., f =< .. ' " ':" ~Y:"(i' , E-221 67150 This report is not to be published nor may it be quoted. as representing the Bank's views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT THE SmpPING ACCOUNT IN THE WORLD BALANCE OF PAYMENTS May 27, 1952 Economic Department Prepared by: Grace W. Finne CON T E N.T S Pa~e 1. Summ&£l and'Conclusions 1 II. Discuss1onsof ~ t. . > Sources and Estimates 4 III. The~lorld ShiP2ing Account in tae Balance of P.a~Ilt8 , ' . • . $ 6 1 .. World Account 19J.9-l9>l. 6 2. Gross Freight Receipts and payments 1949 and 1950, by Countries 6 3. Shipping Receipts from Vessels Registered under Foreign Flags 7 4- Gross Freight Receipts and P~nts by Areas 8 5. Port Disbursements 8 IV. ~ac~o:rsinflueneirw the Shipping,Accountin~he' Balance ot. P~ents . ., 10 1. The Supply ot World Tonnage 10 2. The Supply of National Tonnage 11 ). COmposition ot Fleet 12 4. Demand tor dry...eargo shipping 12 5. Demand for Petroleum and Petroleum Products 13 6. Type and Length of Vessel Employment 14 7. Freight Rates 1.5 8. The Outlook for Freight Rates 19 9. The Cost of Ship Operation 19 ~O. The cost of Port Disbursements 20 v. Statistical ,Appendix *) 22 List of Tables 2.3 *) Statistical Appendix is not included in basic study, but is available on request I. SUMMaRY AND CONCLUSIONS The bulk of international trade is transported by sea.. About 65% of the world shipping services are provided by the merchant fleets of the U.K. J the U.~. and Norway. These countries,as well as a few others J have merchant fleets well in excess of the requirements of their foreign trade and therefore, enjoy a net surplus on ocean freight payments. The importance of the shipping account in the balance of payments of a countr,y depends on the relation of the shipping account to the value of ~orts and imports and also J in the postwar period, on the balance bet\'leen hard and soft currencies. For countries like the U.K. and Norway" the net receipts from shipping are of great importance in bridging the gap between the value of ex- ports and imports. Most countries in the world run a net deficit on the international ship~ ping a ccount; some" like France and Italy, despite a considerable national ton- nage. Europe and North America have a surplus on shipping account" while the rest of the world has a deficit on international shipping services. The rela- tion between gross receipts of the domestic merchant fleet from international shipping services, and freight payments to foreign vessels, is modified by the amount of port disbursements paid out by the domestic fleets in foreign ports ana received by national ports from foreign vessels. In gross shipping receipts or payments, we include liner freights, charter hire (voyage, tirne- and bareboat charters), as well as foreign exchange pas- senger fares. Freight rates are determined basically by the relation of supply and demand. This is particularly true of short-term rates, but long-term rates are also influenced over a period of time. Estimates based on data submitted to the International Monetary Fund show that international freight payments were at a level of ~).7 billion in 1949, and $3.5 billion in 1950. Vie estimate the 1951 gross freight payments at $5.5 billion. This reflects an estimated average increase in freight rates of 50% for dry-cargo vessels and 30~ for tankers, as well as an estimated 6.5% in~ crease in the volume of world dry-cargo trade, and 12% in the volume of oil trade. Som~lhat more than of the $2 billion estimated increase in shipping payments in 1951 was probably paid by Europe and North America, and somewhat less than half by the rest of the world. The volume of world trade increased an estimated 22% in 1948-1951 .. while world oil demand increased about 27%. The volume of world trade is estimated to increase about 12% in 1952-1956, and the volume of oil demand by about 20%. By the end of 1951, the oceangoing world fleet was 79 million gross tons J of which 18.5 million GRT were tanker's and 60.5 million Q"ftT were dry...cargo vessels and passenger vessels. The active world f~eet was about 70 million Q1tT because of the wi thdravlal of about 9 million GRT of dry-cargo vessels in the U.S. Reserve Fleet. - 2 - Total world fleet increased by 10.2% from December 31, 1948 to December 31" 1951.., while the tanker fleet increased by 24%. The total world fleet of oceangoing vessels is estimated to reach 90 million gross tons in 1956" while the active merchant fleet may be about 75 million gross tons. About 65% of the world dry-cargo fleet and of the world tanker fleet are engaged on a long-term basis. The freight rates for tonnage in long-term em- ployment (liner rates and long-term tanker charters) were rather steady during 1948 through 1950. In 1951, increases in liner rates from 10% to 25% were announced.., while long-term time charter rates for tankers increased about 20%. About 25% of the world dry-cargo fleet and 10% of the tanker fleet are em- ployed on a short-term basis, either on voyage charter or timecharter. In 1949, short-term dry-cargo rates (voyage and timecharter) declined somewhat below the average 1948 level. A rather dull market continued during the first half of 1950" but a boost in rates lVas experienced in the fall be- cause of the impact of the Korean war and defense reqUirements, SO that the average rates for 1950 were close to the 1949 level. In 195.1" rates increased tremendously" reaching a postwar high in November. The average voyage charter rate was 108% and average timecharter rates were 155.6% above the 1950 level. Short-term tanker voyage charter rates increased rapidly in the fall of 1950 and in 1951. The 1951 level (average of dollar and sterling fixtures) was 100% above the 1950 level. The remainder of the world fleet" about 10% of the dr,y-cargo fleet, and about 25% of the tanker fleet, is employed on an intermediate term basis. The charter rates for these vessels lie between the short....term and the long-term rates. Port disbursements are the most important foreign exchange operating costs. In port disbursements" we include stevedoring, port fees J bunkering, supplies and repairs. Port disbursements have been estimated in 1949 at $1.3 billion~ in 1950 at ~1.2 billion, and in 1951 at $1.