[13] argued that the “conventional financial theory” assumed that the variation of prices can be modeled exclusively by random processes, which in effect follow a simplest pattern, which is as if each uptick, or downtick, is determined by the toss of a coin.

A more accurate model allowing, however, large price variations, paved the way for a new more reliable type of financial theory: this is the risk model known as “Extreme Value Theory” (EVT), assuming by 2006, that prices vary wildly, with fat tails, which scale, together with a long-term dependence ([13]).

EVT model measures the events, which occur with very small probability: the unexpected. It is a specialized branch of Statistics, which models the probability of rare, extreme, and catastrophic, events, occurring in the tails of the distributions. Tails thus have a story to tell us. Are we listening?

[13] plotted the changes, which have occurred in the standard deviation of the “Dow Jones industrial index” between 1915 and 2005 (Graph 3). Two at least “extreme” events have occurred: in 1930-1935 and in 1987, in a period of 90 years.

Source: author; data from [13].

Graph 3. The standard deviations of the “Dow Jones Industrial Index”, 1915-2005.

Graph 3 shows, indirectly, that about 68% of the standard deviations were small, i.e. within 1σ³; 95% were within 2σ; 98% within 3σ. Some, however, were up to 13σ, in 1930-1935—during the “great depression”—and 22σ during the “Black Monday” in 1987... As shown, the standard deviations of the “Dow Jones Industrial Index” exceeded the 3σbenchmark 14 times; such, large, deviations the theory of “Normal distribution” considers them improbable, and more so that one in 1987 of 22σ...

[4] argued, in his book’s preface in end 2008, that what we need so in order to meet the events we failed to anticipate constructively, is to pass on to simplicity—i.e. to simpler financial instruments and less leverage.

[11] argued that a shipping company has 5 cultures so that to be successful, one of which is “Financial Engineering”. With this issue we have dealt in part VI.

Greeks, in 2020s, managed 1440 international shipping companies, mostly run by a single person, coming from one of the thousand Aegean islands, i.e. being the father of a shipping family, or the elder brother.

Greeks followed their shipping tradition by obtaining at least 3 male children—though during the last 30 years, or so, female shipowners, daughters in a shipowning family, surprised the industry, and their fathers, with their achievements, like the manager of “Navios” shipping company, Mrs. Angelliki Frangos.

Greeks, historically, and since old times, they have expanded the sea trade and shipping, as worldwide cross-traders, as their poor agricultural mountainous country could not help them to survive. Shipowning/shipmanagement attracted Greeks from the beginning as being suitable to be managed by a single person and a quite number of Captains, in a “way of living”, and not as a “profession”.

A Greek shipowner is the person who mobilizes the majority of company’s $ equity and gets also an “adequate” bank $ loan. To have the Money required, however, is a necessary, but not a sufficient, condition, in shipping, and the relevant knowhow is a desirable, but not a “sine qua non” condition, as it can be hired in an organizing known as “management by departmental managers”. Thus ship owning/ship management found a fertile land in this country.

Shipowners-managers, the Greek-style, run a company, where the majority of them are not listed ([5]), and where management and ownership coincide in the same person. A shipping company—the Greek style—has all the characteristics, which a Greek personality is seeking after: i.e. “to work the hours a manager likes”; “he/she to take all final decisions”; “to employ the key-persons who he/she only thinks suitable”; “his/her opinion to have finally to be followed, often leading to split ups; his/her wife or son or daughter to take over after his premature death.

Shipowning is the ultimate most prestigious aspect of shipping businesses for a long time ([11]), and this is one reason for attracting the Greek managers. And this will be also the reason for Greeks to emerge as shipowners/ship-managers in years to come, if one adds the fact that shipping provides also the opportunity to make great fortunes...

Greek Companies focused on 2 types of ships: “crude oil tankers” and “dry cargo bulk carriers” for the time being. During recent times we remarked a tendency for the Greeks to order Containerships and Gas carriers as well.

Management by departments

The Greek-owned shipping companies are organized—the larger ones—in a number of in-house departments, say about 15 - 18, where people are gathered together in the same function. Those have studied it by education, and they are preferred by the company, if they have learned it also in practice by sea experience, all speaking the same technical language.

