Choice Library Review

This review appeared in the library journal CHOICE in March 2010

Stopford, Martin.  Maritime economics.  3rd ed.  Routledge, 2009.  815p bibl index Maritime Economics is an exceptionally well-written overview of the international shipping industry.

Stopford combines extensive experience in both the private sector and academia (including Global Shipping Economist, Chase Manhattan Bank; chief executive, Lloyds Maritime Information Services; and visiting professor, Cass Business School and Copenhagen Business School).  He delivers a very thorough yet elegant description of the multiple objectives and constraints faced by the shippers.  Eventually, the reader starts seeing a motive behind each action of a shipper, and the mosaic of facts forms one coherent picture.

The book is rich with examples, tables, and diagrams, which make theoretical concepts much more applied and accessible.  This reviewer's personal favorite is chapter 4.  It explains the specifics of the supply and demand formation in international shipping and provides a nice illustration of the process with real-life data and examples.  This book will be highly appreciated by anybody interested in the economics, regulation, and history of international shipping.  It can be used as both a textbook and a reference book.

Summing Up: Highly recommended.  Upper-division undergraduate through professional collections.  -- V.  Lugovskyy, Georgia Institute of Technology

Getting to grips with the mess we are in

Michael Grey

Michael Grey

Lloyds List 27th January 2009

WE ARE getting rather a lot of economics being preached at us, understandably, in these challenging times.  Economics has been described as the "gloomy science", although you will find plenty of people who will assert that it is not a science at all.  It is certainly not an art, and may best be described as "organised conjecture".

My trusty Imperial Reference Dictionary defines it as "the science of household management", which is of limited utility when BBC journalists Evan Davis and Robert Peston are attempting to explain why we are in such a mess at seven o'clock in the morning.  But it is something we clearly need to know about, today more than ever.

Some sort of understanding of basic economics is also of enormous importance if you work in shipping or some other branch of the maritime industry.  I was taught economics for three years at a rather progressive school by a Yorkshireman, whose favourite saying was "where there's mook there's brass".  The only other thing he said that I have retained about the industry I have spent my life in, was that it was "subject to very loompy investment".  He was certainly dead right about that.

Economists clearly don't have all the answers, and can rarely, it seems, agree about much.  We were reminded the other day in the obituaries of Mrs Thatcher's economic adviser Alan Walters of the 387 or so eminent economists who denounced the policies he advocated, but which, to their collective chagrin, subsequently turned out to have been dead right.

In the maritime industry, soothsayers or necromancers, rather than economic advisers, would appear to be the experts chiefly consulted by shipowners, who recently, and not for the first time, seem to have boobed in a spectacular fashion over the probable short- or medium-term demand for ships.  But, you might say, they were merely, as providers of a derived demand, giving their customers what they were screaming out for more tonnage to carry all that iron ore and coal and containers and oil which everyone was going to need.  Were they to retort, about midsummer last year, I have a shrewd idea that the banking system is all going to implode in the latter half of 2008, so I am not ordering any ships this week, they would have been dismissed as lunatics.  It's probably not fair to describe them, as somebody cruelly has, as lemmings.  Lemmings aren't daft, they just don't have many contrarians in their ranks.

These are strange times, and it is probably true to say that nobody really knows what is going on in the maritime industry, or indeed in any other.  But what better time could there be to publish a book in which the economic mysteries of the shipping industry are revealed, than in a period of such universal chaos and utter bewilderment?

Success in the maritime industry, as I have heard Martin Stopford, director of Clarksons, patiently explain over the years, is much to do with timing.  And my goodness, his timing in publishing the third edition of his highly acclaimed Maritime Economics has on this occasion been exemplary.

This is the book for which we have all been waiting, as it is nearly 12 years since the appearance of the second edition, which in the case of the volume I own, the most referred-to book in my library, is just about on its last legs.

This is a massive book, nearly 250 pages longer than the previous edition, but it remains as readable as ever.  'Accessible' is a word that elitists like me don't like to use, but Stopford's work is easy to navigate, logically arranged and is once again a pure pleasure to read.  I venture to suggest that it is thus for one main reason, and that is the enormous enthusiasm for the maritime world exhibited so unashamedly by its author.  He unguardedly lets this out quite early in the book when, introducing the reader to the organisation of the shipping market, he concludes that "shipping is ultimately a group of people; shippers, shipowners, brokers, shipbuilders, bankers and regulators, who work together on the constantly changing task of transporting cargo by sea.  To many of them shipping is not just a business.  It is a fascinating way of life." The book has been substantially rewritten.  The previous edition rather leaped straight away into the economics of seaborne trade; now this is given a solid context in the global economy, tracing its development and evolution through 5,000 years of shipping.  Dr Stopford has maintained his faith in the movement west of the regional centre of sea trade, the Westline theory, which at present is hovering over East Asia.  One wonders whether the march of India will be a further waypoint in this curious circunmavigation.