$ billion. Port disburse- ments have been estimated on a basis of an average of 40% of gross income for dry-cargo vessels and 25% of the tanker gross receiJ;t s in 1949 and 1950. The 1951 port disbursements are based on the 1950 level, reflecting an estimated 12~ increase in port costs, a 6.5% increase in dr,y-cargo trade and a 12% in- crease in the volume of petroleum trade above the 1950 level. The 1951 increases in port disbursements are mainly due to the increased cost of oil bunkers and of cargo handling. The estimated increase in the cost of port disbursements was thus less than the freight increase, even of long- term shipping rates. The cost of shipping services as a percentage part of the OIF-cost of irr~ortsor as part of the sales price to the consumer, varies according to the intrinsic value of the commodity, the ruling levels of freight rates, and the distance carried. - 3- Business cycles are historically reflected in the world shipping market in an accelerated way •. If a general recess in world trade should occur, the decline in shipping receipts and payments is thus likely to be more marked than the decline in world trade. Indications are that 1951 was a peak year in regard to shipping receipts and payments on a world basis, as well as ship9ings earnings by the principal maritime nations. The outlook for tanker employment seems favorab+e for 1952- 1954, with prospects of sustained activities in 1954-1956. The liner dry-cargo market will probably hold firm during 1952-1956. The tramp ship market will probably weaken substantially until enough tonnage is withdrawn from active service to establish a new balance with the envisaged subtracted demand, par- ticularly in coal shipments. - 4- II. DISCUSSIONS OF SOURCES AND ESTIMATES ; The shipping account in the World Balance of Payments for 1949 and 1950 as discussed in this paper J is based on data from the International Monetary Fund and on the writerts estimates where such data are lacking (Tables l-A.. l-B" l-C, 2, 2-B, .3 and 3-B) ~ The 1951 account is wholly estimated (Table 4). The IlliiF receives data on international shipping transactions from member countries in answer to a questionaire (1) .mose main features are listed below: Receipts Payments A. Receipts by Domestic Vessels C. Payments to Foreign Vessels on account of: on account of:. € ; 1. Gross freight on exports and 1. Gros s freight on imports •. cross trades. 2. Receipts from timecharters. 2. Payments for timecharters. 3. Passenger fares from foreign ~. Passenger fares paid by nationals on passengers. board foreign ships. B. Port Disbursements from Ships D. Port Disbursements by Domestic Ships in national Ports: in foreiSE Ports: NOTE A and C: The gross freight (A-l and C-l) is meant to include gross liner freights as well as voyage charters and bareboat charters. The amounts stated under A-1 are, on a world basis, the counterpart to the amounts stated under C-1. The same is the case with A-2 and C-2, ~~3 and C-3. Band D: Port disbursements include: port dues and fees, bunker fuel J stevedoring;-ship I s stores, repairs, etc. The a;"D.ounts stated under "Btl and liD" should lo~ically equal each·)otlilst'. Coastal and domestic shipping transactions are excluded, although some countries do not separate international. and domestic shipping transactions. The c~rencies most generally used in international shiP9ing are sterling and dollars. Some countries, like the U.S.S.R., China and several smaller, under- developed countries, do not submit any data at all. Of the reporting coun- triew, very few submit complete data on the shipping account. A number of countries - in particular in South America" Africa and Asia - do not separate freights paid on imports from the delivery price of imports (CIF-price). In such cases, the freight has been estimated in this paper at an average of 12% of the CIF-price of imports (Percentages by trade routes are given in Table 2-G). (1) I.M.F. BalanCe of Payments Manual J January 1950, Table V. Certain changes in the IlVIF formula have been suggested. - 5- Canada and Belgi wn do not clearly separate international ocean shipping from international inland waterway shipping, and no breakdown has been esti- mated. Many co~tries have not yet sent in information about 1950. In these instances, estimates based on 1949 figures have been used. In the United Kingdom, shipping account tanker receipts and payments are excluded. Estimates have been submitted on the basis of the size of her tanker tonnage and by comparison with the earnings of the Norwegian tanker fleet. The I.M.F. data are not broken down between the receipts and payments on account of dry-cargo and tanker services. On a world basis, dry~cargo gross receipts 1949 and 1950 have been estimated in this study as 70~ and tanker receipts as 30~ of total receipts, on the basis that dry-cargo ton- nage is about 75~ of the world fleet and tanker tonnage about 25%, assuming somewhat higher earnings per ton for tankers. In regard to port disbursemen,ts, receipts are lacking for most ports in South America, Africa and Asia. Total receipts of these areas are, there~ fore, somewhat understated, and their net payments consequently somewhat over- stated. The exclusion of payments' of port disbursements for these areas is not very important, since they do not possess any extensive merchant tonnage. Also for ~urope, the port disbursement account is far from complete~ The U.K., France, ltaly and Sweden e.g. submi,t neither port disbursements receipts nor payments. The amounts of port disbursements received and paid on a world- wide basis are, therefore, grossly understated.' iive have attempted to adjust the port disbursement account (port dis- bursements received and paid) by estimating that port disb~ements for dry- cargo liner vessels in 1949 and 1951 were about 48% of gross freights (see Tables l.3-A and 13-B) and for dry-cargo bulk carriers about 25%. Assuming 65% - 351b distribution as between liners and bulk car~iers" the weighted average port disbursement as per cent of groes freight is about 40%.; For tanker vessels" 2S" of gross voyage income is assumed to represent the mag- nitude of port disbursements. The 1951 port disbursements have been estimated on basis of the 1950 port diebursements, taking into account an estimated increase of 12% in the cost of port disbursements l a 6.5% increase in the volume of dry-cargo trade and a 12~ increase in the volume of petroleum trade. Because of the steep increase in gross freights in 1951, it would not have been feasible to apply the same percentage of port disbursements related to gross freights in 1951 as in 1949 and 1950. klthough the available balance of payme~ts data are incomplete, they may be regarded as indicative of the relative magnitude of the world ship- ping account and the relative position of areas and countries. - 6 - III. , JORlD SHIPPING ACCOUNT IN TH.E BALANCE OF PAYll:iENTS TF.E -V' 1. -~;orld account 1949-1951 On a world basis, the estimated bill for shipping freights was $,3.7 billion in 1949, ;;~,3.5 billion in 19.9:) and ft5.5 billion in 1951 (Tables 2-B, 3-B and 4). The year 1951 was a year of exceptionally high freight rate levels. de believe that the gross freights (received or paid) will level off in 1952, perhaps dropping to approximately ~4 billion. It could well b~ that the 1951 gross shipping receipts may not be equalled Or surpassed for several years to come. ,vhen freights again atain a level like that of 1951, it will probably be due to a larger volume of world trade rather than to any boost in freight rates similar to the 1951 perform~nce, unless there is a threat of another war, 2. Gross Freight Recei2ts