Maritime Economics
In general, maritime economics explains how the shipping market is organized and works, including reasons for sea transport, organization of sea transport,
prices and freight rates determination, ship finance, market cycles, shipping companies return on investment, how shipping company survive depressions,
drivers in ship design, and market forecasts.
Macro Economics
In macro-economics, the maritime economics addresses the questions of where shipping has come from and where it is now, including sea transport and the global economy, and the economic organization of the shipping market.
In macro-economics, the shipping plays a central part in the global economy, including market covering the transport system, the demand for sea transport, the merchant fleet, how transport is provided, the role of ports, shipping company organization and political influences.
Shipping market cycles dominate the industry’s economic thinking, including characteristics of how shipping cycles leads on to a review of how experts have explained the shipping cycle.
The maritime economic model consists of three components, namely supply, demand and the freight rate mechanism, including key variables which influence the supply and demand functions for the shipping industry. Emphasis is placed on market dynamics.
Shipping business is conducted through four related markets dealing in different commodities, namely freight, second-hand ships, new ships and ships for demolition. Emphasis is placed on dynamics of how they are connected by cashflow
Micro Economics
In micro-economics, the maritime economics addresses the questions about the practical issues facing a shipping company, including how the shipping costs and revenues are structured, how is the ship financed, and how does the industry make a commercial return on investment.
In micro-economics, the costs, revenue and financial performance are of importance, including costs and revenues of operating merchant ships, where costs are divided into voyage costs, operating costs, and capital costs. The basis for cashflow analysis includes company accounts, income statement, balance sheet and cashflow statement.
Ship finance is the most important item in the shipowner’s cashflow budget. The ship can be financed in many ways through the world capital markets. This also includes the four main ways of financing ships: equity, debt, newbuilding finance, and leasing.
Risk, return and shipping company economics is offering very mediocre returns over long periods, interspersed by bursts of profitability. This will also include the shipping company investment model. Application of the theory of the firm to shipping companies to establish what determines return on investment in shipping and how the shipping industry prices risk.
Forecasting and Planning
Maritime economics also means analysis and forecasting. Market forecasts cover the market in general, whilst market research
applies to a specific decision.
Read more about uncertainty and risk in investment analysis here