Directorate-General for Research
Working Document
Transport Series
- W 14 -


1. Categories

Maritime transport can be categorized on the basis of two criteria: service and distance. The first covers bulk shipping and liner shipping for cargo, and passenger ferries and cruise ships for carrying passengers; the second covers deep sea and short sea shipping.

The different types of transport are distinct from one another. Bulk transport is generally organized within a free market and is labour-intensive rather than capital-intensive. Liner shipping, on the other hand, is organized in conferences, which for the most part are cartels that control the rates and market share of a specific liner shipping company or group of companies. In terms of production factors, liner shipping is highly capital-intensive in both tonnage and land-based infrastructures.

As regards the carriage of persons, passenger ferries are generally operated as a public service, whereas cruise ships are part of the tourism sector.

Deep sea transport involves long distances and is generally carried out by liner shipping services. Short sea shipping, on the other hand, covers maritime transport services between the EU Member States, other states in the Baltic Sea and the Mediterranean, and Norway and Iceland. In other words, short sea shipping does not involve an ocean crossing and includes sea/river transport by coastal vessels to and from ports in the hinterland (8). A significant number of bulk, cruise and ferry services which technically fall under the service criterion qualify as short sea shipping.

2. World and Community fleets

In economic terms, the most important aspect of maritime transport is the tonnage of the merchant fleet. In fact, this figure generally covers all the material resources at the disposal of the sector, some of which are not necessarily in use either because ships are obsolete or in poor condition, or because of economic factors. While the aggregate figure for the world fleet, which ignores the flag/ownership distinction, provides us with a true picture of the situation, the disaggregated figures (or Community figures where applicable) are distorted by such a distinction.

Bearing these considerations in mind, the tonnage figures nevertheless provide some useful indications. At 31 December 1994, the world merchant fleet (9) amounted to 475 859 000 tonnes, reflecting a 13% growth over the previous 15 years. Various factors contributed to the increase. The world fleet, which had remained fairly stable between 1980 and 1982 (+1%), underwent a net laying-up of 5% from 1983 to 1988, and 16% growth between 1988 and 1994.

Also at 31 December 1994, the European merchant fleet (EU 12) amounted to 67 775 000 tonnes. At the same date, on the eve of their accession, the merchant fleets of Austria, Finland and Sweden amounted to 4 335 000 tonnes. The combined tonnage therefore totalled 72 090 000 tonnes, equal to 15% of the world fleet. Between 1980 and 1994, the Community fleet (EU 12), in contrast to the world fleet, declined by 44%. This dramatic fall is the outcome of a reduction of 51% between 1980 and 1990 and a 6% growth after 1991. In total, the EU 12 share of the world fleet fell from 28.7% in 1980 to 14.2% in 1994. Between 1992 and 1994, the EU 15 increased the size of its fleet by 6%. This reflects the greater dynamism of the merchant fleets of the Baltic countries, which does not compensate for the opposite tendency as regards the EU 12, however.

This downward trend in the Community fleet is confirmed by the figures dated 1 January 1995 for tonnage ordered or under construction for the Community fleet. This amounted to 10 674 200 tonnes, compared with a world total of 75 067 500 tonnes, and corresponded to a share of 14.22%, thus confirming the erosion of the Community's share of the world fleet. It should be noted that Norway's merchant fleet, which accounts for nearly all the non-Community part of the EEA fleet, measured just under 21.5 million tonnes at the end of 1994, which is equal to 30% of the Community fleet and 4.5% of the world fleet. Norway also had 1 131 000 tonnes of shipping on order or under construction. The figures confirm the relative dynamism of the Baltic fleets, compared with the other European countries.

However, the shipping companies of the Member States owned 34% of the world fleet in 1994, as opposed to 38% in 1985. The figure for controlled tonnage over the same period showed an increase of 12%, particularly in Greece, which controls 18% of the world fleet and is the largest shipowning nation in the world (10).

Dividing countries into groups according to tonnage provides further material for analysis. Table 2 (11) shows a significant drop of more than 20% in the market share of the industrialized countries, a small drop in that of the countries of Central and Eastern Europe, and a slight rise in that of the developing countries. Countries with open registers, on the other hand, have considerably increased their share of the market. There has also been a slight but real increase in the market share of the Asian countries: China and countries with dynamic economies have increased their share from 6% in 1981 to 11% in 1994. This is a sign not only of increased economic growth in these countries, but also of a redistribution of international trade flows and, consequently, of ocean trade.