and Pa~enta 1949 ,and 1950 bZ Countries The nation with the largest shippings earnings from ~ts national fleet is the United Kingdom. In 1949, freight receipts exceeded freight payments by an estimated ~383 million and in 1950 by $$31 million. Of the 1949 total, receipts from dry-cargo and passenger shipping, after deducting foreign pay- ments, were ~233 million, with an estimated 9150 million from tanker ship- ping (Table 2). In 195b, the U.K.'s comparable surplus of receipts from dry-cargo and passenger shipping were ~311 million, while net tanker receipts have been es- timated at ~220 million (Table 3). The importance of shipping in the U.K. balance of payments may be seen by comparing the above estimated net receipt s with the deriei t between imports and e~orts, amounting to the equivalent of ,jlJ204 million in 1949 and ~983 million in 1950. NOI"i'ray came second to the IT .K, in surplus foreign exchapge earnings from her merchant fleet. After deducting freights paid to foreign vesse1s, Norway had a freight income of $.333.4 million in 1949 and;~308 • .5 million in 1950. Her foreign trade deficit by comparison, was $867 million in 1949 and ~108.5 million in 1950. Other European nations with shipping receipts exceeding freight pay- ments were: the Netherlands" Sweden and Denmark~ France" Italy and Greece, despite considerable gross income from their fleets, recorded a net debit balance (Tables l-A and I-B). In the U.S., the excess of freight receipts from U.S. vessels over pay- ments to foreign flag vessels was ~~369 million in 1949, as against only ~53.5 million ~n 19$0 (Tables 1, 2 and 3). This decline may be accounted for - 7- Vartly because of the drop in U.S. exports, partly because of an increase in the transfer of U.S. tankers to Panamanian flag" and partly because of the relati vely low level of freight rates, rendering the U.S .. merchant marine in an unfavorable competitive position for foreign freights, because U.S. operatirg costs are the highest in the world. Canada had a net surplus of ~t42 million in 1949 and an estimated '~;40 million in 1950. These figures include" however, a contingent of earnings from inland waterways. In Asia, India was the largest net debit nation with net paymerts of an estimated J216.l million in 1949 and ~132.6 in 1950 (Tables 2 and 3). The drop in freight payments between 1949 and 1950 is due to a decline in imports, following the imposition of foreign exchange regulations. 3. Snippin~ Receipts from Vessels * ; Registered • under Foreign Flags Only the receipts from the national merchant fleet appear in the balance of payments of a country. Shipping receipts" however, may also accrue from earnings of vessels ~qned by nationals but registered under foreign flags. In the postwar period, a sizable amount of tonnage oNned by U.S. or European interests has been registered under Panamanian, Honduran or Liberian flags, in order to avoid national regulations increasing operating costs or restrictirg the disposition of foreign exchange earnings. On a world basis, the size of the shipping receipts from vessels t;h~iL :.. - registered, is held to equal the difference between the total recorded receipts from national fleets and the total recorded payments of gross freights. Such difference amounted to ~538 million in 1949 and ~;,617 million in 1950 (Table I-C). Since most of these llmissingll receipts are earned by vessels under the Panamanian flag, we have apportioned these receipts according to the assumed flm'''' of Panamanian shiP'£)ings earnings (Table l-C). 'We estimate that in 1949 U.S. nationals received about $269.~ million from U.S.-owned P~amanian flag vessels,t and that European nationals deposited in the U.S. about ~134.6 million of their receipts from Panamanian vessels, making total shippings earnings accruing to accounts in the U.S. from Pana- manian ships about $403.8 million. For 1950, we estimate a total of ,~)463 million to flow to the U.S. The part of Panamanian shipr;ings earnings to benefit the European Balance Of Pay- ments has been estimated at :;H34.6 million in 1949 and ~154.3 million in 1950. We have not attempted to distribute the part of the ~uropean shippings earnings deposited to £uropean accounts on a country basis. It is not impossible that a country like Greece would be a net surplu$ nation on shipping account if earnings by Greek nationals from Panamanian nag vessels v/ere added to the earnings of the Greek flag fleet. - 8- 4. Gross Freight Re ceip1;.s fUld P~en~s bY; iAre?~ The foll~fing table Sh~IS gross receipts and payments by areas in 1949 and 1950. Gross receipts are adjusted to include the "missing" receipts from Panamanian vessels as discussed above. (For details and methods of adjust- ments and estimates see Tables I-A, l~B, l-C, 2, 2-B, 3 and 3-B of the Statis- tical b-1Jpendix). (in millions of dollars) 1 9 4 9 1 9 5 0 Recorded & Recorded & Adjusted estimated Adjusted esti;nated freight freight Balance freight freight Balance receipt~_ • ..E~j'1lients receipts r:a:Q!!ents North America 1,318.8 504.0 to 814.8 1,098'.$ 542.0 to 556.5 Central and South .America 126.8 526.2 - 399.4 97.8 523 •.3 - 425.5 Europe 2,182.7 1,623.8 1" 558.9 2,294.2 1,621.5 f' 612.7 Africa 57.0 238.1 - 181.1 41.1 214.2 - 173.1 Asia 2.0 607.7 - 605.7 5.8 414.7 ... 408.9 Australia and New Zealand 4.0 191.5 - 187.5 2.6 224.3 - 221.7 TOTAL 'ViORLD : 3,691.3 3,691.3 0 3,540.0 3,540.0 0 It irdll be seen, that North America and Europe were the only areas enjoying a surplus balance between freight receipts and freight,payments in 1949 and in 1950~ Asia had the largest deficit in 1949, followed by Latin- America.. while the reverse was true in 1950. ~'e have estimated that international freight receipts or payments will be about ~~3. 7 billion in 1951 (Table 4). v~e nave not made any breakd01t'm of this estimate as to areas, but it may be ass~~ed that the 1951 shipping account follows the pattern of 1949 and 1950, with Europe and North America as surplus and the rest of the world as deficit areas in regard to shipping service. Of the ~2 billion increase in the 1951 world freight bill, somEWlhat more than half is estimated to have been paid by the industrialized areas of the 'world (Europe and North America) ~ and somewhat less than half by the pri- mary producing countries (rest of the world), based on the relative increase in foreign trade (Table 7-B). 5. Port Disbursements The balance of gross freight receipts and p~ents between areas and countries is modified by the amounts of port ·.d.isbursements paid by national fleets in foreign ports and received by domestic ports from foreign vessels. - 9 - The effect of port disbursements on the net freight surplus of Europe and North America" is thus to reduce the favorable balance, and for Latin America, Africa and Asia to reduce the negative balance accrued from ship- ping freights. In ports where oil and coal bunkers, ships supplies, etc. have to be imported, the foreign exchange receipts from port disbursements are partly income fro~ entrepot trade. The most important sources of port revenue, hovfever, are generally the stevedoring charges and the port fees and dues which represent net foreign exchange earnings when levied from foreign ships., In our opinion, both port receipts and port payments, recorded at $800 and {~.543 million in 1949 and :s6$1 and 'w560 million in 1950 respectively, are grossly understated. -de have estimated port disbursements (receipts or pay- ments) of about;;il,,)ll million in 1949, about ~1,147 million in 1950 and ;1¥1 .. 