Maritime Studies 12 Report: Economic, Environmental, and Competition

This report provides a detailed analysis of various aspects within maritime studies. It begins by examining the significant economic impacts of containerization, highlighting its role in globalization and trade while also addressing its adverse environmental effects, such as greenhouse gas emissions and pollution from ships. The report then delves into the practice of flags of convenience, exploring their economic implications and the associated losses, including issues related to labor and regulatory loopholes. Furthermore, it investigates spot charter and cargo market dynamics, analyzing the factors that influence profitability and market stagnation. The report also assesses the effects of natural disasters, such as floods, on the economy, specifically in the context of agriculture. Key economic concepts like economies of scale, equilibrium, monopoly, and oligopoly are defined and explained. The report concludes by discussing competition issues among shipping lines, including service quality, rate volatility, and the impact of technological advancements. References are provided for further reading.

Running head: MARITIME STUDIES
Maritime Studies
Name of the Student
Name of the University
Author note

1MARITIME STUDIES
Table of Contents
Answer to Question CQ1.................................................................................................................2
Answer to Question CQ2.................................................................................................................3
Answer to Question OP1.................................................................................................................4
Answer to Question OP2.................................................................................................................4
Answer to Question OP3.................................................................................................................5
Answer to Question OP4.................................................................................................................9
Reference List................................................................................................................................11

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Answer to Question CQ1
Economic impacts on containers and its adverse effect
The economic impact of containerization was enormous. It helped trade and economic
integration to grow. The demand for labour in port diminished because the use of cranes and
other dockside equipment replaced manpower. It boosted globalization by making trading easy.
However, the adverse effects of use of containers to carry cargoes is significant. The catastrophic
consequences of containerization in shipping industry is effecting the global economy as the
pollution freight industry generating is huge. Shipping containers generate large amount of
greenhouse gas. The level of carbon dioxide it produce is difficult to detect, as the ships operate
very far out at ocean.1 Other than carbon dioxide, ships also release highly toxic chemicals such
as sulphur oxides and nitrous oxides which, are main causes of acid rain. Due to detrimental
effects of oceanic freight industry some regulations put on them to produce less environmentally
harmful cars. Container ships are responsible for environmental degradation due to gas
emissions. Besides emission of gas, container ship also generate different kinds of pollution such
as biocides (chemicals applied in antifouling paints), ballast water (help to improve stability of
the ship), waste (like garbage and sewage from human activity) and outright oil spills which, is
difficult to clean.
Container ships released tons of garbage into the ocean causing disastrous effects on
ocean ecosystem.2 The use of container ship as well as the amount of garbage it dumped
increased day by day. The garbage contaminated the ocean water and kills sea animals like
seabirds and sea mammals. The existence of sea animals threatened because of toxic ocean water
1 Yin, J, ""Slow steaming of liner trade: its economic and environmental impacts.".". in Maritime Policy &
Management, 41, 2014, 149-158.
2 J Xing, and Zhong, "A reactive container rerouting model for container flow recovery in a hub-and-spoke
liner shipping network.", in Maritime Policy & Management,, vol. 44(6), 2015, pp.744-760.

3MARITIME STUDIES
and loss of mudflats, wetlands and seagrass meadows. The use of containers pollute the air in
many ways. The factors affecting air are particulate matter (which is made up of soot and metal
and are the reasons for murky color of smog), carbon monoxide (if inhaled it can block oxygen
from important organs), hydrocarbons (it produce important element for the atmosphere by
reacting with sunlight named ground level ozone).3 Pollutants and other toxins released by
containers effected the environment and ocean ecosystem. The pollutant particles causes acid
rain which, alter the composition of lakes and rivers lead to death of aquatic species and
microorganisms as the pollution enters soil. Thus, the imbalance in ecosystems destroy the life of
plants and animals. Plants are unable to survive in pollutant rich soil.
Answer to Question CQ2
Flags of convenience and economic losses
It is a type business practice under which a merchant ship is register in a ship register of a
country by owner of the ship and the ship operates the civil ensign called flag state of that
country. The open registries under flag of convenience is highly criticized for its loopholes.4 To
stay legally anonymous and hide their ownership, the ship owners uses flag of convenience.
Even some ships found engaging in crime, unreported and unregulated fishing and provide
substandard working condition. Flags of convenience leads to economic loss as to evade scrutiny
or cut costs, most of the ship owners register under foreign flags.
In this way, they can avoid or pay minimum for taxes, rules, regulations and protection of
seafarers. To avoid extra cost the ship owners choose to register when the cost of registration is
3 M Svindland, "The environmental effects of emission control area regulations on short sea shipping in
Northern Europe: The case of container feeder vessels.", in Transportation Research Part D: Transport
and Environment,, vol. 61, 2019, pp.423-430.
4 S Bateman, "The role of flag states.", in In Routledge Handbook of Maritime Regulation and
Enforcement, , 2015, (pp. 79-94).

