauxite and aluminum.Production of smaller ships, like the Handy-type size, was also boosted steel industry beingsolicited for transporting raw materials like iron and coke, and for transportation of agriculturalproducts such as rice. Reflecting the increasing demand for transport in bulk at the end of2007, demand for bulk carriers has increased, so total worldwide fleet of bulk carriersincreased by 8%, from 25.3 million tonnes dwt, reaching 349.5 million dwt tonnes.

Market transport bulk dry goods

At the end of 2008, the transport dry bulk goods to improved compared with early. BalticIndex doubled, from its lowest value, 2 081 in January to record the December 4 397. IndexBaltic environment in 2008 was 3 239 - about 0.4% more lowest average of 2007. Ships of

Capesize and Panamax have been performing high overcame with previous results of 123.5%.

Monthly indices of ships with both regular and those with irregular flights have increased fromsubstantial throughout the year. Graphs of the temporal vessels with racing graphics andirregular vessels with regular increases were registered in 2008 compared with the last twoyears (see Table no. 5).

Indices transport bulk dry goods, 2005 - 2008Table no. 5

Ships with regular Ships with non-racing

2005 2006 2007 2008 2005 2006 2007 2008

January 505 302 491 812 677 294 632 1 018February 481 298 480 657 715 292 577 908


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Ships with regular Ships with non-racing

2005 2006 2007 2008 2005 2006 2007 2008

March 530 327 550 795 565 321 644 1 221

April 507 326.0 576 1 055 624 325 707 1 080

May 440 323.0 671 1 009 552 304 712 1 544

June 373 331.0 626 n/a 412 359 759 1 250July 313 360 673 n/a 342 421 875 n/a

August 290 417 718 n/a 285 475 920 n/a

September 328 447 828 n/a 352 518 1 078 n/a

October 379 450 985 n/a 391 522 1 044 n/a

November 346 447 1 013 n/a 376 463 1 280 n/a

December 320 484 926 n/a 332 594 1 251 n/a

Average 401 376 711 856 469 407 873 1 170


3. Romanian Shipping Analysis and Perspectives

As it was mentioned before, shippingis one of the basic links of the economic activity of each

state and an important factor of economic cooperation worldwide, being at the same time asubstantial source of income for the states that have significant shipping capabilities. Thus dueto its own specific character as a link between producers and consumers, the sea transportactivity represents a huge movement of goods on the world's oceans and seas, whose surfacemoves daily between 25 000 - 30 000 vessels, carrying approximately 75% of internationaltransport of goods, this means of transport being considered the most effective and cheapest onlong-distance for large amounts of material goods.

Romania as a country that has access to the Lower Danube and the Black Sea, has a long

tradition of maritime and river transport. Thus, the navigation on the Danube River wasofficially put into practice in 1890 by setting up the department of Romanian Service RiverNavigation, which transported goods and passengers on the Danube having a fleet made up of4 tugs, 12 lighters and tefan cel Mare passenger vessel that was able to carry a quantity of 7000 tones / year. The period before the Second World War can be considered as a boom periodfor the Romanian transport fleet, being able to carry over 60 600 tones / year, although the useof this means of transport had in 1938 only 2.1% of total means of transport used, the largestweight being held by the railway carriage, which had 97.7% of all transports.

During the Second World War, the transport situation in Romania worsened due to thedestruction of 50% of the locomotives total, 32% of the wagons total, 1 250 bridges and

footbridge, and the sailing on the Danube became almost impossible because of the destroyedvessels. After the Second World War ended, the need to restore the national economy that wasdestroyed by war, imposed particularly the restoration of the whole transport system, both onriver and sea. This activity was conducted in two main directions: building and repairing shipsand repairing, developing and upgrading the river and sea ports.

The capacity increase of the sea and river transport was registered in the context of developingand modernizing the shipyards from Galati, Constanta, Braila, Oltenia and Drobeta TurnuSeverin, which began production of both vessels having a capacity between 2 000 and 10 000dwt for maritime navigation, and dams and tugs used in river navigation. Thus, the maritimetransport, which has approx. 250 ships, succeeded in postwar period to increase its contribution

to the total volume of transported goods of 27 596 000 tones in 1990 compared to the total


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volume transported in 1938 to around 60 600 tones and the river transport from 1 326 000tones in 1938 to 12 044 000 tones in 1990.

