Greek Shipping

Excerpts from: Greek Island Social Networks and the Maritime Shipping Dominance they Created: Onassis, Lemos and others [Kindle Edition]






  1. Historical Development


The development of worldwide shipping and the impacts upon society could be seen first with the ancient trading culture the Phoenicians.  The Phoenicians are credited with the development of a manpower sailing vessel called the bireme.  This galley, a ship powered by rowers, was able to harness the wind when it was blowing from astern.  They had not learned how to sail into the wind, in order to go into the wind the vessels were galley powered or manpower.  The Phoenicians were famed for their monopoly on a purple dye which was made from the murex snail.  The purple dye was used for, among other things, royal clothing.  Additionally, the Phoenicians are credited with the development of the alphabet.  The Phoenicians trading territory was the Mediterranean region, consisting of the Fertile Crescent of the Levant, and most of theMediterranean Sea.  The development of this trading empire however relied on sea going vessels which could economically move products.


In Chapter 3 of the Wealth of Nations, Adam Smith (1776) argues that an economy cannot develop without specialization of labor, and key to the specialization of labor is the size of the local market.  Smith states:


“…As by means of water carriage a more extensive market is open to every sort of industry than what land carriage alone can afford it, so it is upon the sea — coast, and along the banks of navigable rivers, that industry of every kind naturally begins to subdivide and improve itself, and it is frequently not until a long time after that those improvements extend themselves to the inland parts of the economy…  A broad wheeled wagon attended by two men and drawn by eight horses in about six weeks this time carries and brings back between London and Edinburgh nearly 4 tons weight of goods.  In about the same time a ship navigated by six or eight men, and sailing between the ports of London and Leith, frequently carries and brings back 200 tons weight of goods.  Since such, therefore, are the advantages of water carriage, it is natural that the first improvements of art and industry should be made where this convenient sea opens the whole world to market for the produce of every sort of labor   (p. 22).”


A small market allows for little specialization of labor, the larger the market the greater the specialization.  Adam Smith saw sea shipping as a source which could open up markets to additional specialization.  This author would argue that economic development has gone hand-in-hand with the development of cheaper and ever cheaper forms of transportation in general, and sea transportation specifically, which in turn has allowed ever more specialization or labor.


  1. B.    Specialization of Shipping


  1. 1.     Dead Weight Ton Capacity


DWT refers to the dead weight tons in metric tons, this is the cargo capacity of the vessel and there are multiple tonnage ratings referring to specific weights of ships.  The International Maritime Organization adopted the following additional measurements of tonnage in 1969:

Gross tons and net tons:

The convention meant a transition from the traditionally used terms gross register tons (grt) and net register tons (nrt) to gross tons (GT) and net tons (NT).  Gross tonnage forms the basis for manning regulations, safety rules and registration fees.  Both gross and net tonnages are used to calculate port dues.  The gross tonnage is a function of the moulded volume of all enclosed spaces of the ship.  The net tonnage is produced by a formula which is a function of the moulded volume of all cargo spaces of the ship.  The net tonnage shall not be taken as less than 30 per cent of the gross tonnage.  (International Maritime Organization 1982). 


This book will mostly use dead weight tons (DWT).


The Phoenicians ships were capable of carrying 50 to 100 DWT.  These ships were the state-of-the-art until the Romans, around 100 B.C.E., developed larger cargo vessels capable of carrying up to 1,000 DWT.  However, these would be considered barges and not particularly seaworthy.  With the development of the Marconi rig ships, the Phoenicians learned how to sail at about 45° angles into the wind, this was called tacking into the wind (no sailing ship can sail directly into the wind).


Until the development of the steamship, sailing ships ruled the waters.  In the 1700 and 1800s two-masted ships called Briggs could carry approximately 150 to 200 DWT.  A three-masted Barque could carry 250 to 700 DWT, a three or four Masted ship called a Barquentine could carry 250 to 500 DWT.  Some ships were  designed for speed, such as the famed tea clippers.  The Cutty Sark, a clipper ship built in 1869, had a capacity of 921 DWT.  The tea clippers were considered extremely fast for their era.


