Abstract

Various trends have reshaped the global maritime and shipping industry. Firstly, many countries have changed the logistic structures, prices, comparative advantages, costs, and supply chains related to the shipping business. Such trends are up to date outlining competition levels in international markets and affecting the integration process to major trading networks. The case study that will be used in the proposal is that of China. The study will look at how the major shipping industries are relying on the demand from China either indirectly or directly. However, there was a slowdown in China that might affect the international trade volumes and economy. The effect was on the demand of commodities since China consumes 50% of most of the raw materials. Some of the sectors affected included: consumer goods, tech hardware, capital goods, and semiconductors. Most developing countries have fueled the need for maritime transport services due to their continuous economic growth and increase in retail trade. Shipping plays a vital role in exports and imports and without these services developing countries would not take part in international trade. With the surge in expertise in supply chains associated with maritime services, most countries are growing their market share in this industry. However, the growing supply and demand for shipping services may result in new markets that might affect the industry’s operations. With many factors such as huge transport costs and oil dependency, many countries are developing strategies to sustain the transportation system and ensure minimization of the scarcity of such services. The proposal will touch on the effects of emerging markets on the global shipping business based on that of China.

 

Impact of New Emerging Markets in the Shipping Business – China

Introduction

Various developments have been experienced that outline the maritime and global seaborne trade forms. Factors that have intensified the growth in the shipping business are increasing the involvement of the private sectors, trade liberalizations, and containerization (Branch, 2007; Peter, 2005). The result of this is the rise in the manufacturing operations to cater for the growing demand for goods, intraregional flows, and the emergence of new supply chains. Growth in the maritime industries has also resulted from the entrance of new markets or players from other sectors (Anderson et al., 2008; Luo & Tung, 2007). This is mostly experienced in developing countries that find new opportunities and interests from countries such as China that have huge competitive advantages in the shipping business. Blair, Yali, and Hagt (2006) assert that macroeconomic conditions also determine the developments in maritime transport which account for the major capacity of universal trade. Despite the claims that the economy of China is facing an economic downturn, the country remains a major player in the shipping or exports and imports in 2016 (Yang et al., 2016).

In Europe, there are struggling economies that have affected the demand for container shipping lines. It depends on the ability of a country to connect with other trading partners to streamline their operations and increase the supply capacity in their markets (Bateman, 2009; Song, & Panayides, 2012). With China determining the maritime transport of other countries, data used will show the capacity of the shipping services in different trade route across the world and reveal how the country has traded with other partners. Challenges that accompany these trade routes will also be used to guide the proposal. To expand transport markets, new policies and strategies aimed at increasing sustainability must be developed.

Statement of the Problem

Research on the effect of new markets in the shipping industry needs to be conducted, since some important facts may be identified that will help with the growth and sustainability of the sector. Some of the factors would be overcoming global financial burden, and control of costs. Therefore, the strategy would need to understand how these new markets impact not only China but also global countries (Behnam, 2004; Rosenberg & Chung, 2008). This is, in particular, looking at the supply chain management and maritime logistics. Answering these inquiries will give more insight into the significance of this proposal and why it should be done.

Purpose of the Study

The research aims to determine the impact of emerging markets on the global shipping business while looking at China’s case. This is a significant study area since it gives a glimpse at the importance of growing the global shipping industry and, therefore, the proposal will use the business reviews and reports to access such information.

Research Question/Hypothesis

The success of the global shipping industry has been viewed from various contexts by different researchers. Here, the most significant question to ask is how China has played a role in the industry and how do they develop strategies that shape its operations. This study will help in the investigation of the Chinese shipping market and how it has affected the international partners leading to impacts on the supply chain management and the ASEAN maritime logistics.

Earlier studies will be employed to help understand these questions and analyze their contributions to economic growth. As part of the research, the investigation will incorporate a research hypothesis which is: The more the need for boosting shipping business and accepting impact from new entrants, the more the need to consider the huge costs associated with increased maritime transport services.