We will describe very briefly only 3 departments, perhaps the most important, if one adds to them and the “Operations department”. The Chartering department is responsible to make the sales of company’s sea transport services, in as profitable as possible freight rates, the whole endeavor governed, however, by Supply and Demand; this department maintains also company’s public relations with company’s charterers/customers.

The Technical department is the one to attend the building of company’s new ships and, by planned-repairs and drydockings, to have them able to do their job: to load and unload cargo, and transport it safely, from port to port. In addition an in-house crewing department is there to staff the ships with efficient and effective seamen; this being one of the crucial functions of a shipping company, nowadays, where of course the figurehead is Captain followed by Chief Engineer.

Shipowners do their “management by distance” through their Captains/Engineers... Thus, in shipping we have a “joint management”. The controls and the orders are drafted-out and sent by the departmental managers, on the basis of their previous sea experience, circulating circulars with suggestions to ship’s personnel. The departmental managers are managed by the Shipowner.

Summarizing this part, a shipping company (consisting of tramps⁴) is managed—the Greek style—by “three management blocks” (Graph 4):

Source: author.

Graph 4. The 3 blocks having management’s power to control a shipping company and its vessels the Greek style.

One can see the “optimism” of this industry by looking at the new buildings ordered by shipowners. Table 1 shows the activities of 3 top world shipping nations (Greece, China & Singapore) concerning their orders for new buildings in 2025, and the purchases and sales of 2^nd hand ships carried-out by the Greek and Japanese shipowners.

Table 1. The activities of 3 top shipping nations towards new buildings, and those of Greece and Japan in S + P markets in 2025.

As shown, Greeks sold 272 ships, while they purchased only 179 (66%), supporting our theory that Greeks achieve economies of scale, and of age, also in all their 2^nd hand purchases. These 272 ships sold, we believe, were smaller and older than the 179 acquired... Greeks turned into ordering, heavily, containerships due to the effort of most worldwide economies to grow after the global economic crisis in 2009, and thereafter, the Pandemic in 2019-21 and thereafter. We will turn now to our core subject.

Table 2. The nowadays strategic issues that have to be solved by Shipping Management, 1973-2025.

Source: author.

Shipping Management started as a Science in 1973 ([12]), we believe, when it has been found out, since then, that there is a number of shipping strategic issues, which had to be solved. Table 2 presents the questions, which a shipping management is called to answer, even nowadays.

The banking sector mainly, and to a much lesser degree the Stock exchanges, obliged shipping companies to adopt certain management innovations so that to be financed by them. One demand of the financiers was the need to appoint an “external auditor” in the production of company’s audited figures.

Table 3 now indicates the first5 principles for a more effective and efficient shipping management.

Table 3. The 5 management principles suggested to be applied by the more efficient & effective Shipowners.

Source: author; certain data from [11].

The economic factors behind the above areas are, however, and familiar, and should be known to those studied economics: “maximizing company’s net profit” or “minimizing company’s total cost” or “both”...

But what is not mentioned at all by microeconomic theory is the “Perfect Timing”, as economics work in a timeless world... Shipping management, however, has its own dynamic characteristics, depending on supply and demand, performing within a calendar time...

The 5^th box of Table 2 reminded us that the depreciation of ships is a cost⁵, which has to be subtracted from gross profits... Depreciation is determined by the level of the prices at which the manager bought, or built, company’s ships, and by their (remaining and useful) life. Depreciation is also, however, company’s saving... The above mean that here also a strategy is required.

“Accumulated depreciation” & “retained earnings” are purposed to enable a company to achieve future investment in “earning” assets (and for a potential higher future income). Shareholders, we believe, will accept a reasonable reward for their equity, if this is their only better alternative (opportunity cost).

Shareholders increase their personal income (dividends) when depreciation is low, or zero, and when the retained earnings are also low or zero, and when gross profit is high... This policy, however, means that the company decided not to grow above its initial size, and moreover the value of company’s assets will fall by wear and tear and age.

Zero depreciation, and zero retained earnings, however, means also to have to ask shareholders for additional equity so that the company to grow with additional ships/assets. Perhaps the company has then to borrow, so that to buy and build “earning” ships, but by increasing itsfinance risk. Here also a strategy is required.