The specific aspects that the Romanian commercial fleet has faced since 1990 can beconsidered to be the following:

excessive stoppages for repairs and upgrades due to the reduced capacity in this area ofthe shipyards, also caused by the chronic lack of funds;unsatisfactory reliability of the Romanian equipment;reduction of the tonnage carried by sea;lack of state monopoly in foreign trade as well as that accomplished by the nationalfleet in conducting the Romanian export and import;lack of legislation in this area complying with the economic stage as well as thecommercial fleet requirements;lack of strategies in the field;the impact of the commercial fleet decentralization.

Before 1990 there was an overrated fleet that was operated solely on the principle of minimumcosts and whose foreign income was directed exclusively to pay external debt, thus leading toaccumulating an external debt to the main owner IEFM Navrom Constanta of U.S. $ 29million. However, Romania held the 4th active fleet top position in Europe and 12th top positionworldwide. At that time, IEFM Navrom Constanta had 290 ships in operation; ICE Navlomarhad 10 cargos and a tanker. A joint venture - Roliship also performed its activity, a form ofcooperation between Navrom Constanta and a company from Libya, which had 2 vessels.Certain measures were taken after 1990, without a clear strategy, which had adverse effects.Thus, IEFM Navrom Constanta divided into 3 companies, namely:1. Navrom CNM, who specialized in general vessels, took over 118 vessels with 730 900 dwt;2. CNM Romline, which took over the line vessels and Ro-Ro - 85 ships with 656 850 dwt;3. CNM Petromin that took over the oil vessels -187 vessels of to 4 620 000 dwt.

Taking into account the current situation and also due to the permanent removal of vesselsfrom the commercial exploitation as a result of defects, inability to carry out repairs and non-granting the navigation category by the international maritime insurance companies, there canbe noticed an annual decrease in transport capacity and a general reduction of the Romanianfleet by 2010 to 26.4% of the current capacity, which according to the Strategy Directorate ofthe Ministry of Transport are:

Perspective of Romanian fleet reduction by 2010Table no. 6

Removal from serviceEntry into service

preliminatFleet at end of period

PeriodNumber

of ships

Capacity

thousand

tonnes

Number

of ships

Capacitythousand

tonnes

Number

of ships

Capacitythousand

tonnes

1994 - - - - 258 6251.71

1995 43 649.61 6 105.50 221 5707.60

1996 19 395.78 18 266.50 220 5578.30

1997 16 243.89 13 111.75 217 5446.20

1998 26 393.16 2 8.00 103 5061.00

2000 14 120.00 - - 179 4941.00

2001-2005 69 2062.21 - - 110 2879.00

2006-2010 37 1226.96 - - 73 1652.00Source: Review of Maritime Transport, 2006-2009


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The main causes that led to this situation in the field of maritime transport that the Romaniancommercial fleet is currently facing are in the Ministry of Transport specialists opinion thefollowing:1. non-complying with the impact of the economic activity decentralization;2. general collapse of the Romanian economy and the reduction of the Foreign Trade during1990 - 1993, which determined a dramatic fall in the amount of traffic through the Romanian

ports from 66 million tons in 1989 to 29 million tones in 1993;3. the state non-involvement in supporting the national maritime interests, although this is anational strategic goal, in this respect being significant HG 740/90, which excludes theshipbuilding financing from the budget to;4. the phenomena of bureaucracy in restructuring and privatization of shipping companiesowned partially or integrally by the state;5. physical and moral depreciation of the ships in service;6. accumulated debts by the Romanian shipping companies to external creditors, which leadsto Romanian ships arresting and restraining in different ports until the foreign debt is paid,with all the economic and financial effects being left upon the Romanian ship-owners;7. unfair competition practiced by foreign companies whose ships navigate under flags ofconvenience (Honduras, Malta, Cyprus, Liberia, Panama, etc.) and without having signed anyinsurance with the well-known international marine insurance companies, such as LloydRegister, Bureau Veritas or Lloyd Germanisher, they charge dumping charges below thetariffs charged on the international market of freight, competing unfairly with the Romaniancommercial fleet.