The fact that the biggest increase (16%) has been in the fleets of countries with open registers cannot be attributed to changes in the real economy. Rather, it demonstrates the shortcomings in the maritime policies - in their widest sense, as described in the introduction - of the other countries when it comes to creating conditions of free and fair competition, or even securing the expected returns on their maritime investments (12).

It is interesting to see the distribution of different types of ship within the world merchant fleet (13). In 1993, tankers accounted for approximately one third of total tonnage, and bulk carriers for slightly less than one quarter. The huge increase in ships transporting chemicals between 1993 and 1994 (179.6%) has very little significance, since it only accounts for 2.5% of total tonnage.

Between 1973 and 1993, the world tanker fleet grew by 20%, with a 52% increase in tonnage between 1973 and 1978. This was followed by a drop of 32%. Trends in tonnage figures for tankers are directly linked to the severity of the oil crises and political and military relations between Israel and the Arab states. During the same period, 1973 to 1993, the volume of oil products carried by sea fell by 10%. In 1977, however, the best year for the transport of oil products, the increase over 1973 was only 12%, compared with an increase of 52% in the number of tankers (14). There was thus a drop of 26% in the relative rate of use in the four-year period from 1973 to 1977.

Two further factors to take into account before completing this picture of tonnage trends are laying-up and scrapping. The most recent figures published are for 1993 (15). Although 1993 saw a drop in tonnage laid up both in terms of ships - 427, compared with 445 during the previous year - and tonnage - 8.9 million tonnes of capacity, compared with 12.3 million - it should be noted that this included a substantial number of very large capacity tankers. Overall capacity (excluding vessels being fitted out) thus dropped by 3.4 million tonnes, in spite of a reduction in the number of tankers laid up amounting to over 100 000 tonnes. In other words, the sector - faced with stagnation - regained some of its operational flexibility by laying up the largest ships.

In 1993, the number of ships scrapped was the highest since 1987. It was the third consecutive year that breaking-up increased, with the scrapping of 390 ships amounting to 18.2 million tonnes of capacity. Of the 390 ships, 156 were tankers with a total capacity of 13.9 million tonnes, so there was an increase in the breaking-up of large-scale units. The People's Republic of China scrapped the most ships, followed by the Indian subcontinent.

The following points are intended to stimulate some thoughts on the subject:

  • the world fleet appears to be moving towards ships of medium tonnage in order to be more flexible, possibly in response to greater variability in the market;
  • the place occupied by the Community in the world fleet is shrinking. Future prospects relating to ships under construction or on order also confirm this trend. This decline, which is also affecting OECD members, does not appear to be the result solely of competition based on social and environmental dumping or lower safety standards in newly emerging countries, but is probably also due to gaps in the maritime policy of Member States. Norway, an industrialized country within the EEA, is showing considerable dynamism in this sector;
  • the major part of Community-operated tonnage is affected by the "shadow flag" phenomenon: 33% of the world merchant fleet is registered under these flags, while the Community fleet has no more than a 15% share of the world fleet;
  • the growing fleets of countries with open registers indicate that legislation in the Community countries, and in the industrialized nations generally, is inadequate to provide the conditions that investors expect, both in terms of competition and profit margins. It is only in times of political and military unrest, such as the Gulf War, that the need for protection from a modern navy leads to a return to the flags of the major naval powers.

3. Community maritime transport

We have already shown that the Community shipping sector, in terms of controlled tonnage, is one of the largest in the world, despite the fact that it is in a state of continuing decline. This is in marked contrast to the world fleet, which has shown an average growth rate of 6.5% over the last ten years. At the end of 1995, the Community shipping sector comprised 5630 companies and, at the end of the previous year, provided jobs for 153 309 people, of whom 127 579 were from within the Community and 25 730 from outside. Employment figures have also fallen, particularly as regards Community workers: in 1980, the number of Community workers employed was in the region of 250 000 (16).

The sector is undergoing a process of concentration, however, which will ensure that small businesses can find a niche for their particular specialization in the market, for example short sea shipping. This process of concentration, which should continue until the end of the century, is motivated by the need to provide users with an intermodal transport service. In this respect, there does appear to be some integration between the different modes of transport and auxiliary services in a synergic relationship to provide and sell services. However, a similar integration process does not appear to be taking place within the Community in the same way as in other parts of the world which are in direct competition with European maritime transport. The competitiveness of the latter is therefore being weakened.

Cruise services are thought to be a suitable area for development, provided there is a corresponding increase in family earnings, particularly the element devoted to spending on non-essential items.