493 million in 1951 (Tables 2-B" 3-B and 4) .. The important cut in the gross shipping receipts by port disbursements may be exemplified by NOI'"'v'ray. In 1949: Norway thus paid ~~223 million in port disbur~ements compared with ;;;;351 million gross freight receipts. In 1950 J port disbursements by No~~egian vessels in foreign ports were ~195 million, compared with gross receipts of $,326 million dollars. The relative decline in port payments in 19$0 may perhaps be due to a larger proportion of the Norvvegian fleet being on time charter in 1950 then in 1949" On timecharter port disbursements are paid by the charterer. The receipts by Norwegian ports were unir~ortant a~ counter balance to freight payments to foreign ships. The Netherlands illustr'lte hOW" port earnings influence the overall posi tion on shipping account. In 1949 J port receipts totalled ;r;40 million, compared with ~1~S6 million paid in gross freights to foreign ships and $119 million received by the Dutch merchant marine (Table 2). No data are avail- able as to the amounts disbursed by Dutch vessels in foreign portse Port disbursements are the most important foreign exchange costs off- setting gross freight receipts. However~ a sizable proportion of seamen's wages are also frequently paid in foreign currencies. It would J therefore", not be accurate to determine a country's net foreign exchange .position on shippings account by vi~¥ing only the balance of gross freights and charter hire received and paid as well as of port receipts and payments. -10 - IV. FACTORS INFLUENCING THE SHIPPING ACCOUNT IN THE BALANCE OF PAYMENTS 4 I The shipping aecount in the balance of payments of a country is deter- mined basically by the supply of national tonnage and the ruling levels of freight rates. The level of freight rates reflects the relation between the supply and demand far tonnage, with some allowance for the cost Of providing shipping services. h.2he SUEI'll of World Tonnage The oceangOing merchant f~eet of the world reached 79 million gross ton (111 million DWT) by December 31, 1951 (Table 5). Dr,r-cargo tonnage amounted to 60.3 million gross tons and tanker tonnage to 18.5 million gross tons. A distinction must be made between the total supply of world tonnage and the active oceangoing fleet. r,he active world merchant fleet at the end of 1951 stood at about 70 million GRT, of which about 51.5 millionGRT were dry-cargo ships, and 16.5 million GRT were tankers. About 9 million GRT of dry-cargo vessels were laid up in the U.S. Reserve Fleet (October 31 1951) • In the postwar period, the tonnage of oceangOing, war~built vessels in the V.S. Reserve Fleet has fluctuated from about 7 million gross tons to about 13 million gross tons, vessels being laid up in times of declining freight rates and reactivated in times of increasing freight rates. The Reserve fleet thus has a stabilizing effect on the fr~ight market. The total world fleet increased 2.9% in 1949; 2.8% in 1950 and 4.1% in 195.1, the greatest increase being in tanker tonnage (Table 5). In 1949 hO'l'rever, the active oceangoing tonnage declined in spite of the additions through new construction, because of heavy withdrawals of tonnage to the U.S. Reserve Fleet. In 1950 and 1951, the active fleet was implement by a large scale reactivization of Reserve Fleet vessels as well as by new con- structiQJ;'l • . Aa of January 1952, 14.3 million gross' tons of oceangoing ships were under construction or on order, of which 8 million gross ton were tankers (Table 5-C). If steel supplie,s for ship construction are not ~verely re- duced as compared with 1950 and 1951, the shipyards of the world will probably be able to maintain the 1950.. 51 leve:;!. of output of about 1.5 mil- lion gross tons of vessels launched annually. (Table 5-B). It would then require about four year s to complete the vessels n~'1 under construction or on order. In order to estimate the possible withdrawals from the active merchant fleet 1952-1956, we make the follml\fing assumptions.: a) that there will be no major war, nor severe business depression; b) that the level of liner freight rates will be relatively stable; c) that tramp rates may approxlmate1949-50 leveJ.s; d) that tanker rates -«ill be sustained in 1952-54, with some leve:;!.ing off in 1954...56; e) that the cost of constrij.ction and operating costs will remain at about the current levels .• - 11 - On these assumptions we estimate a withdrawal of ahout 4 million tons of dry-cargo vessels to the U.S. Reserve Fleet, which would then reach about 13 million gross tons. About 12 million GRT of the active dry-cargo vessels and 1.4 million GRT of tankers were more than 25 years old by 1951. iie estimate that about 4.5 million GRT of dry-cargo vessels and about 1 million GRT of tankers of this obsolete tonnage will be withdrawn from active service by be- ing laid up, or scrapped, in 1952-1956. Marine losses may amount to 0.3 mil- lion GRT for the four year period, Total estimated withdrawals from the active merchant fleet would thus be about 9.8 million GRT~ and the total net increase about 4.5 million GRT. Accordingly: the active mercnant fleet by 1956 woul~ be about 74.5 million GRT. The tanker fleet would be a~out 25.5 million gross tons, and the dry- cargo fleet about 49 million GRT, i.e. the active rurJ-cargo fleet would de- cline by about 1.5 million GRT and the active tanker fleet vmuld increase by 7 million ORT compared with the status of the active fleet by the end of 1951. The total oceangoing fleet by 1956 may be about 90 million GRT assuming that 3 million GRT of the laid up vessels will be scrapped. 