Importance of the Research

The proposal highlights the importance, challenges, and implementation of the solutions to issues facing international shipping business in relation to that of China. Understanding this will further the research on sustainability in the shipping business and add to the novelty of it. Hopefully, we show how different countries trade and its significance to the global growth of this industry and international trade.

Theoretical Framework

Citing Notteboom (2012), maintaining sustainable transport is one of the major challenges facing the transport sector in the 21st century. The guiding theory in this proposal is finding out how sustainability in the shipping industry is to be enhanced through the participation of firms in international trade. The specific focus is on how different countries including China are participating in the supply chain of the industry and their roles in the maritime business. Some of the variables that assist in the formulation of the research question are productivity, first movers in the shipping market, and policies and strategies put in place by these countries to enable sustainable shipping operations. The proposal will try to determine the some of the emerging markets and programs aimed at understanding the research questions through the game theoretical framework.

Literature Review

Liner Shipping Alliances: Past Trends

The creation of strategic alliances between different countries resulted in the growth of the global shipping industry (Cafruny, 1985). These inter-firm collaboration agreements also created collaborative advantage among the firms (Keohane, 1988). There are different grounds for which these type of agreements were created. Some of them are the competitive strategy, social exchange, resource-dependence, and transaction costs (Chapman, Soosay, & Kandampully, 2003; Wu et al., 2006). Since the 1990s, several liner shipping alliances that were created have fueled investigations into the factors that contribute to their increase and issues surrounding them. The main feature of these alliances is stiff competition which has been propelled by economic and political interferences. In the 1960s, container shipping emerged which caused interference in the liner shipping sector. It was initiated in the United States, and its impact is still felt especially with the advent of technology in global trades. It spread to Europe and Asia and has become a competitive maritime strategy for some countries.

Contemporary Shipping

Various authors have attributed third world trade as a means to achieving some distinct objectives that include: marketing, financial, strategic, operational, and financial (Song & Panayides, 2002). China’s shipbuilding industry faced financial challenges that called for the need to upgrade and modify the structure of the industry. A way of improving the branding of the shipbuilding organizations in China is through the promotion of financial institutions to facilitate loans and attract the support of the private sector into this market (Cheng 2011; Nieuwenhuis et al., 2007). According to Anderson et al. (2008), weak macroeconomic conditions experienced in China and the decrease in growth of the sectors resulted in difficult times for the shipping industry. However, Jaffee (2010) states that sectors like the liquefied petroleum gas experienced tough conditions that saw their supply shoot up which attracted development of new projects and initiatives to take advantage of this position.

Before China penetrated this market, many countries used to produce many commodities that are shipped to the different developing countries (Cheng, 2011). This led to increasing prices of commodities which reduced the demand in the economy. Similarly, the container activities faced difficulties which paved the way for the new market for the tanker business. The maritime logistics in other countries still report favorable outcomes despite the small demands that are affecting the rates imposed (Cheng, 2011).

Chinas’ shipping industry experienced both advantages and some few challenges after joining the World Trade Organization (WTO) (Erickson & Goldstein, 2012; Rimmer & Comtois, 2009). Since it is a huge contributor in the international shipping market, it has approximately 230,000 ships that can carry about 50 million tons, which is an enormous percentage of the global market (Notteboom, 2012). The total amount of exported goods to other countries from China is about 84% (Notteboom, 2012).

