6 Economic background of the German and European maritime in-dustry
The following overview of the maritime sector shows how vital the sector is to the economy. It gives an impression of how regulations of the maritime transport sector may generate significant economic spill-overs beyond this sector.
Germany has 390 commercial shipping companies which control a fleet of more than 2600 ships (equivalent to around 6.6 % of global commercial fleet and 5 % of total transport tonnage). Around 20 % of these vessels sail under German flag. More than 30 % of global container capacity is controlled by German shipping operators, which makes it the largest container fleet worldwide (Winter, 2008).
Germany’s maritime industry can be divided into the following sectors i. Maritime shipping
ii. Marine and offshore equipment supplier industry iii. Shipbuilding
These three sectors combined generated a value added of € 47.7 billion in 2006, cor-responding to roughly 2.055 % of GDP (Winter, 2008).
The largest sector of Germany’s maritime industry is maritime shipping. In 2006 it pro-duced a turnover of € 31 billion and employed 60 000 people out of the total workforce of 380 000 in the maritime industry. Germany ranked number 4 in the world merchant fleet in 2006 after Greece, Japan, and China with total deadweight tons amounting to 64 739 952 (Federal Ministry of Transport, Building and Urban Affairs, 2009).
In 2007, a total of 315 050 000 tons of cargo was handled in German ports, of which 192 027 000 were received and 123 023 000 were dispatched. Around 37.1 % of these consisted of containers (Eurostat, 2009).
As far as incoming goods are concerned, around 2% arrived from ports within Germany while roughly 98 % were shipped from foreign ports. The largest part (nearly 40 %) was shipped from other EU member states. The second largest volume was received from East Asia (10.26 %), of which China was the main trading partner with 7.2 % of total goods received. Third was Middle and South America (9.65%), followed by Africa (6.24
%) and North America (5.52 %). Distinguishing by commodity groups, the major share of received goods consisted of semi-finished goods and manufactures, electronics and machinery, leather and textiles and special transport goods. Taken together, these categories accounted for more than 80 % of all imported major commodity groups (Eu-rostat, 2009).
Focusing on the category of dispatched goods from German ports gives the following picture. Roughly 96.66 % of goods are shipped to foreign ports. The lion’s share of the total amount of dispatched commodities, namely 46.8 %, went to other EU countries.
The second largest recipient region of dispatched goods was North America with 10.68
%, followed by East Asia (9.39 %) 4.52 % of which went to China. The major share of exported goods consisted of electronics and machinery, semi-finished goods and manufactures, vehicles and special transport goods. Taken together, these commodity groups accounted for more than 90 % of all exported goods (Eurostat 2009).
The 5 major ports, through which incoming and outgoing cargo was shipped in 2007, were Hamburg, Bremen/Bremerhaven, Wilhemshaven, Lübeck and Rostock. With 37.51 % of all goods handled, Hamburg is Germany’s most important port (Winter, 2008).
In 2007 a total number of 30 200 000 passengers were transported by sea. Around 57
% of these were transported within Germany. Of all passengers travelling to and from ports outside Germany, roughly 93 % were other EU destinations (Winter, 2008).
6.2.1 Maritime and offshore equipment supplier industry
Germany’s marine and offshore equipment supplier industry comprises about 400 companies with up to 76 000 employees. In 2007 the industry’s revenues amounted to
€ 11.9 billion, 13.8 % higher than the previous year. With regard to revenues Ger-many’s marine and offshore supplier industry is number two in the world after Japan.
With regard to exports it is number one (Ehmer et al. 2008).
Focusing on revenues according to federal state reveals that Germany’s equipment supplier industry is not restricted to the coastal areas. Indeed, as Figure 2 below indi-cates, Baden-Württemberg’s and Bavaria’s supplier industry tops the list with those lo-cated in Hamburg and Schleswig-Holstein.
Figure 2: Share of revenues of maritime and offshore equipment supplier industry by federal state, 2007 Source: Ehmer et al., (2008).
The biggest market for suppliers is commercial shipbuilding followed by naval ship-building. Sales in offshore technology still play a minor role but are increasing in the markets for offshore oil and gas as well as offshore wind energy.
With a share of 62 % in total orders the biggest clients of the German supplier industry are shipyards, followed by direct sales to shipping companies with a share of 13 %.
The third largest position is indirect sales to other suppliers with 12 %. Retailers (9 %) and business enterprises (4 %) play a minor role (Ehmer et al., 2008).
6.2.2 German shipyards – employment and utilized capacity
Until the end of 2008 utilized capacity and employment in German shipyards (the big-gest client of Germany’s maritime supplier industry) displayed a positive development.
Overall employment increased by 1.7 % between September 2007 and September 2008. For shipyards located in East Germany, employment even increased by 3.0 % during that period (VDMA, 2008). However, this situation has changed dramatically with the current economic crisis (see Box 2).
6.2.3 Competition and market structure in international shipping
Developments in the liner shipping industry indicate a growing market concentration.