2. The Suppl~: of National Tonna&e In 1951~ the United States~ United Kingdom and Norway cwmed 64% of the world's oceangoing merchant fleet. Together with Panama, the Netherlands J France, It~, Sweden, U.S.S.R. and Greece, these ten countries accounted for 85/0 of the registered gross tonnage of the world (Tables 2, 3, ;; and 5-E). Panama cannot be termed a shipping nation, since the tonnage registered under her flag is almost entirely m,ned and operated by nations of other countries (Table 5-D). Many smaller countries which had little or no tonnage prior to World War II, are pursuing programs for developing a merchant fleet (e.g. Co- lumbia, Costa Rica, Ecuador, Guatemala, Iceland, India, Indonesia, Iran, Ire- land, Israel, Korea, Liberia, Pakistan, Switzerland and S~~ia (1). These plans are not expected to change materially during the next few years or to affect the current relative distribution of wor~d to~~ge. The main criterion as to whether a nation has a surplus or a deficit on the ocean transport account, is the relation of the available national de~and for tonnage. In spite of considerable national to~~age, countries like ?rsnce and Italy are on balance net shipping deficit nations, because of the large national demand for shipping. Norway is a typical example of a country with tonnage far in excess of her foreign trade requirements: 85/0 of her fleet is engaged in !!cross trade I! , i.e. trade between foreign ports. Part of Norv.ayTs imports, financed by U.S. loans or grants, are carried in U.S. vessels as required by U.S.legislation. , i (1) Source: - New York Times, January 15" 1952. , .. - 12 - 3. CQ320si tiC'll of the Fleet An important factor determining the total earning power of a nation's fleet is the bre~~down into dry.cargo liners, bulk carriers, passenger ves- sels, tankers and special type vessels, such as refrigerated vessels, heavy lift vessels, whaling taru{ers, etc. These different types of ships cater to different market.. The composition of the fleet varies from time to time and from country to country. Each of the above categories may be further divided into major groups according to size. Equally important is the quality of the fleet as measured by the number of old and new vessels, slow and fast ships, etc. Although the physical condition of a national merchant fleet greatly influences its earning power, the value of experienced management and seamanship cannot be overem- phasized. The lItoolsi: in the shipping industry are internationally made and traded, but the way a ship is op9 rated is often decisive in this extremely competitive business. 4•• I\:mand for ~rY7(~£.rRo ShiEP~ng The demand for shipping services is deterrr~ned by the level of ocean- born world trade and of ocean travels. World dry-cargo trade, ta~en as the total amount of seaborretraffic loaded into world ports, was estimated by the U.I~. at about 490 million metric tons in 1948, 510 million tons in 1949, and 5,5:) million tons in 1950 ('I'able 7). An increase of 6.5% has been esti- mated by the 1.M.F. for 1951 (Table 7-B), which would bring the 1951 level of world trade to about 606 million tons. The general increase in world oceanborne trade during 1949, 1950 and 1951 above the increase in tonnage supply, implied a better utilization of shipping space. The extent to which a vessel. f s cargo capacity is utilized, varies considerablY however from trade to trade, between inbound and out- bound movements, and according to seasonal fluctuations. The demand for shipping is very differentiated, e.g. 1 the demand for luxury travelling accommodations and. the demand £ or moving coal in bulk. The geographical distribution of the demand for ocean serv~ces plays an important part in the employment of ships. Using 1948 as the basis, we find that in 1950 the dry-cargo loaded in European ports increased bv h2~, in 1\.sia by U%I in Africa by 21% and in Oceania by 7';;, while in the 1rorth American ports the tonnage of goods loaded in foreign trade ieclined by 19% Crable 7). (1) We believe that the demand for transporting general merchandise, Le. the demand for liner cargo, will increase an average annual rate of about 2.5% to 3% in the 1952-1956 period. We enVisage a severe drop in the demand for bulk cargoes~ compared with 1951, maip~y beoause of a falling orf in U.S. coal exports to Europe, but also because of the drive for greater food production in many countries would diminish the demand for overseas grain. Ore shipments on the other hand may show some increases above the 1951 level. (1) U.N. Statistical Office. - 13 - $. Petrol~um and Petroleum Products Between 1948 and the end of 1951, world oil demand increased about 275~. The 1951 demand for oil was about 12% over the 1950 level, estimated on basis of mid-1951 figures (Table 8). The demand for tanker tonnage as indicated by the demand for oil in- creased at a higher rate during 1948-1951 than the increase in the supply of tankers by new construction, and at a higher rate than the increases in pro- duction because of the added importance of ~dddle Eastern oil production" necessitating a long haul of oil by tankers. The demand for oil transportation is seasonal: the fall and the winte~ are the peak seasons, while late spring and summer months are the off-seasons. The seasonal pattern reflects the demand for fuel oil. In 1950, 47% of the world tanker fleet hauled oil and oil products from the Persian Gulf as against 23% engaged in the transport from the Caribbean (1). By point of destination~ 33% of the world tanker fleet hauied oil for U.S. ports and 38~ for European ports. The brisk demand for tankers was evident in 1951 when some 300 tankers controlled by the Anglo-Iranian subsidiar.r" the British Tanker Company, were easily absorbed on other routes when oil ceased to flow from Abadan and 5an- durmashu (2). Tankers can be divided into "d1rtyll tankers" used to transport crude oil" and "clean" tan-kers" for the transport of refined oil It is be- lieved that most of the oil tanKer fleet is engaged in the transport of crude oi:l.. Whaling tankers are not part of the regular tanker fleet: they are used to carry whale oii during the whaling season and are generally laid up and overhauled during the off-season from about April to December. T4e demand for t~~ers, if paralleled to the estimated increase in crude oil production in 1952-1956, may grow at an average annual rate of about 4.5% to 5%, or about 20% for the 1952-56 period 0). Calculations hav~ been made that the demand for tankers and supply of tanker tonnage will be in equ.ilibrium by 1954, assuming no scrapping is done (4). According to our estimate of 1 million gross tons of taru~e;:,s laid up or scrapped, employment for the active tanker fleet should pe rather assured up to 1956. The impact on the demand for tankers by pipe line construction makes ,it more difficult to obtain a view of the future demand for tapj{ers. , i (1) S,?-n Oil Company; "Analysis of V{or1d Tank Ship Fleets!!, December 1951, by B. Saurino. (2) British Information Service, December 20, 1951. (3) The Oil and Gas .,Journal" December 1951, p~e 280" liThe World Tank Ship FieetU , b~ B. Saurino. (4) Ibid. - 14 - 6" !