Instability of the maritime shipping industry

The changing pattern of international trade in 1980s, combined with important technological developments, has led to structural as well as technological changes in the world shipping industry, which is the main means of transport in international trade. The world merchant fleet is unable to respond quickly to a rapid decline of seaborne trade because existing tonnage cannot easily be redeployed, while contractual obligations regarding ships under construction or ordered cannot be broken without substantial financial penalties. This characteristic of maritime transport may lead to excess tonnage situations - as in mid-1970s when seaborne trade started to diminish, especially in the petroleum trades. The resulting imbalance between supply and demand reached its peak in 1983, when the average annual figure of estimated surplus tonnage reached 28.5% of the world fleet. The physical volume of world international trade stood at the lowest level since 1975, at 3.2 billion tons. This declining trend continued until 1988. The main cause of the prolonged shipping crisis was the very high level and the scale of government financial subsidies in the developed market-economy countries as well as indirect support measures (e.g. through fiscal arrangements) for the acquisition, operation and, in particular, building of new ships during the past decade.