Our experience with this industry has taught us that in times of a depression, neither banks or stock exchanges or shareholders or else, will be willing to provide cash to a company in distress. Thus the clever shipowner has to be prepared for a depression resting exclusively on his/her ability.

This means that if a7years cycle is about to happen, then the first3good years to be followed by an intensive policy of higher depreciation, higher retained earnings and low dividends, and the last4years to apply a low depreciation, low retained earnings and low dividends...This company preserved this way its liquidity.

The new principles are presented in Table 4. Some of them may overlap with, or contained-in, the preceding 5 principles of Table 3.

Table 4. 8 further principles to be adopted by the shipowners.

Source: author; some data comes from [11]; (*) this strategy applied by the Greek shipping company “Eletson”, (in product carriers), however, it does not concern economies of scale per se, we believe, but it has certain advantages.

The 1^st box of Table 4 tells us what managing a shipping company is all about, meaning to understand how demand and supply of ship space determine the freight rate, what role a voyage distance plays in shaping demand, and the importance of the seaborne trade determining the volumes of goods that have to be transported by ships.

Between 1982 and 1985, e.g., ~94 m dwt of tankers (UNCTAD), have been scrapped and their demand also fell. This is not a frequent situation when supply anddemand have both been seriously reduced. But even if demand for ship spaces increases, does not meanthat the freight rate will also increase (Graph 5).

Source: author.

Graph 5. A simulation of the short run Supply facing a fast changing demand (an 11-month time horizon).

As shown, the D₁ demand for ship space, starting from a low level, increased let us say 50%, from D₁ to D₂ and 15%, from D₂ to D₃. Supply had no enough time (short run) to increase even faster than demand, but its existing initial level was more than adequate to satisfy the existing demand. As a result, the freight rate increased only from $8000 to $9000 (12.5%).

As the demand further increased, from D₂ to D₃, the freight rate increased from $9000 to $2,4300 (2.7 times)... This simulation has described the situation when even a small rise in demand (15%), when facing an inelastic supply, can produce a very large rise in freight rates (2.7 times).

Graph 5 indicated further how important is the elasticity of Supply for the level of the freight rate, given demand—most of the times neglected, as the emphasis is given on the elasticity of demand, if at all. Most of the first part of the Supply is almost absolutely elastic up to the intersection with D₂. After this point, supply takes an almost absolutely inelastic shape, where small increases in demand bring-in large increases in freight rates, as the orders placed in the shipyards cannot yet reach the market due to the (11 months) construction lag.

It is now when the laid-up ships have to leave their anchorage, minimizing their port time and the off-hire one and use their economic speed so that their supply to rise by all known means to satisfy the rising demand—i.e. before ordering ships and delivering them.

The reader may calculate⁶ the elasticity of Supply in its first elastic part, and he/she surely will find it > 1; and for the second inelastic part this will be found < 1.

There is a “time lag” between an increase in demand, which is expected to trigger new orders of ships, and the delivery of them—11 months later. Thus demand at t₀ should be compared with the supply at t+_{11 months}, so that to take into account the building lag, here assumed equal to a maximum of 11 months on average (with the exception perhaps of such more sophisticated ships like ULCCs & large LNGs/LPGs).

Figure 5, shows the balance between Supply and Demand of “crude oil tankers”, between 2007 and 2012. It also shows that their supply moved faster, in 2007-2011, than demand. This means that shipowners ignored the falling demand in their orders. In 2012, e.g., supply grew at a rate five times slower than that of demand...

Source: author; data from [11].

Figure 5. The balance between the changes (from y to y) of the crude tanker fleet (supply) and demand, 2007-2012.

The tanker owners, apparently, ignored demand’s stagnation in 2010-11, and its fall in 2013 (not shown).They felt a fear to be left behind, at a time when almost all shipowners ordered tankers... In addition, in 2009 and in 2010 the demand for tankers also fell...

The dry cargo owners behaved also similarly as the tanker ones (Figure 6).

Source: author; data from [11].