¥pe and Length of Vessel ~mplo~ent The type of vessel employed and its duration depend on the requirements of international trade, the cost of ship operation and the level of short-term freight rat~s. Long-term employment of am.ps as discussed in this paper has been taken to imply liner services, and charters stipulating employment for t,i'iO years or more. Short-term employment has been taken to include all charters for a duration of less than three months, and intermediatE;! term employment as char- ters between three months and two years. In the period after World War 11 a trend towards long-term employment of vessels has been evident. The increased importance of liner ser~nce6 as against dry-cargo tramp serVices, reflects both the increased flO'll of maO\l"- factured goods in international trade" and the enhanced regularity of 'world trade movements, requiring scheduled shipping services. In the tanker market, long-term employment through long-term time charter or direct ovmership of tankers by the large oil companies, reflects the re- quirements of the companies for assured deliveries. In prinCiple" the oil companies try to meet their reguJa r shipping requirements by a fleet O"fmed or operated on long-term contracts and fill their marginal requ~rements by short- term chartering. The increased costaof ship construction~ particularly noticeable in the postwar periodl also influence ship owners to place a vessel in long~term em- ployment for a more secure return on t he investment. This is particularly true of newly constructed tankers, where a long-term charter frequently forms an integral part of the financing of the vessel. In times of higher freight rates, the part of the active world tonnage on short... term employment increases. Thil;! is due in part to the transfer of vessels from intermediate term orlon~-term employment to short-term contracts as their old contracts expire, and to the reactivation of laid-up vessels to take advantage of the market. Because of the fluctuations of tonnage between the various ~es and length of employments" it is difficult to ascertain the percentage distribution of the active world merchant fleet in this respect. We estimate in this paper, that in the 1949-1951 period, the average proportion of' the active world fleet engaged in long-term services was 65%, applied to dr/-cargo as well as tanker tonnage. We further estimate that about 25% of the dry-cargo fleet was em- ployed on a short-term basis, and that the remainder tonnage, 10% of the dry- cargo fleet, and 25% of the tanker fleet, was engaged on an intermediate term basis. The percentage of the·various national fleets employed in short-term and long-tert+! engagements vary considerablY from one country to another. In Nor- way (as of December 3l~ 1950) only about 18.4% ot the dry,-cargo fleet vias contracted for a short-term basis, with another 2.J% on an intermediat.} term basis" while liners were 5?% and long-term timecharters were 27.2% of the dry-cargo fleet. - 15 - Of the tanker fleet, 11.5% was on short-term voyage charter, 73.8% on long-term time charter and l4.7~ on intermediate term consecutive voyage charter (1). In the United Kingdom, mid-l950 tramp tonnage made up 27% of the dry- cargo fleet, operating in foreign ports, while liners constituted 73% (2). In the Netherlands, only 13% of the dry-cargo fleet operates in tramp trade, as against 87% employed in liner services (as of December 31, 1951(3). 7. Frei~ht Rates Freight rates may be divided into the following main categories: a) the free market rate for dry-cargo bulk carriers (tramps); b) the free market rate for tar~ers; c) the liner rates for dry-cargo and passenger vessels in regular service; d) the long-term charter rates for tankers; e) the inter-company voyage charter rates (tankers). Only categories (a) and (b) fluctuate from day to day a ccerding to the current supply and demand •. The liner rates (c), and the long-term tanker charter rates (d) react slowly to the general trend in the mark;et, as do the inter-company voyage charter rates(e), which are set to reflect the rate of two years timecharters. Consecutive voyage charters (dry-cargo and tanker) and medium-term timecharter constitute the borderline cases, the degree of response varying vdth the length of the charter. (a.) The Free Iv~arket Raye for Dry-Careo Bulk C~!iers (TrarnpsL Dry-cargo rates for tramps are either quoted on a voyage charter or a short-term timecharter basis. The voyage charter rate is quoted per ton of commodity freighted" the timecharter per 1)1 T of the ship. The main differenGe between the two types of charter parts, is that the charterer on a timecharter undertakes the expenses of fuel and regular port disbursements~ which are paid by the shipowner on a vqyage charter. The freight index for dry~cargo tonnage fixed on voyage charter stood at 105.5 by January 1948. (July-December 19h7 :: 100) (Table 9). It fell steadily during spring and summer, reaching a low of 8:1- in 0 ctober, but re- covereo to 88 by December. The upward trend continued in 19h9, rea(,ming 91.2 in May. The index declined during the next period to a low of 67.5 in Octo- ber, recovering again to 75~6 by December 1949. In the spring of 1950, the voyage charter rate index showed minor varia- tions of around 75~. In August, however" rates went up to 90 and the inc~ease continued during the fall, with December closing at 121 (3). \ " (1) Norwegian Shipowners Association. (2) No data available as to u.k. tanker employment. Source: Chamber of Shipping of the U.K., Annual Report 195b-51, page 138. (J) Norwegian ShiEpini , . News, Freight Index. - l6 - The rise continued at an accelerated pace during the spring of 1951" reaching a height of 190.3 by June.. In July and August the index dropped to 176, recovering to a lev~l of 186 in September and October. In November, 1951 a new high of 192 was recorded. The average for 1951 was 176.7, as oompared with 84.9 in 1950# or an increase of 108%. In 1952, the index dropped to 167.9 in January, and to ~S5.8 :i,.n February, with indications of further declines, due mainly to the reductions in coal ~hipments from the U.S. to Europe. Short-term dry..cargo timeoharter rates displayed the same general trends during 1948 and 1949, although they were at a higher level than the voyage charter rates during 1948 (Table 9). The time charter index, on the other hand, dipped much lower than the voyage charter in 195'0, reaching a low of 64.2 by June 1950. The recovery started in July and continued during the fall at an increasing pace, with a remarkaole increase from 91.4 by November to 117.5 by December. Then" in 1951, timecharter rates outdistanced voyage rates~ increasing by leaps and bounds. From 147 in January 1951, they reached a height of 238 in June, dropping in July and August to a level of 208, then gaining 20% in Septem- ber and climbing to a peak of 249.5 in November. The average time charter rate in 1951 was 210.7 compared with a level of 18.6 in 1950, or an increase of l.55.6%. 'rhe relative cost of ocean freight as part of the CIF~cost of a bulk commodity varies according to the value of the cOlThllodity freighted. For coal :;Jhipped from the U.S. East Coast to Antwerp, e.g. the J anuar;;t 1952 freight rate aboard a U.S. v~ssel was $lO.50 per ton. The OIF"'price of coal in Antwerp was $22.50. The equivalent freight rate on grain was 2;13.50 with the OIF-price on grain at .