The initial ships built for steam were still wooden ships, and wooden steam ships were limited to less cargo capacity than the sailing ships because of the added weight of the steam engine.  What they gave up in cargo capacity they made up in speed and the ability to make way in most conditions.


With the development of steel as a boat building material the cargo capacity of ships exploded.  The famed liberty ships built by the United Statesduring World War II had a cargo capacity of 10,685 DWT and were manned by 41 men.  The United Statesbuilt 2,751 of the ships between 1941 in 1945.  This is the largest number of ships ever produced from a single design, which, as we shall see later, will play a part in the development of the Greek shipping industry (Wikipedia “Liberty Ship”).


Ship capacities since World War II have grown continuously and are now constrained primarily by the abilities of ports to serve the vessels.  The very largest of the tanker and dry bulk carriers can only be served at few ports which have the water depth and the shore facilities necessary to handle these large ships.


  1. 2.     Break-bulk


Prior to the invention of the container used for a container ship, ships hauling general freight required the use of stevedores for loading and unloading.  This was a time consuming and painstaking process as each ship was required to be unloaded and loaded by hand.  Each individual item contained in the ship had to be handled separately, this is what was called break bulk shipping.  Break bulk shipping entailed many more risks such as breakage, theft, etc., and the stevedores were controlled by unions typically in the developed world.


  1. 3.     Tanker


Tankers are ships used to haul liquid products, they are typically broken down into clean and dirty tankers.  Clean tankers would haul such products as fresh water, wine, molasses and other food products, another category of clean tankers would be called chemical tankers.  These tankers haul such products as ammonia chlorine and typically range in size from 6,000 to 60,000 DWT.


Dirty tankers primarily haul crude oil, and capacities of these tankers are generally used in names of identification.  The Suezmax tanker is named such because it is the largest vessel which will pass through theSuez Canal.  The current channel in theSuez Canalallows for a maximum of 20.1 m draft.  The typical Suezmax ship will haul about 240,000 DWT and has a beam of 50 m.  A very large crude carrier (VLCC) has a capacity of 200,000-300-000 DWT.  An ultra large crude carrier (ULCC) has a capacity of 320,000-550,000 DWT.  Other tanker sizes include a General-purpose Tanker with a capacity of 10,000-25,000 DWT, a medium-range tanker commonly called a Panamax tanker with capacities of 60,000-80,000DWT, and the Aframax tanker with capacities of 80,000 to 120,000 DWT.  Figure 3.1 is the webpage specifications of an Aframax Tanker taken from the website of Teekay Corp, a publicly traded corporation specializing in tanker operations Teekay (2011).


Figure 3.1 Specifications of an Aframax Tanker (Teekay Corp 2012).


The largest tanker ever built, and to this date the largest ship ever built, was rated at 564,765 DWT and has a length of 458.45 m.  Originally named Seawise Giant she was built in 1976.  In 1986 during the Iran-Iraq war she was attacked, but not sunk, in the Strait of Hormuz.  She was renamed Knock Nevis and served as an oil storage facility in the waters of Qatar.  In 2010 she was delivered to be broken up and turned into scrap at a shipyard in India (International Maritime Organization 2011).


  1. 4.     Container


Container ships are ships designed to haul only containers and have largely done away with break bulk shipping.  Today the containers are largely packed at factories and hauled by truck or train to the port facilities and in turn handled by Gantry cranes which load and unload these containers on the ships.  Containers have eliminated tens of thousands of jobs that were required when shipping was done by break bulk.  The capacity of the container ship is measured by TEU’s.  Over time these ships have become increasingly larger. 