Figure 6. Dry Bulk carriers’ demand and supply in dwt, 2005-2012.

As shown, the demand for dry cargo ships was stagnant 3 whole years, i.e. from 2009 to 2011, and also fell in 2012. The owners were very liquid as a result of the 2003-2008 boom, but they showed an unjustified high optimism because of the unfavorable demand indicators in 2008-2010... Also, shipowners failed to follow demand in 2009 and 2010. One may add here that the investment activity of the shipowners is different if they get-out from a boom or if they get out from a depression. We will turn now to our conceptual subjects.

In Table 2, and in box 2, and in Table 3, and in box 2, and in Table 4 and in box 7, we suggested to shipowners to finance their ships by achieving an “acceptable” capital cost, meaning the lowest possible cost of capital. This is not an easy task, which belongs to “financial engineering”—a new discipline.

The “cost of capital” arises from the capital borrowed mainly from the banks, the stock exchanges, the bond markets and... from company’s shareholders. The company pays a «rent» to the above owners of capital, in the form of interest, or dividend, to convince them to part from these funds, by paying also to them a risk % for losing them.

The above endeavor is clearly a core subject of a new multidisciplinary field called “Financial Engineering”—FE thereafter. FE appeared, we presume, in a book form in 1992 ([14]), and it can be defined as the “science, which applies technical methods—derived par excellence from Mathematical & Computational Finance—to the practice of finance ([3]).

FE, we believe, is a multi-selective, “mosaic”, discipline, because it has drawn especially from at least four disciplines: applied mathematics, computer science, statistics and economics.

[13], as well a number of others⁷, demonstrated the shortcomings of the modern conventional finance... Of course FE is misnamed, and as a result is classified as a branch of Engineering, though it is not. In fact, FE is a branch of “Applied Finance”. The need of professionals to understand, and profit from the management of other people’s savings, including new financial products etc. sold by the banks, and the finance needs of the enterprises, led to the development of this new profession.

FE’s main 10 applications are shown in Table 5.

Table 5. The 10 main applications of the FE.

We will describe only the first 3. “Arbitrage” is an old operation, where an asset, (good or currency), is sold, and purchased, at the same time, in two (or more) markets. These markets should have a price difference so that to provide a profit to arbitrageur.

“Corporate finance” concerns the single large corporations with a separation of ownership from control where their needs of finance are substantial. A “derivative” is a “financial contract” with a value based on some underlying asset (like the price of a stock, bond, or good). Shipping we believe may fall in the case of corporate finance. [11] argued that a shipping company has to have five cultures, so that to be successful, one of which is “Financial Engineering”.

Table 6 mentions the main issues of FA, which managers need to know.

Table 6. The main 5 issues which Managers have to know in the area of company’s FA.

Source: author; data from [15].

An area of improvements in FA, for the sake of the enterprises, is to make more meaningfulthe variables involved in company’s “income statement”, the “balance sheet” and the “cash flow”. E.g. the positive “net profit before tax” provides only the information that the net profit is positive. “A net profit margin divided by total sales” is more telling, showing how much of company’s sales finally have emerged as net profit.

Another issue is to divide “net profit” by “total assets” to get the ROA (the return on assets/vessels)—which is a measure of profitability. Another improvement is to allow time to accompany the above statements, like e.g. by asking: “was company’s profitability ratio going-up, while debt ratio went also up?” “Does the improvement in the “gross profit margin” mean also improved “net profit margin”?

Managers must focus on the ways company’s activities resulted at the figures reported, and not on the figures per se. Sales e.g. are driven by the nature of the relation between products, or services, which a company sells, and how company’s staff attempts to sell them, and the characteristics of the market every time. Sales are an accumulated sum of dynamic activities, which occurred over the past.

In shipping, the $ sales to be achieved by ships are pre-calculated per voyage, and also the expected net profit/loss is calculated before hand, i.e. before the shipowner decides to accept the job. There is also the possibility for the pre-calculated net profit to be compared with the actual one, after a voyage is completed. Thus the risk in shipping can be greatly reduced, because the shipowner is free to undertake, or not, a voyage, which is forecast to leave a $ loss.

