About 12% of ships around the world fly the Liberian flag

This is from The Economist:

Over 4,400 vessels (about 12% of global shipping) fly its flag. And the number is growing.

How did this happen?

The secret of this maritime success is an old practice known as the flag of convenience. In the 1920s shipowners began to register their vessels abroad for a small fee. This allowed them to avoid taxes and labour laws back home. Liberia had few regulations and made it easy to sign up. By the 1960s it had the largest merchant navy in the world.

Read the whole thing here.

Apparently, the government of Liberia makes over $20m a year from its shipping registry.

Two of the “unique advantages” cited on the registry’s website include:

Vessel Construction – The Liberian Registry does not require vessels to be constructed by a particular nation. The supplies for construction and outfitting are also free from similar restrictions. Without this type of protectionism, shipowners are allowed to search and solicit shipbuilders solely on commercial considerations, such as competence, experience, and price.

Vessel Manning – Manning requirements specified by the Liberian Registry are based exclusively on competence, international recognition and safe operation. Many national registries require manning by citizens of the country of registry. This promotes higher wages, inflated labour costs and overheads, excessive bureaucracy, and the potential for interference from organized labour.

The Liberian Registry is headquartered in Dulles, Virginia in the United States.

Since its inception, the Liberian Registry has been operated from the United States. In fact, the U.S. structure and principles governing the Administration of the Liberian Registry are embedded into Liberian law. Pursuant to these statutes, the Registry must be principally operated from the U.S. and managed by international maritime professionals for the benefit of the people of Liberia. The strong U.S. – Liberia alliance provides the Registry with the ability to participate in the international arena with key industry institutions.

Turns out oil prices are so low it’s cheaper to sail 9,000km around Africa than cross the newly expanded Suez Canal

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This from the Mail & Guardian:

Essentially, it makes more business sense to sail the longer distance – even though the Suez Canal shortens the Europe Asia trade route by at least 9,000 km – and burn more fuel by increasing speeds.

With oil touching $30 a barrel, a recent analysis by SeaIntel, a maritime monitoring group suggests that if shippers can accept an extra week of transit time by sailing south of Africa, it would save them an average of $17.7 million a year per vessel, in transit fees.

According to the analysts the Suez Canal would need to reduce fees by around 50% – and the Panama Canal which similarly affected by 30% – for crossing to be commercially viable for long-haul ships.

Also:

That’s bad news for Egypt, which spent $8 billion on expanding the Suez Canal, opened with much fanfare last year. The expansion, accomplished in a record one year, was intended to reduce waiting times from 18 hours to 11 hours. Authorities said they expected canal revenues to more than double from the annual $5.5 billion in 2014 to $13 billion by 2023.

On a related note, if you are interested in shipping and global trade be sure to read Marc Levinson’s The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger. I recently picked it up and really like it so far.

H/T Charles Onyango-Obbo