The Greeks have given us the Spartans, the Amazonians, Alexander the Great, and many more Greek mythologies that fascinated us in its history. During the mid-20th century, the awe-inspiring growth of the Greek shipping business can only be categorized as an industry outlier.
What have the Greeks done right to be in such a position?
Was there any difference in national economic conditions that sparks this development?
Why hasn’t any other country matched or surpassed the achievements of Greek maritime dominance?
As of 2006, the UNCTAD reported that Greece stands for roughly 18% of the world’s fleet, the second-biggest fleet ownership is Germany with roughly 8% of the world’s fleet.
Looking into the Greek shipping industry, we understand that their dominance was a combination of multiple factors that come into play.
After the Second World War, the demand for liquid tankers cannot be met by the Norwegians, which was then the de facto provider in liquid tank charters.
Added by the fact that Greek shipping companies are, on average, smaller and family-owned, which lent to a competitive advantage of being more adaptable to sudden shifts and change of demands.
The technological improvement of dry bulk carriers also plays no small role in aiding the Greeks in clawing more market share from its competitors.
All in all, the Greek shipping industry is interesting and with this short blog post, we can understand how it’s rise to prominence.
Post Second World War
Between 1945 to 1973, the world had a tidal wave of growth in international maritime trade, increasing 6 folds between 1945 to 1973.
Economic growth requires political stability, that the period after the world war has seen a period of peace.
This disruption tapered off the demand for liquid tankers and increased the demand for dry bulk carriers in the 1980s. At that point also, the Greeks are well-positioned to capitalize on that shift.
As the increase in the supply of bulk carriers are attributed by the global freight rates, any impact on the freight rates will invariably affect the shipowner’s business as well.
In addition, the period after world war two also has seen global decolonization. The European Nations and Japan have collectively granted independence to over 25 nations. The newly independent countries also contributed to the boom of maritime trade, as the new national leaders work hard to develop their own economy with agriculture, energy, mining, and so on.
With the upward rise of maritime trade and global demands, comes the increasing demands of oil. The first wave of growth was spurred by the oil business that was monopolized by the Europeans and the United States before the Organization of Petroleum Exporting Countries (OPEC) stepped in and disrupted the market.
Closure of Suez Canal
The Closure of the Suez Canal forced the charterer to contend with higher bunker costs and longer transit time. And more importantly, the increase in transit time also means that there are fewer cargo vessels in the market for charter.
Therefore, the closure of the Suez Canal that coincides with the increase in freight rate also buoyed the Greek shipping industry. Bigger ships were required to compensate for the increase in transportation cost, and the Greeks obliged as well.
Right Place at the Right Time
The notion that the second world war demand growth has helped maritime nations such as the UK, Norway, and Greece. But what sets Greek shipping apart is not only the fact that the increase in demands is met promptly but also the fact that the Greek shipping industry shifted from liquid tankers to bulk tankers effectively.
By 1974 the Greek-owned tanker fleet had become the largest in the world, representing 17% of the global fleet. Starting from scratch in 1945, it reached 8.2 million gross revenue ton in 1965, 14.7 million gross revenue ton in 1970 and 21.8 million gross revenue ton in 1974. Tankers represented 40–48 per cent of the overall capacity of the Greek-owned fleet in the years 1958–75.
As we mentioned earlier, the initial stage of global oil is monopolized by the ‘seven sisters’ – Esso, Chevron, Mobil, Gulf, Texaco, BP, and Shell. The establishment of the OPEC nations with Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela has drastically decreased the demand for oil.
This has resulted in an oversupply of liquid tankers, while conversely, the demand for dry bulk cargo carriers has increased.
The Greeks had adapted to the sudden decrease in oil demands. They underwent massive restructuring and weathered the storm.
Whereas the British and Norwegians could not cope, the Greeks practice of “flagging out” their ship registry, therefore having a lower cost of doing business has helped, helped them keep their businesses afloat.
By 1973, the Greeks had already amassed enough capital, therefore during that period, they invested in supplementary shipping businesses such as shipbuilding and ship repairing in order to harvest other sources of income.
As an example, Empros Lines started newbuilds in 1974, taking orders for the MV Empros and Katerina Dracopoulos to survive the oil crisis of 1974. Many Greek companies perish in 1973, but like rose like Phoenix in the same year to build their portfolio of fleets in the bulk carrier industry.
Characteristics of Greek Owned Shipping Companies
Although Greek ship companies come in many shapes and sizes, the most prominent type of shipping companies is traditional, family-owned and small.
A large number of small companies in Greek-owned shipping is due to tramp shipping, which permits businesses of all sizes to enter the market.
The nature of smaller Greek companies basically molded them to be lean and agile, their fleets under management are relatively old ships.
Operating older vessels has its inherent benefit of reducing overall fixed cost but nevertheless have a higher variable cost and is very susceptible to the volatility of the market.
Many small companies are played out by the cyclical and unpredictable freight rates, being unable to fulfill their bank loan repayments, they invariably wind up their shipping business. But, the low barriers of entry in the Greek essentially open the gate to entrepreneurs to enter the market again with renewed business acumen.
Another important feature of the Greek shipping business is that they are predominantly family-owned.
To draw some association related to family-run businesses that is completely unbacked by empirical evidence, but by logical reasoning, is that Family-run businesses are mostly operating in a more long-term perspective.
There are no cumbersome shareholders to satisfy, there are no quarterly or annual reporting to satisfy stakeholders that everything is fine. Business decisions are made not for the short term, but for the long term, even that means a short-term loss in revenue.
This has played a significant role in maintaining the Greek prominence in the maritime industry.
Leadership in World Shipping, Greek Family Firms in International Business; Theotokas and Harlaftis (2009)