The first thing that a ship manager has to understand is shipping cycles. Stopford (2009) contributed in a detailed presentation of shipping cycles, and in particular he recorded the freight rates of dry cargo ships since 1741 (Figure 1).

As shown, 22 cycles recorded along 259 years, or 1 cycle for every ~12 years on average. The Wind/Sails were the exclusive means of propulsion till 1871 (130 years since 1741 or ~19 years on average over 7 cycles)! Of course, the technology of ship propulsion progressed over these almost 300 years. Moreover,

4 wars⁸ took place since 1740, and par excellence those led by Emperor Napoleon, which lasted 24 years (1792-1815)!

In 1871, the type of ships, called “tramps⁹”, appeared. The title is un-related to propulsion. In addition, one may be misled to take, e.g. “bulk carriers”, (successors of tramps), as ships entirely different from tramps. In fact, it is not the propulsion which differentiates tramps from non-tramps, but speed.

After wind, steam is used in propulsion, and after steam, oil. The “internal combustion engine” was a crucial invention. It is only during recent decades, due to an aggressive global climate, that the use of a green fuels is sought after, coupled with a device to retain Sulphur. The choice of oil as fuel for engines, (first in private cars), was indeed decisive at that time, though it could be avoided!

This in shipping is the King! It “takes” almost all initiatives, and supply (the Queen) responds, as the case may be, but not always successfully (Figure 2). The cyclical behavior of demand is also apparent. Some argue correctly that if demand is cyclical, then prices are also cyclical.

As shown, demand’s % increases/falls are not followed by analogous timely supply % increases or falls, e.g., the rise of demand in end 1992 by 7% faced supply’s apathy. Surely, shipowners are people of waiting & see. Also, the fall in demand in 1999, also faced supply’s apathy. For the fall in demand in 1994, supply responded, but with a year delay! Of course, the supply in order to respond to demand needs to pass construction time (of ships); this period varies according to shipping cycle phase.

In more detail, in end 1992 demand increased by 7%, while supply increased by only 2.5%. One must take into account also that Demand is measured in billion tons, while supply in million tons. As a result, Supply had to increase in greater percentages than demand. Moreover, in late 1994 till 2000 supply fell behind demand except in 1999. It seems that supply was affected by demand from end 1995 to early 1999 and in 1999-2000.

As Alfred Marshall (1842-1924) wrote: the price (the freight rate here) is determined by demand and supply, the same way that the scissors’ two blades cut paper!

Taking e.g. the period from 1741 to 1870 ships faced a cycle when they were about to be scrapped, i.e. at their ~19 years of age on average! Shipowners were happy at that time, if they have built ships when cycle started. It is also recorded that the duration of a boom was shorter than the duration of a recession (with the exception of the 1988-1997 boom, which lasted 10 years!).

Stopford (2009: p. 106) calculated the duration of shipping average peak as equal to 3 years (1947-2007) and the duration of average trough as equal to 5 years. Thus, a vessel, in her life, will face 4 peaks and 4 troughs. Short booms mean that supply responded fast to demand. It also means that long time charters are preferred… Good things, however, do not last forever…apart from being shorter.

Professor Harlaftis (1996), the main modern historian of GOS, attributed GOS’ miracle to the ability of shipowners to form partnerships with persons exclusively coming from the same place, and having also certain close relationship one with the other (next of kin); moreover, Greek shipowners had a natural motive to seek-after-all-opportunities¹⁰; they also adopted a strategy concerning the proper choice of cargoes, and they used to “buy when other sell and sell when others buy”. We will try to make this last one meaningful. This general rule is perhaps advisable when one deals par excellence with shares...

Seaborne trade (=demand) for various reasons may fall. Given supply, and distances, this will cause a reduction in freight rates. Shipowners stop to order, and buy ships. If the recession continues, then they “drive” their ships to lay-up, and finally, and after sometime, they scrap them.

Scrapping takes place if there is no hope for a vessel to earn something above her cost of operation, say after¹¹ 3 - 4 years of trying, maintaining, waiting and see. The unknown factor in this process is time. Time varies as volumes involved may be different each time.

The “world oil trade” is shown in Figure 3. It fell 50% down of what used to be in 1979 and in 3 close occasions: 1983, 1985 and 1987! As a result, tanker freight rates fell (Figure 4).

As shown, the world oil trade fell in Jan. 1983, 1985-86 and in Jan. 1987 (Figure 3; indicated by blue arrows). As a result, the freight rates indices for tankers fell also, though fluctuating (Figure 4; red arrow) during the same years, though since January 1987 tanker freight rates increased (orange arrows) for two sizes of tankers.

Moreover, new orders for tankers fell to a minimum (1982) (Figure 5), i.e. just below 1m dwt, out of 16m at their peak. Additionally, seventy-five (75) million dwt of tankers were laid-up (1983) (Figure 6) (blue arrow)! There is a

proverb in Greek language saying: “A nice day can be recognized from dawn”. Dawn in shipping is when there are zero¹² laid-up ships! Reality, however, is different (Picture 1; as shown the dawn for the laid-up ships is foggy).