This is illustrated by the fact that in 1995 16 liner operators accounted for 50 % of global total capacity whereas in 2007 only 7 liner operators made up 50 % of global to-tal capacity. Indeed, the top ten liner operators accounted for 60 % of toto-tal TEU capac-ity in 2007. Of these, four liner operators are European-based with 37.82 % of total TEU share (UNCTAD 2008).
Disaggregated data by type of cargo shows that market concentration is rather high in container shipping. Here, the top 20 companies control 81 % of the market. With re-spect to tankers, the top 20 companies control 33 % of the market. In the case of bulk carriers, concentration is less pronounced. Here, the top 20 firms control 17 % of the market (UNCTAD 2008).
Overall, then, the liner shipping industry represents an oligopolistic market. The degree of oligopoly, however, varies by trade route. While the market structure in the liner shipping industry on the Europe – North American trade route constitutes a loose oli-gopoly, the liner industry on the Europe – Middle East / Far East trade route fulfils the characteristics of a tight oligopoly. Both transpacific-eastbound and transpacific west-bound liner shipping is somewhere in between these extremes.
Box 2: The impact of the economic crisis on the maritime shipping sector
In the course of the financial crisis, real global output growth fell from 3.5 % in 2007 to 1.7 % in 2008. As a consequence real growth of world trade slowed down markedly to 2% in 2008 – compared to a growth rate of 6 % in real terms the previous year (WTO, 2009). As a decline of output by between 1 % and 2 % is expected in 2009, trade volume will decrease as well.
According to the latest revisions of the WTO, global trade will decline by at least 10 % in volume terms in 2009 (WTO, 2009). This would mark the biggest drop since the end of the Second World War. More specific, in developed countries, export volumes are expected to fall by more than 10 % whereas developing countries will experience a much smaller decline.
There are several factors contributing to this. First, world demand is slowing in all regions at once. Second, following the crisis in the banking sector, there is a shortage of trade finance. Fi-nally, an increase in protectionism, often used as a measure for fighting an increase in domestic unemployment can contribute to a slow-down in trade-flows. A decline in world trade is worri-some, especially for an export-oriented economy like Germany’s. In January 2009, Germany’s export volume fell by 18.4 % compared to January 2008. The outlook for the rest of this year is
equally bleak. German seaports report drops in container trade of up to 35 % in 2009 compared to the former year and up to 50 % for auto trades. (Handelsblatt 2009).
With regard to maritime shipping, two leading indicators confirm the slow-down in global trade.
The Howe-Robinson Containership Index, which measures containership charter rates for all established categories, fell by 74 % within one year. Having reached a peak of 1 382 points in April 2008 it collapsed to a mere 360.5 points by April 2009 as the Figure 3 below indicates.
A second measure indicating the negative effects of the current crisis on the maritime shipping sector is the Baltic Dry Index which quantifies the cost of shipping bulk cargo by sea and is used to display changes in the global demand for manufactured goods. In the second half of 2008, the index fell by 94 %. While it has slightly recovered since, it still remains at an all-time low.
Overall, achievable rates for shipping companies are only about a quarter of the rates gained a year ago.
Figure 3: Howe-Robinson Containership Index, April 2004 to April 2009 Both the deterioration of the Howe-Robinson Containership Index as well as the fall of the Baltic Dry Index suggest a low demand for sea shipping due to the start of the financial crisis. More-over due to a considerable boom in world trade in the years prior to the crisis, the industry had put in numerous orders for new ships, especially container ships. As a consequence, the market is characterized by large overcapacities putting further pressure on freight rates. At the end of April 2009, 506 containerships lay idle representing around 10.6 % of the entire fleet. As a re-sult, charter rates fell drastically. At present, none of the big shipping companies is able to oper-ate at a cost-covering level. The situation could deterioroper-ate further if all the 11 400 container ships currently in the order books worldwide were built. While they would increase the global container fleet by 60 %, no increase in demand is in sight.
Consequently, there are also negative effects for shipyards. While orders for 2009 are expected to be completed, the outlook is bleaker for the years ahead. Usually customers make a down payment of 10 to 20 % for a new order with shipyards pre-financing the rest. In the current eco-nomic climate, however, shipyards find it rather difficult to get access to the necessary capital.
As a result, their volume of orders is dwindling. Incoming orders are at their lowest level since 2001 and are likely to decline further. In Germany, this has already led to the insolvency of 4 shipyards with negative effects on the labour market.
In summary it can be noted that the current economic crisis has led to an overall slow-down in global production and global trade. Coupled with existing overcapacities in the maritime ping sector, it resulted in declining freight rates and unutilized ships. Next to owners,
ship-yards start feeling the negative effects as incoming orders fall and access to credit is being re-duced.
7 Data sources and monitoring options
A key question is the monitoring and enforcement of the policy measure. The challenge of data needs and availabilities are situated in the triangle of international law, (supra) national jurisdictions and environmental ambition. Furthermore, the decision which emissions are considered the baseline for setting up the scheme also influences the data needs. In the following sub-chapters, the possibilities and data needs for identify-ing the absolute sectoral emissions and for settidentify-ing the cap are discussed. Subse-quently, the bases of assessment / trading and corresponding data needs and monitor-ing requirements for the three selected options are discussed in chapter 8.