Two-thousand and six saw the launch of the largest container ship at the time, the Emma Mærsk.  She had a rated capacity of over 11,000 TEU, but in some circumstances can carry over 15,000 TEU, depending on the weight.  The ship was rated at 156,000 DWT and could make a trip from Hong Kong around the Cape of Good Hope toGermany with only 14 as crew on board. 


Figure 3.3 is a graph comparing the cost to ship a TEU in relation to the change in the continuous commodity index.  The continuous commodity index comprises 17 commodity futures that are continuously rebalanced: these include cocoa, coffee, copper, corn, cotton, crude oil, gold, heating oil, live cattle, live hogs, natural gas, orange juice, platinum, silver, soybeans, sugar number 11 and wheat.


Figure 3.3 Cost to ship a TEU in relation to the change in the continuous commodity index (Rodrigue 2012).


  1. 5.     Dry Bulk


Dry bulk carriers are the workhorses of the international fleet, the ships are designed with open holds which can be loaded with cranes or specialized loading facilities.  The ships can haul any dry products, but the five major bulk are iron ore, coking (metallurgical) coal, thermal coal grain, and bauxite or alumina (Stopford 1997).  The minor bulk commodities that the ships haul would include steel products, forest products, cement, fertilizer, manganese, sugar, soy milk, scrap, coke, pig iron, and rice.  The seaborne trade in 1995 in all liquid and bulk commodities (not including container trade)  amounted to 3,770 million tons (Stopford 1997).  In 2011 this had grown to 7,843 million tons (International Maritime Organization 2011).


“In terms of size, the world’s bulk carrier fleet has three categories; ships of up to 50,000 DWT are known as ‘handy-sized’ (world fleet size 3212 ships), ships of 50,000 to 80,000 DWT are known as ‘Panamax’ (being the largest ships able to transit the Panama Canal, world fleet size 1453 ships), and ships of more than 80,000 DWT are known as ‘Capesize’ (world fleet size 796 ships)” (International Maritime Organization 2011).  Bulk carriers embrace a number of variations – single or double hull, with or without their own cargo-handling equipment – but all are characterized by the huge hatch covers that can be rolled or lifted away to reveal the cavernous holds beneath.


  1. C.    Economics of Shipping


The movement of goods by sea borne freight is cheap, it is ridiculously cheap, and it’s difficult to understand how inexpensive this is unless you can see an example. 


In 2011 this author was involved with a coal company which mined metallurgical coal (metallurgical coal is a coal with specific qualities that allow it to be turned into coke, coke is used in the Bessemer process to turn pig iron into steel and is essential for this process) in northern Alabama.  In order to move the coal the company first needed to develop its market.  Today, becauseAmericachooses to export tasks that it finds to dirty, and the pollution associated with these tasks, that market is primarilyChinaandIndia.  This coal company competed with metallurgical coal supplies out ofAustraliaandCanada, and therefore needed to have a cost of coal delivered to the market at a price which could compete with coal delivered from closer sources.  The company knew its cost of production; the great unknown was the cost of freight.


An analysis was conducted by consultant Craig Stepan ofMobileAlabama.  Stepan was a former logistics officer for US Steel and had much experience in moving coal and coal products, as well as iron ore and steel.  Here’s the breakdown of the various steps necessary in the movement of a ton of coal.  The coal needed to be moved approximately 12 miles from the mine in northernAlabamato barge loadout facility on theTennessee River.  The cost to move a ton of coal 20 km by truck was approximately $12 per statute ton.  In the United States coal is sold and moved and calculated in terms of statute tons or “net tons” the two terms are used interchangeably both are the same weight which is 2000 pounds or 907 kg.