£>75 per ton (1). As compared with consumer priees, freight rates generally constitute an amazingly low part. Of the price of Argentinean meat in the United KL~gdom" L~ the beginning of 1952, e.g. ocean charges were barely 5%, or about lid. per pOlli~d for a 6,000 nile trip in refrigerated holds (2). (b) Tanker Voyage Rates Tanker voyage charter rates are quoted in percentages above or below the ceiling rates which were in force during V{orld War II; U.S.M.C. dollar rate~ and the ivI.OS. sterling rates (Table 91 note 2), which are quoted per long ton of oil for the various routes. On the basis of USEC = 100" tanker rates for dollar voyage charters stood at 61 by September 1949, and recovered to 84.4 by December 1949 (Table 10). The rates dropped in January and oscillated in the lower siA~ies in the spring of 1950. In JUly, a 6% increase was noted" with a further 16% rise in August. The rates continued to shoot up1.vards during the rest of the year, closing at 210.6. A phenomenal rise of 53 points took place in Janua- ry, and a height of 278.1 ~as reached in Februarf,195l. A reverse came in March, with a drop to 261.1 1 foll~{ed by a dONITflard trend, which led to a l~( of about 130 during July and August. Rateg increased 18% in September, reaching 191.1 by October and 246.) in November (Table 10). (1) Souroe: M.S.A. (2) Example cited in Presidential address of 75th An.:r'lual lvieeting of U.K~Chamber or Shipping, liThe ShippinS. World", .March 1952. - 11 ... The sterling MOT tanker rates closely paralleled the dollar rates (see Table 10). The devaluation of the sterling in September 1949 had the effect of increasing the sterling rates by the amount of the depreciation. 'l'he impact of the Korean wa.r and the rearmament during the fall of 1950 is thus clearly noticeable on the rates in both the short-term dry.,..cargo and the tanker markets. Competitive bidding for tonnage as well as extraorainar""J features of the bulk markets, such as the British domestic coal shortage and the Indian grain shortage~ drove rates to much higher levels than could be expected from the standpoint of increased demand alone. In tanker rates~ the seasonal fluctuations are readily discernible with spring and summer being the slow seasons. If studied in detail~ both dry-cargo and tanker rates rapid- ly reflect the changes in trade caused by political or economic developments. i,::) Liner Freight Rates Liner freight rates are determined by the liner conferences. Most of the liner conferences in the world have their headquarters in Western Europe (U.K., Scandinavia, the Netherlands) or the U.S." spanning the globe with their routes of scheduled services. The liner rates are relatively steady: they respond only slow'ly to the ups and dO'lms of the tramp charter market or to changes in operating costs. In addition to the regular base rates, liner conferences may impose surcharges on movement~ to certain ports suffering from congestion, in order to compensate for lost time. Liner rates are co~­ prised of detailed schedules for a large variety of commodities. C8XgO is freighted either according to weight or measurement. Regllar shippers re~ ceive "contract rates ll , whiqh are generally about 10% below the "tariff rate". During 1948 there Were no general changes in dry~cargo liner rates. In 1949 also, rates were stable on the whole, although there were some rate increases, e.g. the U.S. Atlantic and Gulf, the Netherlands West Indies ~~d Venezuela Conference authorized a 15% increase as of I~ 2, 1949, and the U.S. Atlantic and Gulf/West Coast of South America Conference a 15% increase as of April 18, 1949. The devaluation of the sterling in September 1949 ::\..mplied a reduction in dollar terms of the sterling Conferenoe rates. Where rates are quoted in both sterling and dollars, tpe sterling r atas were increased by the amount of the devaluation, e.g. in the North Atlantic Passenger Cop1erences. In 1950~ liner rates were again generally stable~ although a."l upr,ard trend was noticeable by the end of the year. The Continent/U.S. Pa::!ific Conference thus increased their rate schedules by December 1, 1950, In 19~J most of the liner conferences announced general rate increases of about 10% to 15% as of January, February, 1IIarch and April. During the summer months, the liner rates seemed steady, and in September, October, No- vember and December a further round of increases took place, mostly of about 10%, bringing the total general increase in liner rates for 1951 to 20·-25%. Some of these conference~ announced the effective date of this round of in- creases to be January 1 .. 1952 (For a partial list of conferences stati::lg in- creases in 19511 see Table 11). - 18 - Passen~er lirer rates were generally steady in 1948-1951. The sterling fares were increased by the amount of the devaluation, where fares were quoted on a sterling-dollar basis. A postwar feature in passenger fares is the com- petition by airlines. (d) Long~tarm Tanker Rates '" ' . ! Long-term time charters for tankers vary from 2-13 years~ many being fixed on a 5-year basis. The rate is quoted per DliiT per month. Time cr..arter s for new construction are generally concluded as part of the financing of the new tanker, frequently one or tVIfO years before the scheduled deli very. Al- though.the influence of ruling voyage market conditions and the general out- look for short-term rates have a bearing. on the long-term charter fixtures, the long-term rates show very 81mV' movements. In 191+8" 1949 and 1950, five- year timecharters em new tankers of 12,600 m:T to 14,,500 D':VT were concluded at 18 shillings to 22 shillings per UNT (Table 12). In 1951, five-year charters were fixed at 23/6d. to 26/- per IT~T for tankers ranging in size from 13 ~ ,500 D',VT to 17.. 400 D\T. A five-year doll ar charter made in November 1951 for a tanker to be delivered by mid-1953, VIlas fixed a t '~3.50 per !)VfT (Table 12). Consecutive vayage charters for 3-5 years are generally fixed on MO'r- 1'1' USMC-rates with a !?tipulated minimum or ma..umum range. ~) The Inter-Company. ~anker. VOiage C~arter Rates A very illIPortant feature· ef the tanker market are the inter-company rates which the large oil companies charge for tanker services. Thes,e 1n- te:r:--.company rates are the transport charges which consti tllte a part of the calculations ef the delivery price for oil and eil products. Throu~h owner- ship, long-term and short-term charters, the big oil companies control about 90% of the world tanker fleet. The inter-company rates are made on a uniform basis by all the big oil companies and are reviewed every six months. These rates are cru.oulatE'd on the basis of the current rate for two-year timecharters spread on a voyage basis. The inter-company voyage rates thus differ from the free market voyage rate and from the charter hire paid to the shipowrers. The inter-company voyage rate from April 1951 t9 October 1951 was U$iJiC plus 2550 per long ton of oil. The effective rate from October 1951 to April 1952 was US1'lC plus 50% (1). . On 36 degree APr crude oil from the Persian Gulf, e.g. the winter 1952 inter-company freight rate ,was ~~17. 