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comparatively low.5 Flag of convenience create a huge difference in wages of seafarers and no
proper definition of basic rights. Seafarers with low wages are suffering from financial losses.
Other issues faced due to flag of convenience includes manipulation of data facilitating illegal
trade, violation of termination policy and no accidental protection.
Answer to Question OP1
Spot charter and cargo market
A spot charter is operated from a load port to a discharge port to carry specific cargo as
per agreement. The exposure of the vessels to the spot market is measured by spot exposure. The
profit earning will be higher if the spot exposure is large and the shipping rate is high.6 However,
it will incur huge loss if the vessel hiring rate go down. Since, too many ships are available for
spot charter the profit level of the cargo market will be low. As, the cargo market is already
stagnant the growth of the market will slow down.
Answer to Question OP2
Effects of flood on economy
The impact of natural disasters and hazards like flood on agriculture is very significant.
The agricultural production of Batangas, Philippines destroyed due to flood thus, the price of
food increases as shortage in the supply of foods.7 The economy affected as it is the source of
both employment and output. The economic development hampered and growth rate slow down.
Export of some goods also get affected because of flood. The natural disasters discourages new
5 A Mendelsohn, "Flags of convenience: maritime and aviation.", in J. Air L. & Com.,, vol. 79, 2019, p.151.
6 H Zhang, and Zeng, "A study of the relationships between the time charter and spot freight rates.",
in Applied Economics,, vol. 47(9), 2015, pp.955-965.
7 B Shrestha, Okazumi, Miyamoto, and Sawano, "Development of flood risk assessment method for data-
poor river basins: a case study in the Pampanga river basin, Philippines.", in In 6th international
conference on flood management, , 2014, (pp. 1-12).

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investment in the area of export. As a result, the government is burdened with more investment
cost.
Answer to Question OP3
a) Economies of scale
When an organization obtain cost advantages because of efficiency of production, is
called economies of scale. To acquire economies of scale the organization lower costs and
increase production.
b) Equilibrium
The situation where, economic forces like demand and supply are balanced is called
economic equilibrium. The values of variables of economics will be unaffected in the absence of
external influences.8
8 R Carbaugh, "Contemporary economics: an applications approach.", in Routledge., , 2016.

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Figure 1: Equilibrium of demand and supply
c) Monopoly
A firm under monopoly market structure is the only supplier of a particular goods or
services. The firm decides the price of the product as there is only one seller.
d) Oligopoly
A market structure which is dominated by small-scale large sellers is called oligopoly.
Oligopolies are price setters and there is entry barrier under oligopoly.

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e) Law of Diminishing Return
When the marginal cost of production go down as there is increase in single factor of
production keeping all other factors of production constant, is called law of diminishing marginal
returns.9
Figure2: Diminishing marginal product of labour
f) Demand
9 R Carbaugh, "Contemporary economics: an applications approach.", in Routledge., , 2016.

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Demand is referred to as desire of a consumer to buy products and services and pay a
specific price for it.10
Figure3: Demand curve
g) Supply
Supply is referred to as the total amount of products and services available to consumers
at a specific price.
10 M Nikaido, Monopolistic Competition and Effective Demand.(PSME-6), in , Princeton University Press.,
2015.

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Figure4: Supply Curve
h) Revenue
Revenue is the income of an organization generated from the sale of products and
services.
i) Firms
A business organization which sells products or services to obtain a profit such as a
limited liability company, corporation or partnership is called firm.
j) Consumers
Consumer is referred to as an organization or person that consumes or uses commodities
or economic services.
Answer to Question OP4
Competition issues amongst shipping lines
The shipping lines get competitions from the operations of same boat, following same
routes, calling the similar parts, loading and discharging on the specified day and experience of

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delays. The service provided by the shipping lines is one of the main reason for the competition.
The volatility of rate create a huge problem in the maritime business.11 The existing ocean freight
rate is low and building of new megaships will cause more competition in the market thus the
rate will down further. The application of advanced technology in the maritime business will
make a difference. Hence, the competition increased due to technological advancement.
11 E Lee, Song, "Competition and co-operation in maritime logistics operations.", in In Handbook of Ocean
Container Transport Logistics, vol. Springer,Cham., 2015, (pp. 477-496).

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Reference List
Bateman, S, "The role of flag states..". in In Routledge Handbook of Maritime Regulation and
Enforcement, , 2015, (pp. 79-94).
Carbaugh, R, "Contemporary economics: an applications approach..". in Routledge., , 2016.
Lee, Song,, E, "Competition and co-operation in maritime logistics operations..". in In Handbook
of Ocean Container Transport Logistics, Springer,Cham., 2015, (pp. 477-496).
Mendelsohn,, A, "Flags of convenience: maritime and aviation..". in J. Air L. & Com.,, 79, 2019,
p.151.
Nikaido,, M, Monopolistic Competition and Effective Demand.(PSME-6). in , Princeton
University Press., 2015.
Shrestha, Okazumi, Miyamoto, and Sawano,, B, "Development of flood risk assessment method
for data-poor river basins: a case study in the Pampanga river basin, Philippines..". in In 6th
international conference on flood management, , 2014, (pp. 1-12).
Svindland, M, "The environmental effects of emission control area regulations on short sea
shipping in Northern Europe: The case of container feeder vessels..". in Transportation Research
Part D: Transport and Environment,, 61, 2019, pp.423-430.
Xing, and Zhong,, J, "A reactive container rerouting model for container flow recovery in a hub-
and-spoke liner shipping network..". in Maritime Policy & Management,, 44(6), 2015, pp.744-
760.