The shipping markets have been among the most active among markets over the last couple of years. This significant growth in shipping markets has been influenced by changes in import policies, globalization and changing freight rates. Globalization and changes in the import policies across states and continents have positively influenced the growth of the shipping markets, with marginalized and developing countries having an opportunity to venture into the global arena.
Freight rates are however proportionate to growth of shipping markets and their contribution to the development of shipping markets has been influenced by several factors, some of which lead to negative growth and increase the shipping risks that freight companies are exposed to (Kavussanos & Nomikos 2000). Some of the issues that affect freight rates are economic growth and demand for specific goods, which is derived from the shipping industry forces. The contribution of the economic growth is significantly associated with a reduction and stabilized freight rates and this leads to fewer risks as compared to harsh economic conditions.
Economic developments lead to a change in the status of the shipping industry. In most countries, change in economic growth leads to stabilization of all transport services, including those offered in the shipping industry (Kavussanos & Visvikis 2006). For this reason, most of the freight rates are favored by a stable economy, making it possible for freight owners to diversify their products and services for increased profits. In a stable economy, there is increased trade and investment in local and international goods.
This means that when the demand for commodities is high, there is an associated increase in demand for shipping services and hence a significant reduction in the freight rates imposed by the shipping industry. A stable economy is therefore a key influence in the stabilization of freight rates among the various shipping companies.
Taking the Hellenic Marine, LLC Company as an example, there have been significant changes in its profits, assets and market share. Over the last five years, the company has witnessed major changes, which are mostly influenced by fluctuating and unstable freight rates. The instability of the freight rates has been influenced by among other things, the changes in price of commodity prices, fuels and other import policies that affect transit of goods from one region to another (Schwartz & Smith 2000).
The longstanding fluctuations in oil prices have also affected the freight rates in Hellenic Company. The relationship between freight rates and oil prices is linked to the bunker prices that account for nearly thirty percent of the entire operating cost (Manoliu & Tompaidis 2002). The bunker prices directly influence the freight rates because the prices interfere with the operating costs, influence demand and supply and affect the goods and services in transit.
The freight rates are also affected by...