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Greece

Capital Athens
Time Zone EET (GMT+2)
Country Code 30
Mobile Codes 690,693,694,695,697,698,699
ccTLD .gr
Currency Euro
Land Area 131,990 sq km
Population 11.3 million
Language Greek
Major Religion Orthodox Christianity

Greek Shipping Sector Moves Indicate Smooth Sailing Ahead

By Ioannis Michaletos in Athens

(The second in an occasional series of Balkanalysis.com business intelligence reports).

Over the past year, the Greek state has been battered by an unprecedented debt crisis, resulting in a widespread economic downturn in the domestic commercial and service sectors.

According to the latest figures issued by the Greek statistics service, GDP for the last quarter of 2010 was -4.7% and similar figures are expected for 2011, before an eventual growth period. The latter is only estimated to be reached sometime between late 2012 and early 2013, however.

A Prescient Analysis: Greek Shipbuilding Investment

Amidst this gloomy economic news, however, what should also be considered is the dynamic of the shipping sector in Greece, which boasts the world’s largest merchant fleet, and which operates globally. Greek shipping interests today are benefiting from the general increase in global trade, and particularly in the growth of new emerging powers like China and India.

In the present day, some 1,200 shipping companies are located in Athens’ port of Piraeus, the main port of Greece and one of the largest in the eastern Mediterranean. It is estimated that more than 250,000 persons depend on shipping activities in Greece, directly or indirectly, and that the industry annually generates more than $33 billion. Shipping has thus greatly assisted keeping the economy afloat in a country that suffers from increased de-industrialization, high unemployment and tightening austerity measures.

In 2009 the Greek-owned fleet measured 2.974 vessels (More than 1,000 gross tons), which accounted for 14.18% of the global merchant fleet. In terms of capacity, this amounted to 173.54 millions of dwt.

By the end of December 2009, some 748 ships had been ordered over the course of the year by Greek companies; these vessels had a total capacity of 64.9 million dwt. Interestingly, Greek maritime companies traditionally have tended to invest in new ship-building during times of global recession, so as to receive their orders just in time for the anticipated economic upturn to materialize.

In a late 2005 article by the present author for Balkanalysis.com, it was noted that “It is widely assumed that the ‘righteous circle’ of shipping will end around 2010… the assumption that the cycle will be completed in a few years means literally that the analysts have predicted a slowdown of world trade. By closely monitoring the shipping industry, very illuminating highlights can be made regarding wider economic and political affairs.”

The above example illustrates two things: firstly, that the Greek shipping interests had already predicted the slowdown, and the coming 2008-09 global crisis; and secondly, that Balkanalysis.com had at that time pinpointed an important aspect of Greek maritime sector affairs, in the larger global business context, through continuous monitoring of relevant business intelligence.

A High-Risk Business

The importance and the vital role of business-related intelligence is of outmost importance when dealing with a globalized sector such as maritime trade and only a broad and comprehensive assessment could provide results, especially in terms of pointing out the exact cycles of growth and decrease.

Back in early 2010, the Greek merchant sector, due to its continuous building programs, managed to maintain a fleet in which the average vessel is 11.6 years old on average, compared to the global average of thirteen-year-old ships. This difference translates into better chartering deals worldwide, and lower insurance premiums. Simply put, newer ships have more advantages and a newer fleet is considered to be a big plus.

Therefore, the correct interpretation of global trade trends can be illustrated to a great extent by analyzing investment moves made by the Greek shipping companies as related to fleet upgrades, since they traditionally have been able to properly estimate the up and downs of the global system, and in the process have also attempted to extract as much advantage as possible from this estimating.

Thus, Greek shipping interests tend to sell when prices are high, when the economy seems to be doing fine, and to invest in ship-building when others have quit the business or have chosen to sell. It’s a high-risk game in which the ones that remain cool and industrious can look to multi-billion-euro potential profits, in terms of the decades ahead or, in some cases, just a few years.

2011: An Anticipated Upswing

A recent report released by the United Nations Conference on Trade and Development (UNCTAD), entitled Review of Maritime Transport 2010, has revealed that the previous years of investments and programming by Greek companies  has, as expected, started bearing fruit. 2011 is predicted to be a more dynamic year, and this will greatly benefit the ailing Greek economy. More specifically, the UNCTAD report estimated that the total capacity of the Greek-owned fleet has reached 3,150 vessels, totalling 186,095 million dwt.

In mid-2010, some 15.96% of the global merchant fleet was recorded as being owned by Greeks, a considerable increase over the previous years characterized by global recession. Now, however, a new global upturn has begun- one that is likely to fill the coffers of the trading and transport companies.

After Greece, Japan follows as the second major global shipping power, with China in third place and Germany fourth. It is quite interesting that Greece thus figures higher than these superpowers of industry, trade and export, despite having a population of only 11.3 million people and a limited trade presence, even in the peripheries of Europe.

China is the key factor that explains the virility of the global shipping trade even in times of recession. For example, in 2009, Western Europe witnessed a 38.2% drop in imports of iron ore, whereas China saw a 38.9% increase over the same period. It thus appears that the world was saved from a 1931-style depression at the last moment, due to the dynamics of the Chinese economy along with those of India, Brazil and other emerging economic players.

Greek shipping companies have operated in such countries for decades, and have cleverly made use of their traditional advantages soon enough so as to avoid the recession. It is likely that this saved the Greek economy from collapse in 2010, when the country accepted IMF patronage after the series of public blunders and governmental mismanagement that brought Athens to such a delicate situation.

In 2010, according to research conducted by the Ν. Cotzias Shipping Consultants company, Greek companies invested $9.3 billion, and bought 325 vessels, having a total capacity of 22.8 million dwt. Of those ships, 82 were oil tankers (most of them of the VLCC type), a move that signals confidence that the oil trade will flourish in the coming years and in parallel that the oil prices will inevitably increase and break the $100 barrier.

In total in 2010, ship transactions totalled $30.9 billion, meaning that Greek ship-owners bought almost 33% of the available ships for sale, with the Chinese having a 9% share and the Japanese a 16% share. Therefore, Greeks bought more ships in terms of value than both the Chinese and Japanese companies combined during 2010- a clear signal of overall confidence from Greek ship-owners that global trade is soon to boom, and that they should therefore seek to acquire vessels in order to meet demand before their gigantic competitors.

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