ABSTRACT
This chapter demonstrates the supply and demand framework for shipping economics in brief. The demand for shipping is simply defined as the amount of cargo that requires transportation. The fundamental measures used in the shipping industry are the distance navigated in miles and the volume of cargo transported in metric tons. The supply side of the shipping industry is defined as the shipping fleet available to transport cargoes. The conventional approach to measuring supply is to take the existing fleet size of the industry, subtract existing lay-ups, and factor in a rough estimation of the 'slow steaming' effect. Every ship is rated according to an optimal speed, which depends on its design and initial test conditions. There are four main markets in the shipping business: the freight market, the new building market, the sale and purchase market, and the demolition or scrap market. There is a strong academic emphasis on modelling shipping markets and predicting/estimating the dynamics of the business.