Tankers eventually did not escape… death (=scrapping) (Figure 7).

The tanker tonnage in laid-up (Figure 6) is scrapped within 4 years (1982- 1985) (Figure 7). Industry does not rush to scrap, as it knows that this is the final act for ships, but it takes its time, trying to sell them first, or rent them for storage¹³ of oil (Figure 6¹⁴; 20m dwt in 1984). Deliveries are also related to orders some time ago, given the ship building time (Figure 7) of one year or so on

Picture 1. Ships in lay-up, waiting, in fog, for employment. Source: unrecorded; modified.

average, depending on the phase of shipping cycle. In a depression, ship prices are low (Figure 8), and thus sales are not recommended. In 1983 e.g., tanker prices were at rock bottom, i.e. $3m, from $28m in 1980 (1/9^th)! 1983 provided obviously a perfect timing to buy¹⁵ (tankers). At the end of 1982, 13 million dwt of bulk carriers were also laid-up globally, given that after at least 2 years, since 1979, (2^nd half 1981), depression hit also dry-cargo ships.

The Russian Kondratieff (1892-?) (1950)

The point that the above 3 scientists missed, however, was that the actual duration of a long wave depends on how long statistical data exists. Goulielmos (2017) proved that long waves in maritime industry were indeed secular (=100 years), as shown (Figure 10), using 267 yearly data.

GOS appeared on a shipping register, (e.g. on Lloyd’s, est. in 1760), in 1856 (Figure 11), owning first sailing and steam ships (Picture 2). GOS’ ships, however, were registered in various non-English ship registers since 1830, as shown by Harlaftis (1996).

Picture 2. Sail & steam Greek ships in port of Piraeus in 18^th century. Source: Internet; Sailing & Steam Ships in Port of Piraeus, a painting by Volanakis C. (1837-1907); modified.

In 1860 Greeks owned 13,537 GRT, and in 1861 4,609 ships of 29,000 GRT, mostly sailing (Vassiliou, 1961). Notable is that market fell due to a recession in 1894.

The Greek fleet grew fast between 1883 and 1945, except during war years. Also, demand grew rapidly in 1869-1914 and in 1920-1930. It fell, however, in 1930-1939 due to the 1929-1936 depression.

As the world markets re-opened in 1945, dry cargo freight rates increased and continuously rose, till 1947 (Figure 13). Soon, however, a falling trend started, and the pessimism among ship-owners returned (1949).

The market is clearly cyclical: where an increase in rates due to lack of supply, and/or a rise in demand, given distances, induces a higher shipbuilding production, and given that demand is not coordinated to supply, as we showed above (Figure 2), freight rates fall… Ships emerge in greater numbers than needed!

Tanker freight rates (Figure 14) had a similar cyclical pattern.

Given that only scrapping may correct permanently¹⁹ an oversupply of existing, rather old/uneconomic, ships, demand for ship space re-appeared strong latter, (at the end of 1950); orders for new ships stopped just prior to it. When the memory of 2^nd WW started to faint-out, Korean War (1950-1951), revived it, by creating a “stock-building panic”.

Between 1945 and 1950 freight markets stabilized, while between 1951 and 1955 improved. Greeks rushed to order and buy ships. Seaborne trade increased by 16%, but this was short-lived (12 months), followed by import restrictions. These factors led to the laid-up of ships by 1953, the other classical result of a shipping crisis. The crisis deepened, however, covering also the 1^st half of 1954.

Greeks considered 1956 as the year when GOS’ miracle started! Data do not

support this, however, as the miracle started in 1946 with the 100 Liberties they bought; good markets maintained in 1949-1950; continued in 1957-1959 (except in 1960); and in 1961. However, the growth can be faster when fleet starts from low levels, as GOS did, rather than when fleet is grown-up.

Orders placed then for ~6m tons of a total value of $1b, of which 150 units in Japan! GOS increased from year to year 30% in 1950-1951 and 26% in 1954, 1956 and 1957 (Appendix 1)! This considered as miracle. Greeks were traditional customers of UK shipyards, but they realized that British shipyards could not offer the lower prices and higher finance, which Japanese could! In addition, after 1956, Suez Canal nationalized, and freight markets improved.

The spot dry markets moved into recession for 3 years (1970-1972). The owners, who could predict this recession, signed (long term) time charters²⁴ (Figure 15).

As shown, freight rates, for dry cargo ships fluctuated below 100 units (=1947), till 1972, when a recession emerged, extending to 1975, which interrupted by 2 prosperous years: 1973 and 1974.

In tankers, years 1967 and 1970 made the whole good difference (Figure 16).

As shown, tanker freight rates, after a long period of low levels from 1957 to mid-1967 (~10 years), showed a cyclical pattern, with peaks in 1967 and in 1970.

