By Hilmi Armoush HA519
Table of Contents
Sailing in the Dark6
The Greener Wins7
Competitive Analyses – Drybulk Shipping8
Porter Five Forces Model9
Threat of Substitutes10
Bargaining Power of Buyers10
Bargaining Power of Suppliers10
Rivalry between Established Competitions10
Key Success Factors11
In 2008, the global economic crises had a strong impact on the maritime market. A drastic decline of freight rates were immediately visible to below operating cost and many shipping companies found themselves in a very unviable position, struggling to cover costs and sustain existence. Trade slowed down with a 4.7% growth compared to 5.7% in 2007, total volume of drybulk cargoes loaded in 2008 stood at 5.4 billion tons out of which major bulk trade estimated at 2.1 billion tons. On the other hand, drybulk fleet increased from 368 in 2007 to 391 million-deadweight in 2008 while order book was estimated at 289 million-deadweight. (UNCTAD 2009) As a result, in 2008 fleet productivity was decreased to 5.36 tons/dwt and to 28.66 tons-miles, while Baltic Dry Index slumped from its peak 11,793 in the middle of 2008 to 1,100 points in November. In 2008, drybulk carriers reported for demolition reached 3.1 million-deadweight – the highest since 2003 and is expected to have grown in 2009. Due to some positive signals in 2009-2010 in the freight market, and comparative lower vessel prices, many owners are now considering to enter the market, or increase their fleet through mergers and acquisitions. Until 2008, it seemed that many players forgot about the cyclical nature of the industry, regardless, what’s important is: Did those players learned their lesson? This report discusses how the future uncertainty could have different scenarios for the drybulk market and analyze how they can impact its competitive structure. The central question I am going to discuss is “How will the Drybulk Market develop in the near-term Future?” The time frame covered is 5 years, although various scenarios and analysis can be shaped for longer-term, yet, the chosen timescale should be sufficient to provide an insight on the competitive structure – especially with many deliveries to hit the market by 2010 and 2011 – and identify the current challenging uncertainties on the macroeconomic level which will affect markets' structure in the near-term. Therefore, I will first identify the macro-economical environment that could affect the industry and what key factors could drive change in its structure. From the most critical uncertainties, I will provide four different scenarios dated June 2015. The report will then analyze the drybulk competitive structure using porter’s five forces model which will help firms to strategically identify their key success factors and competitive advantages through strategic positioning, choices and implementation.
The international flavor for drybulk shipping makes it directly affected by many external factors, to identify the driving forces of Drybulk environment, and what opportunities and threats lie within, the PESTEL framework will be used to investigate those factors that affect the industry and companies operating within. (Table-1)
Political| Environmental policies could affect world’s trade and economies, they can also affect the maritime sector and the standards required onboard ships. Many conflicts around the globe are causing economical slowdown to many nations, other issues such as piracy, terrorism, and security need to have a degree of international agreements.The degree of political stability affects the demand for...