Economics of the Markets for Ships

The newbuilding and scrapping markets determine the capacity available for maritime transport. By shipping raw materials, intermediary goods, and final goods around the world, the different types of vessels facilitate world trade in goods. The second-hand market differs as exchanges in this market allocate vessels among shipowners without affecting the total transport capacity. In this chapter we analyse the structure and functioning of the different markets for ships. There are several agents in these markets, and no individual shipping company, yard, or scrapping firm can dominate the market. The scrapping market will be controlled more strongly following the strengthened concern for spills of dangerous materials at the scrapping sites. We also investigate developments in ship prices and market values over the last 20 years. Ship value ideally reflects the expected future profit from operating a vessel for the rest of her economic life.