Once the coal is loaded on the barge, the barge, together with other barges, would be taken in a tow.  Each barge would be capable of holding 1500 net tons.  A total tow could be anywhere from 8 to 12 barges in the Tennessee River, and even larger on theMississippi Riverwhere the locks are much larger.  The determining factor on how large a tow will be is the size of the waterway and the economics of breaking apart a tow to get it through the locks.  It was determined that it was not economical to break apart a tow and an eight barge tow was chosen.  This tow was then taken from the barge loadout facility on the Tennessee River into the Tennessee-Tombigbee Waterway, which ended up in the Black Warrior River which emptied into theportofMobileAlabama. MobileAlabamahas a large coal shipping terminal calledMcDuffieIsland.  The cost of moving a ton of coal the approximately 850 km from the Tennessee River into the Tennessee-Tombigbee Waterway and down the Black Warrior River toMobilewas about $38 per ton.  Once the coal had arrived at the McDuffie coal terminal inMobileAlabamait was then loaded onto a Panamax size dry bulk carrier.  Once the coal is loaded on a ship and enters the international market all coal is measured in terms of metric tons, one metric ton is approximately 1.102 net tons, 2205 pounds or 1000 kg.


A Panamax size dry bulk carrier draws (the “draw” of the ship is the distance a ship protrudes under the water line of the vessel at its full capacity) about 45 feet.  A Panamax ship is the largest size vessels which can pass through thePanama Canaland the typical weight restrictions would be about 75,000 dead weight tons (DWT).  However, the port in which the coal was to be delivered inChinahad a shallower bottom.  Therefore, for this company’s calculation purposes, it needed to restrict the draw, thereby limiting the tonnage thePanamaship could haul to about 59,500 metric tons.  The cost of moving a metric ton from the McDuffie coal terminal inMobileto a central coal distribution location inChinawas about $46 per ton.  So let’s examine this again to point out the obvious economics of sea shipping.

These are per net ton to the ship and then metric ton from the ship to china.

  • $12 by truck for approximately 20 km ($0.60 per ton per km)
  • $38 by barge for approximately 850 km ($.0447 per ton per km)
  • $46 by Panamax dry bulk ship for approximately18,000 km (one way) to Shanghai ($0.00255 per ton per km)

Please keep in mind that the shipping costs were assuming that the ship was only hauling freight in one direction and returning empty.  Unfortunately there are very few bulk commodities that theUnited Statesimports fromChina.  The trade betweenChinaand theUnited Statesamounts to Dry Bulk Ships hauling raw materials toChinaand returning empty.  Yet container ships come toAmericafull to unload containers and return empty toChina.








Above is an example of the movement of dry bulk materials, a more particular interest to readers will be the movement of containers or TEU (20 foot equivalent units) which are moved on container ships and bring the bulk of the consumer products to our shores from the producers located primarily inAsia.  In the week this author was writing this section he listened to the Coracle Shipping Knowledge Podcast for January 13, 2012.  In this podcast the narrator pointed out that the cost of shipping a TEU from Asia toEuropewas ranging from $575-$600.  As pointed out above a TEU is a container that measures 8 feet wide by 8 feet high by 20 foot long, with a volume capacity of about 1250 ft³.  Most containers shipped today are 8x8x40’ this would be measured as two TEU’s.


  1. D.    The Four Shipping Markets


There is a common belief that sea shipping companies make their money from the movement of commodities.  This would only be partially true.  While the operation of a ship is primarily involved in the movement of commodities, the profit and losses of a shipping company is often more highly impacted by the company’s ability to trade in what are called the four shipping markets.


  1. 1.     Freight Market


The freight market is what is most commonly thought of when thinking of ships and shipping.  The original freight market as an exchange opened as the Baltic shipping exchange in 1983.  This was in market where agents for ship owners and agents for companies needing freight ship would meet and agree to “fix” a ship.  The terms of the contract were negotiated and the respective principals were expected to abide by the terms that the agent negotiated.  Two types of contracts are possible when negotiating a ship.  One would be a freight contract whereby shipper agrees to transport cargo at a fixed price per ton and the other is called a ‘time charter’ which is where the ship is hired by the day, week, month, year, or years.