In general, the Community provides high-quality, specialized maritime transport services. As a result, the companies concerned can be divided into four product categories: large-scale shipping companies with different types of ships providing specialized services, the industrial giants which organize the transportation of their own products (oil companies, for example), bulk carriers and charter companies.

4. Short sea shipping

Any discussion of maritime transport generally centres on ocean-going transport, but it is worth mentioning short sea shipping, which has already been the subject of a communication from the Commission (17) and a European Parliament resolution (18). In fact, it is an area of particular interest to some Member States, because of the possibilities it provides for linking up peripheral regions and islands. Since it is adapted to both sea and rivers, short sea shipping also constitutes an important link in the Community intermodal transport system (19), to which - despite being slower - it makes a significant contribution in terms of energy saving and environmental protection on routes where it has to compete with road and rail transport. Short sea shipping is also particularly relevant for Community enlargement in the Baltic region and, more generally, as regards trade with the countries of Central and Eastern Europe.

In spite of the advantages listed above, there is currently scarcely any integration between short sea shipping and other forms of transport, so competitiveness is reduced. The same does not apply, however, to feeder line services, whose share of the container line market has risen from 30% in 1982 to 43% in 1992 (20). Feeder services link minor ports with major ports where there is already a concentration of ocean-going container trade. Feeder services are mainly operated by liner shipping companies, and this enables running costs to be reduced. As a result, they are taking some trade away from road transport. It should be noted that among the feeder line operators, there are a number from outside the Community.

In the communication mentioned above, the Commission proposes a programme of measures for feeder services which is intended to make full use of their competitive potential, even outside their own sector. The programme includes action to improve the quality and efficiency of port services and infrastructures, as well to prepare them for enlargement. In particular, the programme recognizes the importance of research and development.

In its resolution referred to above, the European Parliament expressed approval of the programme and underlined the positive consequences which improvements in the feeder services sector could have for the entire transport system, as well as the shipbuilding industry.

5. Community maritime transport problems

It has been demonstrated how the Community's global presence in maritime transport has declined, in spite of the size of the Community fleet. This has been caused by a loss of competitiveness, due not so much to poorer quality services, but rather to the higher costs associated with Community registers. This view has come to be generally accepted and forms the basis of the communication from the Commission (21). The solution proposed is primarily a Community initiative aimed at speeding up the process of harmonizing safety and environmental protection measures through international conventions (a process that is already in progress), and at introducing more effective controls to ensure they are respected. This should lead to a reduction in environmental dumping, as practised by ships flying "shadow" flags.

We shall return to this topic in due course. At this point, it should be stressed that turning a blind eye to dumping will create massive costs in many areas. On the subject of personnel, the table contained in the Commission communication entitled Towards a New Maritime Strategy, from which we have quoted freely, gives some indication of the relationship between the cost of crews for ten different types of ship in two or three European countries and those of the most amenable flag of convenience. These differences in cost vary from a minimum of 4.6% to a maximum of 958.2%, and out of 42 cases examined only six were less than 100% and 12 less than 200%, with nine more than 400%.

Leaving aside the problems associated with distortion of competition, it can be seen how the effects of crew costs on total costs vary according to the age, category and financing of a vessel, as well as the tax system under which the shipowner is operating and his depreciation method. In the first year of operating a new vessel of relatively high capital cost, such as a container ship, the depreciation and interest costs are the most substantial (58% and 18% respectively), compared with 9% for crew. By the fifth year, the cost structure has changed to 31% for depreciation and 21% for loan interest, with crew accounting for 16% of total costs (22). For a less expensive ship, crew costs can account for as much as half the total cost for up to twelve years. Since provision for depreciation is not an actual expense but is tax deductible, it is clear that as the ship ages, personnel costs become critical.

This leads us to the problem of an ageing fleet. The average age of the Community fleet increased from 16 years in 1985 to 21 in 1994. During this period, the average age of the world merchant fleet increased from 14 to 17 years (23). The reasons for the increase lie in the fact that profits from maritime transport are lower than those in other industries, and this factor, together with reductions in freight rates in recent years, has led to ships being kept in commission for longer. Over the same period, economic growth in the Pacific, coupled with a corresponding increase in demand for maritime transport, led countries in the region to increase their fleets.