Apparently manager’s decision is based on the accuracy of the calculations made-out by the staff of company’s in-house chartering department... Also, the expenses per day of the ship are derived from the annual computerized budget of the company per vessel, where mistakes could also be committed...

Management thus, in shipping, has to use the latest “digital technology” (concerning e.g. ship’s actual speed in the particular voyage; the actual sea distance of the particular voyage; taking the actual weather conditions into account, the port congestion-strikes-holidays, snow, rain and port’s working hours; to know the latest Canal dues and their crossing time; etc.), in calculating the daily expenses of company’s ships per vessel as accurate as possible, and the latest developments in “zero budgeting” theory in “the forecasting of vessel’s voyage result”.

The comparison between actual and forecast voyage result has to be examined without any exception by company’s Economic department for every voyage, and all deviations to be explained by a report to management. Then, measures/additional training, to be decided so that more accurate future calculations to be produced by the chartering brokers, as this is so apparently crucial for company’s existence... and on which management rests.

Also a ratio may be established taking the “forecast voyage result” and divide it by the “actual voyage result” for every voyage. Number 100 will indicate that the two figures are equal, and the forecast proved to be also equal to actual. While ratios above 100 are welcome, ratios below 100 had to be investigated, and especially those below zero and to be explained to management.

Moreover, “profits” reflect the combined effort of the selling/chartering activity, and the cost of the operation activities, in the firm and in the vessels. The “net profit margin” is an expression of that dynamic relationship, which changes continuously, and traces some evolving patterns.

Activities that are behind the numbers must be analyzed and focused on their interactions, if management wishes to control company’s future. We have to find-out the prospective of the past patterns. FA has to report any changes between company’s courses, which has been travelled so far, against those that the management would have preferred...

Let us present in more detail company’s Income Statement.

We can use a “phase plane” to deal with a company’s “profitability measure”. During our research, and at its beginning, we worked mainly with Time Series. These, however, failed to illustrate the “complex and cyclical patterns” that exist in the enterprises. Then, [9] suggested to use a new method especially in dealing with Shipping Finance.

A “plane” was needed to refer to the domain in which a system operates, to an arena for a system’s performance and for a home for system’s attractor. This was the “phase” plane. This means to use a Cartesian, (i.e. due to Descartes R, 1596-1650), plane, and have its horizontal axis for the independent variable, denoted by X, and its vertical axis for the dependent variable, denoted by Y.

There were made two innovations to the above idea: (1) one made by [17], i.e. to map the changes of the variables shown on the X and Y axe, instead of showing only their absolute amounts, and only in quadrant 1, as hitherto, and (2) to use also the 2nd, the 3rd and the 4th quadrants. Smale by so doing opened the door to the nonlinear analysis. [15] defined further the methods of the “Nonlinear Management”.

Let Figure 7 being a “phase plane” diagram of the income statement after making it suitable for a shipping company.

Source: author.

Figure 7. The phase plane of income statement of a Shipping Company.

If a company is found on the course denoted by letter A, this means that it was able to avoid a proportional decline in its “net profit” from vessels, while its “revenue from voyages” fell. This company is adaptive. If the company is found in the course denoted by letter B, it means that it has suffered a disproportional loss, when revenue from voyages was also lower. One explanation is that this company had probably a high fixed cost, and it was not able to reduce it. This company is rigid. This company, moreover, cannot respond to changes in demand. In the course denoted by letter C, company’s “net profit margin” was constant.

Table 7 shows now what it means for a company to be in Quadrants 1 - 4.

Table 7. The meaning for a company to be in quadrants 1 - 4.

A movement between 1 and 3 quadrants is something to be expected: there, the voyage revenue increased, or declined, along with the existing market demand, where some effect on “net profits” has to be expected. But the company had to reduce expenses, when voyage revenue is reduced (line A).

Let us now draw the “Net Profit Margin”—NPM phase plane (Figure 8)—together with that of “total profit”—as the two may differ. In A, total profits increase, unlike NPM.

Source: author; data from [15].

Figure 8. The Phase plane of the “Net Profit Margin”.

