When I was a teenager, I read thick books about maritime adventures, in which a hundred years ago the world was conquered by brave seafarers on ocean-going ships. In particular, I found the English TV-series The Onedin Line very exciting. It showed how between 1860 and 1886 the owner of The Onedin Line sailing company, Captain James Onedin, sometimes got rich and sometimes lost everything in his maritime business.

The shipping company Onedin Line transported cargo on sailing ships from Asia to Europe and back. Sometimes the ships were wrecked and the shipping company lost a lots of money, but most of the time the shipping company made fabulous profits. At the same time, the entire shipping industry was undergoing a revolution, when steamships, being reliable and smooth sailing, replaced sailing ships that depended on the wind. On the other hand, due to their technology, steamships were also prone to breakdowns and dependent on coal. James Onedin was able to foresee that due to the coal workers' strike, the price of coal would rise and the availability would decrease, so it was then that big profits could be made with sailing ships.

It would be easy to think that this exciting time in shipping companies is far behind. But on the contrary, the shipping industry is still an industry that shows big profits and losses; and where business courage and foresight are rewarded.

There are many examples of brave and successful shipping company managers. Everyone remembers how Tallink conquered the traditional Finnish shipping company Silja Line by taking a big risk. At the moment, we can follow how Viking has already bought a significant share of the Eckerö shipping company. What this will lead to, we don't know yet.

A few years ago, during the corona crisis, companies buying stuff from abroad complained about uncertain supply chains – they couldn't get containers or these were very expensive. However, those were very very productive times for shipping companies: container shipping companies made fabulous profits.

During the Corona period, the world simply did not have enough containers to offer. This was due to the pandemic restrictions that slowed down the unloading and loading of ships in ports. Such a large part of the containers was actually outside the ports on vessels waiting to enter the port, and thus there were not enough containers to recirculate and transport cargo. The blockage of the Suez Canal due to MS Ever Given naturally did not make the situation any easier, as a large part of the ships had to wait to get past Africa or go around the continent. When there is a big shortage of containers, customers were ready to pay a several times higher price for them. And the bold shipping companies that had invested in big ships made big profits.

Shipping market

There are two ways to achieve profit in the shipping industry. First, operationally, when cargo or passengers are transported from one port to another in such a way that the income received exceeds the expenses. Second, profit can be achieved through tonnage management, which means selling, buying and chartering ships at the right time. The latter way is where the biggest profits or losses are made.

In good times, when the demand for cargo transport is high, shipping companies can benefit from being able to speed up transport. Faster transportation of products means greater frequency, i.e. more departures and thus the possibility of transporting more cargo. This can bring a considerable amount of extra income to the shipping company every year. 

The same principle also applies to the opposite situation. When there is a downturn in the global economy, the amount of goods to be transported is too small compared to the available ship capacity. In that case, the shipping companies should slow down the speed of the ships, in which case they will transport less goods, and the global shipping capacity will decrease.

In addition, when the demand is high, shipping companies invest in new ships. Often, shipping companies all invest at the same time, which leads to an excessive increase in sea transport capacity. This in turn leads to falling markets after a few years, and bankruptcies.

One example of such a bankruptcy that occurred due to a change in market cycles was the bankruptcy of the Hanjin container shipping company. Hajin was the seventh largest container shipping company in the world at the beginning of the millennium. Competitors of Hanjin Shipping had invested in large ships. Unfortunately, Hanjin itself did not own its own fleet, and during the boom period it made a strategic mistake by chartering ships for a long time at expensive prices. When World Trade plunged in 2009 as a result of the banking crisis, Hanjin had too little cargo to cover its high ship prices. Finally, in 2016, it filed for bankruptcy.

In a similar way, the Finnish shipping company Finnlines ended up in the arms of the Italian Grimaldi Lines, when it had excessively expensive ship charters made in the boom period before the banking crisis. After the 2008 banking crisis and the downturn, expensive ships could no longer make required profit.

Shipping industry today

We are currently living in particularly exciting times in the field of the maritime economy. The international maritime organization IMO and the EU have set the goal of zero-emission shipping by 2050. This means that all business models that have been used in the current commercial fossil fuel era will change. There are opportunities for the shipping companies to take a business advantage in the changing world, as the steamship companies did at the time of the Onedin line, when some of the shipping companies remained in the era of sailing ships.

The goal is clear: emission-free maritime transport, but no one knows for sure yet with what technologies and on what schedule it will happen. It can be assumed that shipping companies that do not prepare themselves for future changes will not survive for many more decades. But on the other hand, those who invest too early in some technology that doesn't solve the problems will also run into difficulties.

In this transition, knowledge and know-how are key to the success of shipping companies. Information about technology, supply chains, transportation and changes in maritime laws is essential.

The maritime transport market is constantly faced with rapid price rises and falls, as described above, and the success of shipping companies and bankruptcies. As the world market situation changes, some shipping companies will make big profits, and some are left behind. There is a golden rule for success: study different options of the future, know how to secure the operations and use the opportunities that come on your way.

If you are interested in these current followers of The Onedin Line, the turbulent shipping markets, welcome to study a master's degree in shipping at the Estonian Maritime Academy.