Starting from the previously mentioned aspects regarding the Romanian maritime fleetscurrent situation and its future prospects, taking into account that the commercial fleet is agood strategic goal of national importance, we consider that it is necessary a greaterinvolvement of the Romanian state to protect our marine fleet trade by applying measures andregulations that support and develop activities that would result in the following:

maritime transport capacity increase of the Romanian commercial fleet that would enablethe conduct of a higher volume of import and export goods to the benefit of the Romanianeconomic entities and reducing the transport capacity use of foreign ship-owners;

by employing the Romanian commercial shipping fleet would improve the balance ofpayments by reducing transport costs, currency free to paid foreign ship-owners;foreign trade operations stimulation and the possibility of entering into new foreignmarkets;new jobs creation both in the maritime shipping companies and shipyards in the shipbuilding and ship repair;

Romanian commercial maritime fleet as national strategic objective and its employment whennecessary would be ultimately an attribute of the Romanian state sovereignty andindependence.

In our opinion, the following measures should be applied in order to accomplish the objectives

mentioned above:Romanian commercial maritime fleet restructuring and reorganization by greaterinvolvement of the state on a park vessels minimum which would constitute the strategiccore of the state and which would achieve the Romanian independence regarding the rawmaterials necessary to the national economy;Maintaining the traditional lines of navigation and provide strategic transport if required.

In this respect the setting up of a state-owned maritime trade shipping company is required,either as a joint venture or a national strategic interest company benefiting of the state capital,endowed with new ships, that meet the world level requirements, staffed with a competentmanagement team and highly qualified personnel, which should become a Romaniancommercial shipping leader due to the facilities and professional competence.The creation of such navigation companies of strategic importance could be achieved only in

terms of its subsidization by the Romanian state, and which once set up on the organizationalprinciples and an efficient management system, due to the charged transport fares and the


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fairness of the transport performance might surpass the foreign shipping companies and theother state-owned or private shipping companies. In order to support the idea of the Romanianstate subsidizing a segment of its own commercial shipping fleet and making research in thefield, we noticed that such practices have been also applied by other developed countries.Therefore the U.S. Government has developed a grant program for the strategic commercialvessels navigating under the U.S. flag for the next 10 years. The system was be called

"Maritime Security Program (MSP) and was considered the main program of national maritimesecurity, which begins with the government subsidizing of the modern American shipsbuilding, built both in U.S. and the foreign shipyards for U.S. owners, beneficiaries ofsubsidies, "MPS" being required before signing a contract for the new ship building tocommunicate within 30 days prior to the shipyard that would build the ship to attend theauction organized for this purpose.

Thus, the investor will receive a subsidy from the U.S. state for each ship of U.S. $ 2.3 millionfor the first year, following that in subsequent years during the execution of the ship to receivea grant of U.S. $ 2.8 million. When the ship is recorded and wears the U.S. flag, will operateunder normal commercial shipping, will be of the RO - RO type or a minimum of 80 000 feetor "LASH" ship type, carrying at least 75 barges or generally will be considered a strategicship by the "Pentagon" that would serve the interests of the army in case of warfare or state ofnecessity. The general requirement imposed by the Pentagon for commercial maritimenavigation, in order to apply for these grants, was that in the above mentioned situations, theyprovide to the ships, on board equipment, terminals facilities and management services to thePentagon whenever necessary.

Besides direct methods of subsidizing a shipping company by the state, series of protectionistmeasures could be taken at least in the first years from the setting up, designed to make thecompany profitable and competitive. In our opinion these measures would abide theinternational law and which in Romania's economy current stage would not be contested,measures that are currently applied by other developed countries, consisting of the following:

1. Romanian economic entities stimulation through facilities creation such ascompetitive transport fares, facilities in granting the licensing of import and export, facilities

and giving priority to the operation of such ships in the Romanian ports, etc., to include in theexternal trade contracts binding transport of goods by vessels belonging to the Romaniancommercial shipping belonging to the Romanian state-owned maritime company;

2. Reductions or exemptions from port charges and taxes for a period of 3 - 5 years fromits establishment in order to strengthen and achieve an appropriate economic efficiency.