Community shipping is also affected by significant internal differences in cost. Fitting-out costs (not just crew costs, therefore) for a container vessel of 1500 TEU range from USD 473 040 in Greece to USD 1 485 650 in Italy, and are over a million dollars in eight countries (24). The costs mentioned here must be compared with the lower costs of the Asian fleets. However, it would be wrong to attribute the progressive decline of Community shipping solely to greater laxity in applying security and environmental protection measures, or to so-called social dumping by these countries. It could be that the former colonial powers, having for many years occupied cosy niches in the maritime transport sector, have lost the habit of constantly monitoring costs and ensuring that they remain competitive. In the same way, it seems likely that the principle of mandatory flags will come into operation, as foreshadowed in France. French refineries are obliged to use a certain number of ships flying that country's flag to transport oil (25).

The Commission is proposing (26) tax incentives based on the flag and the number of Community crew members. This approach, however, which will doubtless be welcomed by operators, will not increase competitiveness. It will only serve to counteract the effects of the increased management costs on competition, and only for as long as the incentives themselves are in operation. In the author's opinion, the best course would be to make the shipping sector efficient once again by integrating it into an intermodal transport system, in which maritime transport is, at present, sadly neglected. This would also encourage the concentration of businesses in groups to provide transport services that users want, and thereby create synergy between the different modes. Finance is a no less important issue. Leaving aside interest rates, which are linked to economic policy or state aid, credit facilities should be straightforward and transparent, as is patently not the case in many Community countries (27).

An important consideration from the point of view of maritime transport is the availability of state aid. In 1989 (28), the Commission put forward guidelines defining the conditions under which state aids to shipping may be considered compatible with the common market. The Commission has concluded that the current guidelines need to be revised ... [taking] into account developments in ... international competition, as well as the global trend towards the liberalization of trade in goods and services (29), and also the most recent case law. The new guidelines should ensure that there is support for the sector through measures that are in the common interest and transparent, and which do not distort competition between Member States.

6. Associated industries

Closely associated with maritime transport are the so-called maritime industries, which no longer consist solely of shipbuilding, offshore platforms and other types of marine equipment. They also embrace a wide range of production and services including shipping, port services and multimodal transport operators, as well as the marine resources and fishing industries and, of course, shipbuilding (30).

Safety, efficiency and compatibility with the environment are interdependent objectives for all these sectors. This section, however, will deal with specific problems affecting the shipbuilding industry, in particular the construction, repair and breaking-up of ships. In 1994, these activities occupied 120 000 workers in the AWES countries (31) - a dramatic drop compared to the 219 000 and 144 000 employed in 1985 and 1989 respectively. Of these 120 000, one fifth were employed in ship repair, where jobs are also in decline when compared with the 42 000 that existed in 1985.

The Community shipbuilding industry, which has a 20% share of the world shipbuilding market, is in the same situation as maritime transport. Production costs are higher than those in the Asian countries, and it has to contend with unfair competitive practices by some third countries. The Community industry scores highly as regards quality, but it still needs to improve productivity. The ship repair sector is in an even weaker state, as a result of having to compete with other European countries and Turkey, and being hampered by higher costs and unfavourable exchange rates.

In addition to the large companies, the shipbuilding industry also includes small and medium-sized businesses which specialize in building craft for fishing and sport.

The Commission envisages an increase in demand, for a number of reasons: the need both to renew the fleet and to comply with new safety standards; more trade in the Baltic and Mediterranean, and the scrapping of a significant number of North Sea oil rigs. On the negative side is the increase in the productive capacity of South Korea and, probably, of China, the countries of Central and Eastern Europe and the USA, all of which are making their presence felt on the international market.

The marine equipment sector, which produces items of a high technological standard, is immensely competitive. These items can account for 60 to 70% of the total value of a ship.

As regards industrial cooperation within the Union, a sector-specific round table is the Maritime Industries Forum. Since its establishment in 1992, the industry has made considerable progress in restructuring itself. Five major European companies have jointly created Euroyard, which has already produced Eurofast for short sea shipping, and Eurocorvette in the naval construction sector.

These achievements are the result of Community policy for promoting technological development in the maritime industries. Among the projects aimed particularly at the shipbuilding and marine equipment industries are MUSYK to provide support for ship production planning and control, MARITIME for the concurrent development and reuse of design data during the development and subsequent life cycle of a ship, and MARVEL to provide a global network for interlinking shipyards and their suppliers.

Competition in shipbuilding is a matter of particular concern for the Community institutions. On the one hand, they would like to see free and fair competition inside the Union, and on the other they wish to protect the European shipbuilding industry from unfair trade practices outside the Community. The most recent legislation on state aid was approved by the OECD in 1994.

