7/10/2020 Shipping: Globalization's Lifeblood

Jan 2, 2013, 11:47am EST

Shipping: Globalization's
Lifeblood
Barry Glassman Contributor
Advisor Intelligence Contributor Group
Wealth Management

This article is more than 7 years old.

If someone asked you to name one industry that has had perhaps the most
impact on the growth of the global economy, what would you say?

Some might include agriculture,

manufacturing or energy production. But
while those are three good answers, you
need to look a little deeper into the
mechanics of supply and demand to get the
Each year, some 86,000 ships move
right one: shipping. more than 9 billion tons of cargo – more
than a ton for each... [+]

From refrigerated freighters and container

ships to car carriers and supertankers, the world’s shipping industry has
played an incredibly key role in transporting 90% of the world’s food,
products and energy while helping to transform the global economy along
the way. Each year, some 86,000 ships move more than 9 billion tons of
cargo – more than a ton for each person on the planet – across our seas each
year.

These facts are brought home in entertaining detail in a new book by Lori
Ann LaRocco called Dynasties of the Sea: The Shipowners and Financiers
Who Expanded the Era of Free Trade.

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7/10/2020 Shipping: Globalization's Lifeblood
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LaRocco, who is the Senior Talent Producer at CNBC, teams up with

Matthew McCleery, Martin Stopford, and Lawrence Lindsey – all veterans of
the industry – to pull together some fascinating insight into the impact that
shipping has on all of our lives. As a whole, the shipping business has lifted a
billion people out of poverty over the past 15 years alone, has fed half the
world and kept the other half warm, and has, “raised the standard of living
virtually everywhere by shuttling products and commodities from where
they’re most efficiently produced to where they’re most profitably
consumed.”

And while the authors paint a picture of the long history of mankind and sea
craft – from the Greeks and Vikings to the British merchants who created
the East India Trading Company – they make it clear that shipping is a
specialized and increasingly competitive business. As McCleery writes in his
preface to the book:

In a “perfect market” like shipping, in which brutal competition, chronic

overcapacity and a reliable flow of destabilizing events conspire to give the
industry the lowest cycle-to-cycle financial returns with the highest inter-
cycle volatility of any asset-intensive industry, one might be tempted to
conclude that the business would do nothing but destroy capital… But the
fact is that shipping has contributed to more fortunes than any other
business except technology.

To shed light on this industry - where the ships themselves can cost upwards
of $100 million a piece - that may not get the full credit it’s due for the
economic impact that it continues to have, LaRocco takes a somewhat
unique approach in her book by interviewing and profiling some 21 shipping

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7/10/2020 Shipping: Globalization's Lifeblood

entrepreneurs from all over the world, including ship owners, logistics
specialists, and the financiers who provide the capital to make it all run
smoothly.

For example, LaRocco writes about Nicholas Pappadakis, Chairman of the

International Association of Dry Cargo Shipowners (Intercargo), a native
Greek whose family ties to the sea go back centuries. Pappadakis watched
the recent shipping boom begin in 2003, as shipping rates rose from $8,000
a ship to more than $100,000, and then crash in 2007 – caused not just by
the recession, but also the rise in the number of Chinese-owned ships.
Between 2009 and 2010, some 1,500 new ship owners entered the market,
resulting in a glut and a drop in prices. “My grandmother had a simple
saying about the cycles: 98 ships and 101 cargoes equals boom; 101 ships
and 98 cargoes equals bust,” Pappadakis says in the book.

As the global economy struggles to regain its momentum following the

recession, it’s clear that shipping entrepreneurs like Pappadakis will be
instrumental in making it happen. “World trade, world finance and the
health of the world economy are all inter-related with shipping,” he says.

Also consider that Gerry Wang, CEO of Seaspan Corp., a $6 billion public
company, considers container shipping “the ocean highway” which connects
manufacturers to consumers. Wang says one way to measure the health of a
nation’s economy is through the items shipped to it – via dry bulk, tanker or
containers. Shipping containers alone transport 200 times the volume that
parcel carriers like FedEx , DHL or UPS do while some 99% of all the goods
you see at Walmart are shipped via container. “Without the effective
container-shipping network, you can forget about Walmart, forget about
globalization, and you can also forget about China being the global
manufacturing center,” Wang says.

In other words, it is the entrepreneurs and financiers profiled within this

book that might truly hold the keys to the global economy’s eventual
recovery or collapse. Those are stories worth reading. As LaRocco writes: “I
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7/10/2020 Shipping: Globalization's Lifeblood

hope the next time you see a tanker, you will see much more than just a
tanker.”

Barry Glassman

I explain complex investment and nancial planning strategies to my nancial planning

clients in a way that makes sense to them. I nd that by using interesting… Read More

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