Gradually, since 1956, in a type of a tanker, called ULCC (Ultra large crude carrier; >2 million barrels; c. 1963) has appeared. GOS owned 3000 ships of 66m dwt in 1973. In year 1975, however, problems emerged, where only $2b devoted by Greeks to buy ships; in addition, the crisis in tankers extended to dry cargoes; GOS owned 48.3m GRT then (1975). The demand for tankers fell between 1973 and 1988 (15 years!).

The growth during this period was more intense (in GRT), where GOS increased almost 4 times, from about 12.9m to 48.3m GRT. Freight markets fluctuated and international various events occurred, i.e. Cuba and Vietnam Wars.

The most important event, in 1967, was the “Six-Days War” between Israel and Egypt, and the 2^nd long Suez Canal closure. This closure lasted 7 years and provided a prosperous period to shipowners by prolonging sea distances. Then, TAR line, (a pipeline), cut back is production in 1970 (15m tons capacity) and Libya’s oil production reduced; which, in 1973 nationalized.

In 1966-1970 shipowners were very active with good freight markets, and as a result Greeks placed many orders. This is really also the period of further economies of scale, where tankers reached 300,000 dwt each. SD14 types of ships emerged, (end 1967), which destined to replace the smaller liberties. As economies of scale intensified and the individual shipments rose, shipping grew by leaps and bounds.

Especially 1970 and 1972 were 2 remarkable years for the growth of shipping demand; seaborne trade rose by 78% (1966-1973) (except in 1971). The peak of the period, however, emerged in 1973, where during summer, the time charter rate for a VLCC doubled, from $22,000/day to $44,000. This had also its impact on ship prices, where a VLCC obtained a price of up to $73.5m from $26.4m (2.8 times dearer)! A Perfect Time to sell.

One may argue that it is difficult for a manager to recognize rock-bottom prices! A manager, however, may: 1) discuss this with an external S + P broker. And even better: 2) he/she can discuss it with company’s in-house S + P broker, if there is one (we recommend to be). And 3) one may use historical data, as follows (Figure 22).

As shown, the price of a 25,000-dwt bulk carrier fluctuated down from her 10-year average price: 28% in 1990-1991; 28% in 1992 and 31% in 1998. So, if this ship, let say, had an average price of $30m, then her rock-bottom price is between: $21m and $22m. If this price emerges in future for a similar ship, then the manager may buy her. To sell her, PT suggests 1996, at $41m, providing a profit of $11m plus the accumulated depreciation.

Appendix 2 proves that the average size of orders of both tankers and ore/bulk carriers, (84% share in GOS in 2020), is higher than the average size of existing fleet, (economies of scale), from 2002 to 2020. This demonstrates that Greeks build larger ships, when they have the opportunity. Are the prices of used ships rock bottom (Figure 23) as we have argued?

As shown, the years of PT were: 1976-1979 and 1983-1987, which were, also, periods of recession/depression. Greeks bought 1568 ships in 1976-1979, and sold 1405. Allow one-year gap between buying and selling, because Greeks first buy and then sell. Sales got rid of 1550 ships! As shown, the two curves move together, but with the acquisitions to come first, and sales to be equal or

higher in numbers (1978-1988). This is also a strategy, we believe, as when one buys at rock bottom prices stimulates the market and the ships sold subsequently may achieve a better price...

During the 1981-1987 depression, ships bought were 1568 and those sold 1910, with one-year delay: 1790. One may conclude that the ships bought are larger than those sold and for this reason are fewer…

What about their prices? (Figure 24).

As shown, in 1982-end 1987, the 4 sizes of the 2^nd hand bulk carriers had their lowest prices, i.e. below $5m each, (for 2 of them), against ~$25 at their peak (1980), and $1.5m each in mid-1986 (rock-bottom). Assuming that Greeks have bought such ships, we constructed (Table 2).

As shown, GOS applied a very good, but not a perfect timing in buying 2nd hand ships as it paid substantially lower prices (i.e. minus 86.5%) from the peak prices prevailed in 1980 for the same ships. But it paid $2.94b extra. We are sure that the PT for 1983-1987 was in 1986 at a price of $1.5m for Greeks to buy ships.

We will examine now if acquisitions in GRT will give the same picture as the number of ships (Figure 25).

As shown, GOS purchases in GRT peaked in 1986 with 3.6m and in 1993 with 3.8m. In 1984 was the year when purchases in number of ships also peaked (Figure 23). The average size of purchases varied from 8333 GRT in 1983 to 11,875 in 1993, confirming GOS strategy (12,000 GRT in 1986) to buy larger 2^nd hand ships when the opportunity comes.

What about age of GOS’ fleet?

As shown in Figure 26, GOS got rid of old tonnage of oil tankers from 12m GRT in 2002 to 0.04m GT in 2020! This indicates that GOS adapted to the fact that tankers, of 15 years or above, are not preferred by charterers due to the fear of a marine accident, especially after and during the 2008-2013 depression. The same happens with non-tankers (Figure 27).

Source: author from Figure 23 and Figure 24.

As shown, old Ore & bulk carriers were in favor of GOS since 2002 due to the trade with China, with a peak of 17m in 2009. Then the depression wiped-them- out between 2012 and 2020 (0.05m).