7. Sea ports

Ports are land-based infrastructures serving maritime transport, where ships dock and persons and goods are loaded and unloaded, and where all navigational needs are catered for.

Ports are therefore the interface for maritime and other types of transport. As a result of intermodality and the vertical integration of companies in this sector, new management technology has been introduced which has changed the way they are run, as well as the legal status of the bodies responsible for running them. Today, ports are also facing increased competition and those that offer an inferior service are being marginalized.

Ports are also the interface for maritime transport and other sectors of the economy. The efficiency of local ports can have a considerable influence on the economies of coastal regions, which largely depend on the maritime industries. Where islands are concerned, ports provide a vital link with the rest of the world for goods and persons. The ports also fulfil a similar need in peripheral regions where land-based transport lacks suitable infrastructures (32).

The Commission has outlined its policy on ports in its communication entitled The Development of Short Sea Shipping (33), which has been criticized by the European Parliament for dealing with the general issue of ports within the narrow confines of this communication (34).

The main aim is to make ports more efficient through interoperability, with labour legislation to optimize the use of infrastructures and operators and provide more competitive services. These objectives would be pursued through technological development in the port sector, adaptation of competition rules to the needs of ports - with particular attention to state aid - and through structural policies and the trans-European networks.

Competition rules require there to be transparency in port charges between ports. This directly affects maritime transport costs: the Commission recommends that charges should be commensurate with the services provided, which should be clearly specified together with the overall price. The communication concentrates on short sea shipping, which is most affected by port charges even though the ships used in this type of transport have a higher draught than ocean-going shipping. Linked to transparency in charges is transparency in state aid, intended to prevent one port from charging less than its competitors. At the same time, there has to be free and fair competition between the different operators in the port area to avoid the monopolies that the Court of Justice has declared to be incompatible with Articles 90 and 86 of the Treaty (35).

As regards the trans-European transport networks, not one of the 14 priority projects relates to ports. However, they are recognized as being part of the network in the Community guidelines (36), which lay down certain conditions relating to which projects of common interest must comply (37):

  • their purpose could be the provision of access by sea or river to ports, and/or internal and transport infrastructures inside the port area and linked to other elements of the network;
  • their aim will be to make transhipment easier, to reduce traffic congestion on land and also the external costs generated by European transport; to strengthen economic and social cohesion, particularly by means of links with peripheral regions and islands; and to provide permanent access to the Baltic ports which, being situated at 60 degrees north, are generally blocked by ice during the winter;
  • additional aims will be to integrate traffic either in a transport network or a multimodal chain, or to develop non-polluting means of transport.

8. Employment

In the maritime transport sector, jobs have traditionally been protected by a national quota system for crews on ships listed in the nautical register of a given country. This means that the country of registration must reserve a certain number of jobs for its own seafarers (38). However, those countries with open registers do not, in general, fix "national quotas". When ships transfer to these flags, therefore, the jobs of seafarers of the country transferred from are adversely affected. Unfortunately, it is not only employment that is threatened. The practice also leads to social dumping and less well qualified crews, since open registers recruit those willing to work for lower pay and levels of social security, which distorts competition. Training standards are also laxer than those laid down in the international conventions, and this adversely affects safety and the environment.

The resultant fall in the number of jobs in the traditional seafaring countries means that young people are no longer interested in working in this sector. There is thus an erosion of maritime culture and, along with it, of technical know-how and knowledge of the sea. If countries are to develop effective maritime economic policies, such attributes need to be widely available in coastal regions.

There is consequently a shortage of maritime personnel, particularly in the industrialized countries, but the same situation could spread to other countries in the future. This is especially worrying when we consider that technological progress and a growing demand for a means of transport that is both safe and environmentally friendly are increasing the need for better qualified personnel.

This brings us to yet another link, this time between maritime transport policy and public policy on training. Seafarers fall into categories, according to occupation. In some instances, technical know-how may be required which cannot be used in other sectors of production, for example the duties performed by deckhands; others use the same technology as other sectors, such as for operating machinery. In both cases, training needs to be carried out in establishments designed specifically for seafarers. This is obvious in the case of deckhands, but it is equally important for other jobs carried out under the very particular conditions associated with the sea and navigation. A high level of training for seafarers is therefore crucial to the whole sector. Without real employment prospects, however, it would be of no use. Well-trained personnel are also essential to the existence of a competitive merchant fleet. Nevertheless, its competitiveness cannot be on the basis of low rates/poor service (39), but rather of optimizing rates for a high-quality service which is in keeping with the principles of a fair transport policy.