The shipping market is extremely volatile; when this author started examining the shipping markets in 2007, trip charter contracts were nearing an all-time high with daily rates approaching $75,000 per day for a Panamax dry bulk ship.  One year later the same rates had fallen to below $15,000 per day.  The ship owners who had chartered their boat in 2007 to a counter-party for a long-term time charter felt that they had made the right decision.  Giving the movement of the market however, this turned out not to be the case in many instances, because the counterparty (shipper) chose to either renegotiate the terms of the time charter or simply walk away and break the charter contract to be fought out in court.  For example, let us examine a press release by Greek Shipping Company Star Bulk Carriers.  The press release shows a repudiation of a long term charter contract at $38,000 per day and the new employment of the ship on the volatile spot market that at the time was paying $29,400 per day until April 2012:




ATHENS,GREECE, January 9, 2012 – Star Bulk Carriers Corp.  (the “Company” or “Star Bulk”) (Nasdaq: SBLK), a global shipping company focusing on the transportation of dry bulk cargoes, today announced that the vessel Star Sigma (“Star Sigma”), which was time chartered to Pacific Bulk Shipping Ltd.  ofHong Kong(“Pacific Bulk”) until October 2013 at a gross daily rate of $38,000, was redelivered to the Company.  Pacific Bulk has agreed to pay the Company a lump sum of $5.734 million in cash for the early redelivery of this vessel.  The Company received a cash installment of $3.5 million on January 5, 2012 and the remaining balance of $2.234 million is scheduled to be paid by Pacific Bulk on/or about January 20, 2012.  In addition to the lump sum payment, Pacific Bulk supplied Star Sigma with 1,027 metric tons of fuel, valued approximately $0.7 million.


Following its redelivery to the Company, the Star Sigma was employed in the spot market under a voyage charter, at a gross daily time charter equivalent rate of approximately $29,400, and is expected to complete its voyage in early April 2012.


About Star Bulk

Star Bulk is a global shipping company providing worldwide seaborne transportation solutions in the dry bulk sector.  Star Bulk’s vessels transport major bulks, which include iron ore, coal and grain and minor bulks such as bauxite, fertilizers and steel products.  Star Bulk was incorporated in theMarshall Islandson December 13, 2006 and maintains executive offices inAthens,Greece.  Its common stock trades on the Nasdaq Global Market under the symbol “SBLK”.  Currently, Star Bulk has an operating fleet of fifteen dry bulk carriers, consisting of seven Capesize, and eight Supramax dry bulk vessels with a combined cargo carrying capacity of 1,625,943 deadweight tons.  The average age of our current operating fleet is 10.6 years. 


Forward-Looking Statements

Matters discussed in this press release may constitute forward-looking statements.  The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business.  Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. 


The Company desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation.  The words “believe,” “anticipate,” “intends,” “estimate,” “forecast,” “project,” “plan,” “potential,” “may,” “should,” “expect,” “pending” and similar expressions identify forward-looking statements. 


The forward-looking statements in this press release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, examination by the Company’s management of historical operating trends, data contained in its records and other data available from third parties.  Although the Company believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond the Company’s control, the Company cannot assure you that it will achieve or accomplish these expectations, beliefs or projections. 


In addition to these important factors, other important factors that, in the Company’s view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies and currencies, general market conditions, including fluctuations in charter rates and vessel values, changes in demand for dry bulk shipping capacity, changes in the Company’s operating expenses, including bunker prices, drydocking and insurance costs, the market for the Company’s vessels, availability of financing and refinancing, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, vessels breakdowns and instances of off-hires and other factors.  Please see our filings with the Securities and Exchange Commission for a more complete discussion of these and other risks and uncertainties.  The information set forth herein speaks only as of the date hereof, and the Company disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this communication.


Simos Spyrou


Star Bulk Carriers Corp.

c/o Star Bulk Management Inc.

40 Ag.  Konstantinou Av.

Maroussi 15124


Investor Relations / Financial Media:

Nicolas Bornozis


Capital Link, Inc.

230 Park Avenue, Suite 1536

New York,NY10169

Tel.  (212) 661-7566