40 per long ton to the U.K. and'N est Europe. The FOB price of the oil was ,:lil.75 per barrel or :j~l.3. 2 7 per long ten" and the delivery price in the United Kingdem was:~30.67. The inter- company freight rate from the Persian Gulf to U.S. ports .. north of Hatteras" was $18.88 per long ton" making a. New York delivery price of ~32 .15 (2). (1) Source; Mutu~ Securitl A~ency. (2) About 75~ of the Middle Baet crude oil output goes to West Europe~ and about 25% to the U.S. - 19 .. Because of the differences displayed in long- and medium-term tanker fixtures, it is extremely difficult to arrive at an average rate in anyone year, even if only certain classes of tankers at specific time fixtures are selected~ In order to fit the tanker market into our general balance of pay- menta estimated for 1951, a rather arbitr~ average increase of 22% for all long-term and intermediate term fixtures was selected (Table 4). 8. The Outlook for Freight Rates I If our set of assumption!!> and estimates in regard to the activ'e world tonnage and the shipping demand are generally in the right order of magnitude, we anticipate the freight market to shmv the following main characteristics in the 1952-1956 period; a) relatively stable rates fOr liners (dry-cargo, passengers); b} Iisustained market for tanl\ers, but a leveling off of the short....term rates from the extraordinary high 1951 level; c) drop in dry-cargo bulk rates to a level similar to the 1949~1950 level or perhaps so~~what below. 9" The Cost of S,hiE OtJBratiol'f At a given freight rate, the extent of utilization of the ship's cargo space and the cost of ship's operation determine the extent to which foreign exchanges accrue to the national balance of payments and the profit or loss to the shipping company. Port disbursements constitute the largest foreign exchange operating costs. ?ort disbursements embrace port dues and fees" bunkers, stevedoring charges, ships I stores apd su~pJ.ies~ repairS J etc. SOIlle $hipping lines, however, calculate fuel and repairs separately. The cost of port disbursements varj considerably from one port to an- other, partly because of the differences in charges and price levels, part- ly because of the differences in the average rate of turnaround time. As between types of vessels, general cargo carriers (liners) require more time in port than bulk carriers and, therefore, pay proportionately more in port disbursements. Among bulk carriers J the dry-cargo tramps spend on the average more t~~e in port than tankers. A$ an illustration of the relative cost of port disbursements (inclusive of bunkers) as part of gross freight earnings, West Europeal1. liner vessels spend an average of about 45% of gross income on port disbursements over a postwar period (Table l3-A and l;-B). Since dry-cargo tramps are shifted from one route to another, port dis- bursements related to either gross freight earnings or the total cost cf a voyage vary to a considerable degree from one voyage to another. - 20 - The degree of variation ,in port disbursements also applies to the tankers which are shifted frequently from one route to another. For a U.S. flag T-2 tanker: on a voyage betv~een U.S. Gulf and New York. port disbursements would thus represent about 6f,t of total operating costs. For the same vessel on a voyage between U.S. Gulf and Japan, port disbursements exclusive of land tolls) would average only about 1% of the total voyage costs (1). The port disbursements for vessels on tirnecharter or bareboat charter are paid for by the charterer, while the shipowner otherNise pays the re~llar port disbursements. . 10. Cost of Port Disbursements \ .. The cost of port disbursements has increased rapidly in the pOstwar period, mainly because of slower turnaround in ports and higher prices for bunker oil and stevedoring. WI'lile before the war vessels in international trade spent an average of 200 days at sea, 165 days in port, the situation bas been reversed in the postwar period. According to NorNegian el;?timates, the index for port di::;lbursements (including fuel) for dr.1-cargo bulk carriers rose from 100 in 1947 to 116 in 1948., 117 in 1949 and 120 in 1950. It is held likely that the increases during 1951 equalled the ones in 1947-1950; in other words; that the 1951 index may be around 140 (2). The turnaround time in ports improved somewhat between 1947 ~nd 1950 but worsened in 1951, with the exception of European continental ports(3). Ports in Australia~ New Zealand.. some in South Africa and in Brazil have been particularly seriously congested during 1950-5l~ while considerable delays were experienced also in Indian ports" Colombo and Malaya. Even in the U.K ... turnaround time was excessive. Since about 81jib of the rorld merchant fleet burns oil as against 19% coal burning" the postwar increases in the cost of bunker oil have been felt severely. Betw'een Marc)1 1949 and mid-19~.t the cost of diesel bunker oil thus increased by 40% and of marine fuel Oil by 37%, based on Port of Ant- werp figures (Table 16). Bunker coal price~ on the other hand declined somewhat in 1949 and 1950 from the high 1948 level (Table 17). Stevedoring charges have risen in the postwar period because of higher wages of labor, and in m~y cases" because of lesser efficiency. In our estimates, we have rather arbitrarily assumed total port disbursements cOst to increase 12% be~;een 1950 and 1951. As to the outlook 1952-1956, we do not foresee any substantial reduction in port disbursements and operating costs generally, although shipowners and port authorities ~ike are seriously concerned about the economiC waste represented by the slo'w turnaround time in ports, and streneousefforts· are made to reduce port eA~enditures and operating cost of ships by greater efficiency. ll) Source:' The Esso Shipping Company" 'New York. (2) Source; Norwegian Shi12p:\ns; Ney'TS~ no.4" February 25,1952" page 194. (3) Source: annual Survey of the Liverpool Steamship A~sociation, Lloydls List .. March 17: 1952. - 21 - v~ith a levelling off or decline of rates from the high 1951 level, the profit margin of the shipowners ,vill thus be narrowed. In the postwar period, constructi( costs have also increased rapid- ly. The cost of a standard dr,y-cargo vessel was thus about three times the prewar price in 1951, with consequent higher overhead charges and increased difficulties in financing replacements of overage tonnage. While the economic position of the shipping companies is of great i;-;1- portance to the balance of payments position of countries with large merchant fleets, the threat of political interference in the international shipping market would have more worldwide effects. Flag discrimination in internat- ional shipping, of which there are many ex~~ples in the p08ular period, leads to a fostering of uneconomic shipping 1 with subsequent increases in the world shipping charges.