History is so important in trying to understand anything about where we are today, let alone our probable course, and the book is hugely enhanced by this addition, not least because of the way the subject is currently neglected in the educational system.

If we are to take on board the implications of the volatile and cyclical industry in which we work, a historical context is a useful tool and, employing a number of sources, Dr Stopford has managed to track the shipping cycles back to 1741.  Stability, like the weather in these northern climes, has clearly never been a familiar feature and really does defy mathematical analysis.  So often it is all driven by unpredictable events.

Similarly, geography, which has been turned into a branch of the social sciences by mad educationalists, has been equally neglected, which makes a new chapter on the geography of sea trade exceptionally welcome.  Other entirely new sections include chapters on return of capital, trade theory and specialised cargoes, which demonstrate the scope of an industry that has employed advanced technology to become itself increasingly specialised.

The last 12 years have seen a lot of changes in shipbuilding and the advance of regulation, which has of course extended into the realms of the demolition market.  Dr Stopford, probably because he was once a shipbuilder, writes about this precarious profession with particular insight, concluding that shipbuilders experience few 'normal' years, due to the long-term swings in trade growth, along with the capacity imbalances caused by shipping market cycles which, he says, "come in all shapes and sizes".  Reinforcing the problems of these much-abused ship assemblers he notes: "Add a constantly changing competitive structure and we can only conclude that shipbuilding is not a business for the faint hearted." You read about the vicissitudes of the merchant shipbuilding industry over the years and it is pretty clear why people get out of this unrewarding sector.  It is harder to deduce why they are still in it.  Habit, perhaps, or stubbornness, or perhaps the pride and accomplishment that can still be gained by taking in such a mass of materials and components, and turning them into a beautiful, new, working ship.

Dr Stopford is not too precious an economist to admit that people charged with economic forecasting are very often wrong.  Perhaps they were given duff information, perhaps the sums were wrong, or more often than not it was one of those 'events' which conspired against all their applied science.  He offers us the principles and key elements of forecasting, which he suggests is "part of the decision process and is about applying economic resources to reduce uncertainty".  But he also emphasises "the challenge of dealing with the unknown".  He underlines the importance of information, while admitting that it is what one does with that information that really matters.  There is, he points out "an interplay between sentiment and rational analysis in shipping decisions", and emotions perhaps have a greater part to play in decision-making than they are often given credit for.

Although forecasters today have computing power unimaginable in earlier eras, they still don't always get it right.  However, Dr Stopford offers some reassurance to those sufficiently dispirited to go off and seek the services of fortune-tellers, in that in the long term, the market rewards who gets it right and, "although a few get lucky, the long-term winners are the ones who do their homework".  One doesn't like to rub it in during such financially febrile times but, as he says, if companies "act irrationally and waste resources by, for example, ordering more ships than are needed, they are punished".

This is a splendid book, well illustrated, with plenty of technical explanation as to the hardware employed by this fascinating industry.  It deserves to be at the elbow of all those who pretend to any knowledge of the amazing maritime world we cheerfully inhabit.

* Maritime Economics by Martin Stopford ISBNJO 0-415-2755 7-1 (hbk) 2 7558-X (pbk) is published by Routledge, price £95 (hbk), £37.50 (pbk) Article from Lloyd's List: Published: 26/01/2009 GMT © 2009 Informa plc.  All rights Reserved.  Lloyd's is the registered trademark of the Society incorporated by the Lloyd's Act 1871 by the name of Lloyd's

Volumes to learn about shipping

VIEWPOINT by Michael Grey

Michael Grey

Lloyds List 17th December 1997

In an industry that has apparently disappeared from mortal ken, how on earth does somebody — you for instance — entering the business learn anything about his -or her new profession?  It is not an easy question to answer and rather raises another, as to how the eager entrant managed to establish the existence of a sea transport industry in the first place.

Perhaps you had learnt something about shipping from a relative, because it is unlikely your curiosity had been aroused as a result of an energetic careers adviser, or a maritime industry milk-run afternoon at the better universities, along with the omnipresent and depressing financial services, and the well informed contingent from the armed forces.

You have to work hard to discover much about this essential industry.

But you have persisted, turned your back resolutely on greed and the martial arts and resolved to take up a career of ,more intrinsic worth.

You have moreover man aged to detect a rare opening in the maritime industry that does not require "a minimum of two years' experience" or "Familiarity with the Greek language" and pays more than starvation wages.

You have triumphed, but with your degree in History or Modem Greats, or similar non-vocational qualification, how can you learn something about the new maritime world you are inhabiting?

You could pick it up by our traditional process of intellectual osmosis, which assumes that if you keep your ears open in a working environment something of use may conceivably enter your brain.

But this is a hit-and-miss policy; better to read some useful and improving books, which will have the added advantage of making you probably better informed than those allegedly teaching you your job, for the chances are that they will be traditional maritime industries' "tunnel visionaries" and might possibly not even be readers of this important newspaper.

Best not to tell them you have discovered their woeful ignorance.  It will not encourage them towards latent scholarship, and your helpfulness may well be misinterpreted.