In January 1998, the Ministry of Transport developed the strategy of the maritime fleetrestructuring and privatization. Thus, the restructuring and privatization will be accomplishedin two stages, as follows:- In the first stage, the following companies Navrom, Romline and Petromin will form:

1. Maritime Transport National Company Romanian Maritime Service plc2. National Shipping Containers - Romcont plc3. Agency of Navigating Personnel - Pernav LTD.

Romanian Maritime Service will take over from Navrom 15-25 cargos of 15 years maximumseniority and ships under construction, from Romline 15-20 cargos and the Petromin oil andbulk carriers. Romcont plc will take 6 vessels from Romline Ro - Ro, 2-4 versatile cargos and2 port-containers cell.

Pernav LTD will take over the staff and specific facilities of the service personnel from the 3companies and will intermediate crew employment for any shipping company in the country.

- The second stage aims at achieving the transition of the other 130 vessels to privateproperty, including the privatization through liquidation of the 3 companies. This phase hasfour sub-stages, namely:

1. Ship selling as an asset sale to pay in full or in installments by public auction;2. Ship selling as an asset sale or termination of leasing contracts with the irrevocable

option to purchase for them, with current holders of charter contracts "bare-boat";


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3. Division of companies on "bare-boat" structures and offering the remaining companiesholding the "bare-boat contract for privatizing through direct negotiation, if there are requestsexpressed;

4. Privatization of Navrom, Romline and Petromin companies by providing their full sale orliquidation and sale of all ships through the tender price by reducing the value of the ship untilthe value for dismantling ship.

Therefore, unless the bases of a program are set to endow the maritime fleet with new capacity,we will no longer be able to speak about the Romanian maritime fleet in 2010.

4. Conclusions

Today over two thirds of the total capacity of goods forming the subject of world trade takesplace on inland sea, the sea and the default transport goods by sea is the most advantageousconditions and in the international trade, the annual traffic of goods and values of billions oftons, they reflect the beneficial to the economies of countries participating in these relations ofproducers and consumers of these goods, the owners of the ship owners and port organizationsthat provide services related to port services operations loading and unloading of ships. Join inthe economic and social progress of mankind generally, increasing the volume of shipments bysea and the adjacent port services, Romania has made substantial progress both in increasingthe capacity of shipping internationally, and by extension and development of seaports andriver.

On overall trends in recent years, the average age of all types of vessels has decreased over thepast 10 years, except the universal cargo remained practically unchanged. Average age ofships tankers decreased by 32.7%, the age of bulk carriers - with 11.3% and the container port- with 23.8%. This statistical trend reversed last decade, the average age of vessels and tankersto bulk carriers increased. Ago with 20 years average age of tanks was higher than that of bulkcarriers (12.1 years compared to 10.7 years), while tanker ships today are less than the bulkcarriers (10 years compared with 12 9 years). Analyzing the evolution of the number of vesselsoperating on the transport of goods, there is a decrease in the number of vessels involved in the

transport of goods and also a decrease in the quantity of goods transported, with repercussionson the volume of foreign trade.

In conclusion, given the fact that shipping takes place in the current context of economic andsocial framework in continuous transformation, both nationally in terms of economies intransition to full market economy, with all the inherent difficulties, and at world in acontinuous process of movement of shipping markets, changes in areas of influence, conflictsof inter-or interstate, commercial maritime fleet Romanian facing many difficulties, should berequired to obtain a constant and substantial support from the state Romanian, both on thedevelopment, maintenance and operation in conditions of maximum efficiency, the strategicgoal of national importance that Romania may ensure the independence and sovereignty andintegrity of Romanian commercial shipping in international maritime transport as important

link in the international division of labor what action was promoted and fostered by theEuropean Economic Community, which the "White Paper, published in 1994, the need to openthe European integration of transport of countries of Central and Eastern Europe.

References1. Alexa Constantin - Transporturi i Expediii Internaionale, Editura ASE, Bucureti, 20012. Caraiani Gheorghe - Logistica transporturilor, Editura Universitar, Bucureti, 20083. Pucaciu Florin-Dan, Muntean Mihaela-Carmen - Expediii i tehnici vamale, Editura Didactici

Pedagogic, Bucureti 20054. Review of Maritime Transport, 2006-20095. www.unctad.org6. www.wto.org

international navigation market

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