Question based assignment-Maritime and logistics management

by Emily Parker March 19, 2016
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Question

Q1.In what ways do environment-related shipping policies affect the following components of the maritime industry?
a New building and scrapping
b Liner conferences and alliances
c Shipping companies’ profitability.
Provide examples to illustrate your answer.
Q2.Three Companies A, B, and C are providing liner shipping services. What effect will each of the following have on the demand for liner shipping services? For each effect, provide a brief explanation and justification.
a Company B increases the frequency of services in a shipping route connecting to a particular port that is also serviced by Company A.
b An interstate highway connected to a port, serviced by Companies B and C, is completed.
c The economy experiences a moderate upturn, trade increases, and business confidence is improving. But Company A’s image is tarnished as a result of a recent strike in one route where both Company B and C also provide shipping service

Q3.Identify and discuss the market structure and key economic issues related to the global dry bulk trades of iron ore, coal and grain.

Q4.Refrigerated cargoes are being carried by both container vessels and specialised reefer vessels. Compare and contrast the likely future growth in refrigerated cargo in both types of vessels. Include examples and economic justification for your views.
Solution

In what ways do environment-related shipping policies affect the following components of the maritime industry?

  1. Newbuilding and scrapping: Scrapping refers to the act of breaking down a ship into parts for disposal or reuse by reprocessing them. Newbuilding, as the name suggests, refers to the construction of new ships using parts from the scrapping. Shipping policies aimed at reducing negative impact on the environment will initially result in an increased amount of newbuilding and scrapping. The environmental impact can be reduced following these policies through an improved hull-design achieved by breaking down old ships to build new ones with better technologies(Hayman, Dogliani, Kvale, & Fet, 2000). A better, newer hull-design can reduce environmental impact by reducing: operational emissions (through reduced fuel consumption) and accidental pollution (through reduced oil spills and exposure of other harmful materials during an accident). Also, an improvement in the quality of design, structure, outer coatings and working conditions for workers and passengers would require scrapping and increase newbuilding which would finally lead to longevity of the ships and reduced scrapping in the future.

An example: New ship scrapping policy in China has enabled faster demolition of the older vessels in order to build more efficient new ones. The transport ministry has announced a subsidy to shipping companies, to be given in two parts (once after the scrapping and once after building the new vessel). This would reduce pollution from old, single-hull ships and increase efficiency of the vessels

 

  1. Liner conferences and alliances: Liner shipping conferences refer to associations of ship-owners served by a secretariat which provide international services on a particular route within specific geographical limits under an agreement. These can fix a common freight rate and regulate carrier capacities(BENINI & BERMIG, 2006). Liner alliances refer to a consortia or cooperation among liner ship owners in order to avoid competition among them and thus increase price and trade stability and efficiency of their services. More the environmental regulations imposed on liner shipping services, more are the costs incurred by them. They take resort to costlier methods of disposal of wastes generated from the building, scrapping and other activities, higher maintenance costs to prevent environmental damage, rising costs of capital and newer and costlier technologies to build more environment-friendly ships. Given this situation, the market for liner shipping services is highly competitive which gives way to destructive price wars, increased costs and falling profits. Thus, strategic alliances benefit the shipping companies by increasing price stability and profitability

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  1. Shipping companies’ profitability: Sustainable shipping policies related to the environment will increase the economic performance and hence the profitability of liner ships companies in the long run. In the immediate future, companies will face a lot of pressure to decrease their emissions and reduce pollution, which will increase their costs for investing in green technologies. Gradually, positive economic side effects would cover up these costs and generate profits for the companies. Continuing the use of older and outdated vessels instead of making newer ones might lead to profits in the short term, but would cause larger loss in the long term. Environmental issues can be divided into operational policies and technical improvements.

Question 2

  1. Company B increases the frequency of services in a shipping route connecting to a particular port that is also serviced by Company A:  

Liner shipping is a way of transporting goods with the help of high-capacity ships that move along given routes from different ports, following a fixed schedule. Then, as Company B increases its frequency of services in its schedule, the demand for its service will increase as customers are going to have more options under liner shipping services for a given span of time. They would tend to opt for this service over any other mode of goods transportation. The demand for Company A’s service might decrease if B starts giving more frequent services. Company A will face increased competition from B and this will lead to a competitive pricing structure in order to attract more demand.

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