China’s Economic Downturn- Effects on Shipping Capacity

The global shipping market faced difficult times due to China’s economic deterioration and reduced the demand for other vessels (Song & Panayides, 2012). The decline in the use of oil product tankers led to the emergence of the freight market (Mangan, Lalwani, & Fynes, 2008; Ng, 2012). Such was created due to demand for oil rising at a higher rate than the end-consumption and still the supply of crude oil tankers grew slowly (Harris, 2005; Lorange, 2009). The entry of the Iran into this market interfered with the oil market which translated to the tanker market (Bonacich & Wilson, 2008; Nelson, 2012). According to Zeng et al. (2013), the dry bulk was also hard hit by the downturn, as most of the factories reduced their imports of specific products such as iron ores. Lots of the shipyards that built most of the dry bulk carriers shut down and this affected the shipping operations. Citing Hoovestal (2013), the container shipping lines were also susceptible to failure, since China holds about 30% of universal container traffic.

With the growth of the international high-end maritime market, China, however, prospects at capturing 40% of it till 2020 to support its shipping industry and try to restore it (Gilbert & Perl, 2013). The incorporation of the Chinese shipping activities in line with those of the world market will pave the way for collaboration of foreign capital. The new companies will fuel China’s penetration to international markets and enhance its competitive advantage (Venus et al., 2009); Zeng et al., 2013). This way, China can control new entrants or other foreign firms to comply with its laws and regulations.

Due to the stiff competition in the world shipping market, most of the companies will need to penetrate new markets, such as the transport of commodities to third parties, so as to enhance China’s international structure in the industry (Venus et al., 2009); Zeng et al., 2013). According to Lanteigne (2008), entry permissions granted to other foreign companies will increase the shipping market and China will get more opportunities to talk in international congresses.

Additionally, the global supply of oil rose in 2016 amidst the disruption in developing countries (Yang et al., 2016). The need to relate the global demand and supply of container shipping capacity for containerized goods has risen since 2016 after the deteriorating market in 2015. Weaknesses in these emerging markets and other parts of Europe are being offset by the strong economy experienced in the United States (Yang et al., 2016). According to Brem and Wolfram (2014), the supply chain management in China is expected to fluctuate with the reduction in shipping traffic for the shipping lines rather than those on outbound containers. Findings from the research that will be done will help in understanding how China and other economies are dealing with the impact new markets are bringing to the existing shipping market.

Methodology

The game theory will be used to present firms in the shipping industry and determine their interdependence in this industry. With this approach, one can model the behaviors of different companies in the shipping industry. Besides, the research design will employ categories such as the world seaborne trade and the world merchandise trade to determine data that relates to the hypothesis. It will gauge the growth patterns of the merchandise and the seaborne shipments in different firms over the previous four eras. Past surveys will also be used in determining the projections by different countries including China of their shipping operations.

The liner shipping operations will be accessed from the UNCTAD Liner Shipping Connectivity Index (LSCI). It will offer a better understanding of a country’s access levels to international market environments through the liner shipping network (Jansson, 2012). A random sample of selected countries in Asia, Europe, America, and Africa will be used and their participation in maritime businesses examined. However, the samples from the leading Chinese partners such as Russia, the United States which owns approximately 19% of china’s exports, will be characterized by the following features: ship recycling, ownership, ship building, seafarer supply, and their liner shipping operations (Lun, Pang & Panayides, 2010). The data collected especially from oligopolistic firms in the shipping industry will determine how different strategies set by each of them affect others directly in terms of shipping capacities, supply chains, strategies and overall international shipping trade (Lun, Pang & Panayides, 2010).

Conclusion

Maritime transport has changed in the recent past due to the emergence of new markets and other factors that affect its operations. China has tried to improve its shipping industry by allocating more funds from private sectors to increase more cargo ships to facilitate its shipping operations. It also joined the WTO, and this move led to various results. For instance, moving to the WTO will open markets for the local Chinese companies and increase foreign trade. Therefore, it has to improve its services to promote the world economy, since it depends on this market too.

It is not just China that plans on improving its shipping activities; there is a rising need across the world to do the same. For this proposal, it is still a concern finding out how developing countries face the challenge of transitioning to sustainable and favorable maritime logistics and supply chains. Therefore, they need to formulate programs and strategies that encourage not just freight sustainability, but also economic development.

 

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