Understanding Shipping & Global Commerce

There are many aspects to our economy. Some are much more discussed than others. For example the information market brought about by the internet and companies such as Yahoo! And Microsoft is often discussed in the media. Also, sectors like retail are brought up in conversation quite often – perhaps due to the fact that they pervade our high streets and have become recognisable to almost everyone.

What you don’t hear too much about these days is shipping. It’s funny that this would be so little discussed as it’s absolutely vital to global commerce. Jeremy Penn, chief executive of The Baltic Exchange called shipping “the global economy’s enabler”, illustrating that shipping and commerce go hand in hand with one another.

Let’s explore various aspects of shipping in more detail to understand its role in the global economic machine more clearly.

The clue is in the name, the vast majority of shipping takes place by boat. You could technically ship things by air, sometimes called air freight, but this would only be necessary in the event that goods need to be transported very quickly. In any case some goods, such as machinery or large volumes of oil and raw materials, may be far too heavy to transport by air.

It’s about economics too; the cost of jet fuel for air travel is so expensive that it may mean the cost of shipping is too high that it becomes economically unfeasible. Oil tankers and freighters use a more economical fuel known as bunker fuel, which is thicker and burns less readily than aviation fuel does.  Interestingly, bunker fuel is paid for by mass and not by volume. This means fuel testing needs to be carried out in order to determine viscosity, density, water content and overall mass. Overall, the fuel economy is much more efficient and therefore ships are a cost-efficient method.

The final part of the appeal of shipping by boat is the fact that volume is possible with large oil tankers and freighters. Typically, the biggest oil tankers are capable of holding 500,000 tonnes, a huge amount more than any aircraft ever could.

Most shipping takes place on ships, but there may be a need to ship by rail. Rail freight is appealing when the location for the shipment is not near a port. For example, transporting goods across the continental United States is a very simple task to achieve by rail.

Many African nations are developing rail links so as to ship between countries that may be landlocked. This is essential to enhance trade, but negates the need for any ship based freight transport. Rail is still very efficient, and is also very reliable.

Rail freight companies may well offer incentives to people looking to ship goods in order to encourage rail based commodity transport.  This is also a very environmentally friendly alternative to road based transport as substantially less fuel is used, which is appealing to certain types of business.

Shipping is important to the global economy, and to illustrate this all you need to do is look at the statistics. It’s no coincidence that the richest nations on earth are also the ones that ship the most goods. A twenty-foot equivalent unit, the size of the shipping container, is what is used to measure the amount of commerce that takes place – these are sometimes known as TEUs.

China shipped 31.3 million TEUs in 2010 according to the World Shipping Council and the United States, by contrast, shipped 11.2 million. No wonder China is expected to become the biggest economy in the world by 2016.

Shipping is crucial to export and import in the global economy, and the numbers of shipments directly correlate with GDP. It’s necessary to look at the overall picture, this way you can understand the role that shipping plays in global commerce and the economy.

The seas are constantly afloat with gigantic freighters delivering all measure of goods to various places throughout the world. Bananas to Britain, motorcycles to Mozambique or perhaps donuts to Dublin – everything we use is shipped from somewhere.

Whether it’s over a short distance from a local farm or the farthest most exotic corners of the world – it all counts as shipping and the global economy depends on it.

Thanks for reading. Please check out the rest of my work on Instructables. I’d especially recommend “5 Steps To Becoming A Successful Project Manager”.

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