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Back Βρίσκεστε εδώ: ΑΡΧΙΚΗ Conference Conference 2018: The Global Impact of Shipping George A. Gratsos speech at TheSeanation Conference

George A. Gratsos speech at TheSeanation Conference

GRATSOS 655x823

Dear SeaNation,

My speech came from notes that I had written and covered points as I thought appropriate at the moment. I have reconstructed the elements of my speech from my notes.

As Peter Drucker, the father of management consulting said:

“Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.
Marketing is the distinguishing, unique function of the business.”

Today, when top management is surveyed, their priorities in order are: finance, sales, production, management, legal and people. What is missing from the list is marketing and innovation.

Today’s shipping contribution to “marketing and innovation” is very little.
• Cost of transport: about 50% depends on change in cost of ship
• Shipyards/Designers: On standardized ships, Owners have little say
• Shipowner’s contribution: to run ships cost efficiently with few “off hires”

What do shipowners want to accomplish?
Customers and Receivers move cargoes, Charterers are only intermediaries.
Agent Based Modeling is far more important than any mathematical, stochastic modeling based on assumptions which rarely play out.

You must understand what motivates people to understand trade flows and act accordingly.

In the 19th century Greeks were traders who, with their ships executed trades. Famous trading houses in Russia, Romania and elsewhere were the Vagliano brothers, Skaramanga, Sifneou brothers, Rodokanaki, Negreponte, the Ralli brothers, the Embiricos brothers and others including Theofilatos, Stathatos, Dracoulis, Gratsos (all from Ithaca) who started from Braila, Romania (Theofilatos built the first Greek cargo steamer in 1873 appropriately named “ITHACA”).

Instead of sticking with trade, most Greek owners eventually became only shipowners and ship managers owning the assets rather than being more closely associated with the cargoes being transported.

An airline arranges for people’s transport, they mostly lease the aircraft to serve their customers. Hotel operators create “experiences” to attract tourists; we have now become basically “taxi drivers”.

We originally were “efoplistes” (“armateurs” in French). People who utilized ships to execute their trades. Not anymore. We now buy assets in order to trade and try to make a profit.

Shipping carries about 90% of world trade transporting low value goods. The airline industry transports less than 1% of world trade by volume but possibly about 40% by value and the most passengers by far. This is a development that left us transporting basic but uninspiring cargoes very economically, cost and energy efficiently but with few international supporters.

Today airline operators who pollute about 200 times more per ton/kilometer than what shipping does, point fingers at us calling us polluters! This just because we are cost and energy efficient transporters who are rarely in the limelight.

Unfortunately in a world of media and flamboyance we don’t feature in order to relate our true achievements which are cost and energy efficient transport for the vast majority of world goods.

Here it is important to understand the very important paper “Time as a Trade Barrier” by the National Bureau of Economic Research (USA) 2012 which states: “A large and growing share of world trade travels by air.

We model exporters' choice between fast, expensive air cargo and slow, cheap ocean cargo, which depends on the price elasticity of demand and the value that consumers attach to fast delivery.

We use US imports data that provide rich variation in the premium paid for air shipping and in time lags for ocean transit to extract consumers' valuation of time. We estimate that each day in transit is equivalent to an ad valorem tariff of 0.6 to 2.1 percent (of the cost goods transported). The most time-sensitive trade flows involve parts and components trade.”

This notion is what drives China to create a trans Asia railroad link from China to Europe cutting transport time from about 30 days to about 15, and also what drove COSCO to invest heavily in the port of Piraeus in order to reduce transport time by a few days by ship and train to central Europe.

We must be aware of these factors and act accordingly.

We must consider the fact that “slow steaming” to reduce ship emissions will cause modal shift moving ship cargo to faster rail or road transport that will emit substantially more. In our thinking we must always factor the “Time as a Trade Barrier” effect.

Understanding Demand
To try to better understand shipping as we practice it, it is important to understand economic cycles and how they affect demand. This can only happen with deep knowledge of how economies function over time as they develop.

Simplistic analysis as provided by many pundits and even academics seem to fall short.

One must have a good grasp of industrial development, cost structures and related elements that drive people to choose cargo quality, sources and processes for their development. Business as usual mentality always seems to fail.

Everything that affects shipping is ever changing. We must adapt to survive.

 

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