What book?  Useful volumes are available by Alan Branch on the elements of shipping, Pat Alderton on operations and economics, while the small 'Sea Trading' series by Williarn Packard provides a good introduction.  However:you cannot do better than Martin Stopford's newly published second edition of his widely acclaimed 'Shipping Economics'.

This is described, in its very first sentence, as "an introduction to shipping market economics", but it is also a very readable book, designed by an author enthused with the mysteries of shipping and who doesn't mind admitting it.

Perhaps changing to 'The Joy of Ships' would do Dr Stopford more justice.  It is an exceptionally well laid-out book that is easy to use, and that's a bonus.

Here is shipping; this classic example of derived demand put into its proper historical context, in which we see world events, meteorological phenomena and political influences all exerting their power on the market for maritime transport, itself the catalyst of economic development.

Here we see the industry's desperate attempts to understand the shipping market cycle, which is far more complex and unpredictable than first appears, and the interrelationship between sea transport, the trade in secondhand ships, the trade in new ships and the demolition market which deals in scrap.

The fact that the ship is not merely a unit of transport becomes quickly apparent.

Dr Stopford is a first-class communicator and those who hear him lecture enjoy their experience, even if they do not always agree with his conclusions.  He is up to date, technically aware and statistically accurate.

His chapter on the global pattern of maritime trade introduces us to the "Westline Theory" in which he suggests that for 5,000 years "whether by chance or some deeply hidden economic force" the commercial centre of shipping has followed a path westward, not unlike the great pandemics.

This progression along the Westline, he says, "provides a lesson in the long-term dynamics of the economic environment in which the shipping industry operates".  There is a historian in him, too.

In its breadth, this book is a tour de force and anyone who reads it cannot but be better informed about the shipping world.

Perhaps you will no better at forecasting the extraordinary changes that take place as the cycles come around … "forecasting has a poor reputation in maritime circles", he notes, perhaps thinking of those days in the 1980s that saw the fjords and half the Aegean roofed over with laid-up ships.

You can't get it right all the time and in this industry not many people do.

Maritime Economics by Martin Stopford (ISBN 0-41515310-7) is published by Routledge, price £22.99 (softback).

John Spruyt

Lloyds List

THERE must have been sighs of relief in our publishing houses when the UK chancellor refrained from raising a value added tax on the sales of books and newspapers.  The protests of the book trade prior to the recent Budget almost convinced me that an increase of 17.5 % in the price of a £4.99 paperback, which would have raised its price by about a pound, meant the end of literacy and civilisation.

But a slightly lighter foot on the throttle of my motor would easily have made up the difference, so I remained optimistic that my pre-Christmas browsing in London's superb bookshops would not be taxed away.  Buying books for others is difficult.  Come to think of it, writing them to appeal to buyers who are not going to read them but give them, must he a strain.  One can avoid the difficulty of assessing someone's exact taste by going for presentation — the beautifully bound classic, the expensively illustrated cookbook.  Or the boxed set: several volumes of one author, or a package of books selected to cover a specific subject.  I have been asked several times over the years to recommend to someone new to shipping a reading package that will quickly bring them up to speed with the basic structure and language of the industry.

Usually the interested party is a banker, (let's assume a female banker to avoid too many he or she) drafted into the shipping department for three years on her way to greater things, or perhaps on jankers for some clanger dropped in retailing or property or other more glamorous sectors.  She is already reading the daily Lloyd's List, a couple of weeklies and some brokers' research.  She intends to go on a couple of weeks' general shipping course, but the next one is six months off, and she wants to get stuck in straight away to talk to real shipowners without making a complete idiot of herself.  What books should she read?  You can't solve this one by giving her a complete list of shipping books, even if you managed to get one.  Cutting out the purely legal and technical is not too difficult.  There is no one generalist teach yourself shipping' that I have yet come across, so a selected package has to be put together.  At the risk of offending those whose magnum opus has been omitted I proffer advice.

First of all she must read Dr Martin Stopford's "Maritime Economics".  Martin is the nearest thing to a holistic shipping intellectual around at the moment, and he is a natural and painstaking teacher and communicator.  As his work is in paperback it is accessible to students and so much a set book that my advisee will ignore it at her peril.

Then she will need a comprehensible tract on ship types — Spenser on Ships would be my choice here.  Something on the mysteries of chartering, not too detailed -try Gorton and Ilire, a trusty standby reference for years and just recently brought right up to date.

Then, of course, as a financier she needs that extra insight into operational issues provided by Spruyt on Ship management.  (Message to Captain McManus of Rhyl -this is the only axe ground in this piece.  My only lapse of objectivity and strict self discipline.  So you can read the rest confident that there is not even a free jam butty in it for me).  Last, but not least, to get a clear idea of how shipping is impacted on by governments, regulators, of how it represents itself and tries to govern its own activities, she needs to include Bruce Farthing's recently rewritten 'International Shipping'.