The “operating margin” rises so that to erode the increases in GM%. In B, total profits—TP will decline as the OM does not decrease sufficiently to offset the fall in GM. In C, both GM and OM rise. NPM will fall, when TP will rise, if there is a sufficient rise in voyage results. In C, TP decline, if the increase in GP is not sufficient to cover the rise in operating costs. In D, TP may be higher or lower. In zone A, profits increase, and this is the desired position for a company to be (i.e. between 1 and 4 quadrants).

Nowadays⁸ shipping managers co-manage their ships with their Captains, because their ships operate thousands of nautical miles away from company’s shore office (headquarters), as mentioned. The times when the shipowner travelled on board, in “Owner’s cabin”, have passed without return.

In shipping industry from the 4 management functions (leading, planning, organizing & controlling) the most important, we believe, for shipping, is Control (Graph 7).

Source: author; inspired by [16].

Graph 7. The three main types of Control in management.

The best control is to “anticipate the problems” and to “prevent them”. This means, however, a long experience and a high imagination, which most shipping managers, operators, departmental managers and Captains lack. The first l.h.s. control is the common one, but it is also the most expensive, which may be also catastrophic... This is based on the “negative” feedback ([2]).

The last r.h.s. type of control is not available to shipping managers—though most desirable—due to “management by distance”. It is also known as “feedforward control”, “direct supervision” & “management by walking around”, a type of management that can be applied, however, by Captains, if trained for it.

All managers need appropriate tools for monitoring and measuring their factories’ performance, and shipowners are not an exception to this rule. But for shipowners there is one problem: distance. Here apropos emerged a “telemetric” system called LAROS, in 2010, by a start-up Greek company, destined to provide (by 2011) reliable data from the vessels by building and using a “nano-satellite”⁹ weighted 5 kg... Thus, the measurement from moment to moment of ship’s bunkers; the malfunction of a ship’s generator or of a pump, are since 2011 feasible and most useful to ship’s technical management at shore.

Of course there are a great number of cases where digitalization can help in optimizing ship’s operations, as e.g. (1) “what is the efficient stowage of a cargo?” or (2) “what is the most economical route to take?” Or (3) “what the weather conditions will be in next 7 days along ship’s route?” The technology of robots e.g. can be used in reducing marine accidents. Having e.g. robots, instead of seamen, to enter into dangerous closed spaces on board, where an explosion and death are expecting...

Moreover, Keynes’ fear, derived from his observation that in “capitalist economies” investment opportunities will be rarer, as their growth continues, let us say, as he did, within the horizon of one generation ([10]), is going not to be verified—given the amounts that are going to be spent on AI in 2026 and thereafter by at least 14 international giant companies...

The 7 prime world companies¹⁰ of AI spent in 2025 more than $400billion... and it is expected that they will double this amount by 2026. Moreover, one of them can be also more economical in AI than the rest of the countries dealing with AI, and building also more data centers, as the case of the Chinese “DeepSeek”.

[10] can continue to rest in peace and to “admit” that there is no need for us to look forward for his millionaires to build mighty mansions and pyramids, so that the country’s investment to become equal to its saving...

And when AI will complete all its investment, the production of energy as Sun does it, will be next, and the proper management of water will be even further next, we expect. Humans have this rare ability to¹¹ find-out ways for spending”, provided the humanity will have escaped from the hegemony of the computer at

Nations nowadays should deal with emphasis with computers, AI, pharmaceuticals, missiles (given the wars), aircrafts, automobiles, ships, software, telecommunications equipment, rare earths, energy production the way of the Sun, water management, fiber optics and in general with those parts of the market that are “knowledge-based” ([2]) showing the so called “increasing returns” ([1]).

A “perfect-timer” shipowner is the King, and he/she will also become a Leader among all other shipping managers. The clever shipowner builds ships, and buys them, at rock-bottom prices, when freight rates are also at their rock-bottom levels and ready to rise (given the time lag between a rise in demand, a fall in supply & a quick rise in freight rates).

One, in his/her analysis, has to underline the importance that perfect timing ([6]) has in doing business in Shipping—given that the new building prices, the 2^nd hand ones, the time charter rates, the spot ones, the scrapping prices, the LIBOR, are all time-dependent.

In 2025, the intense geopolitical influences on shipping industry coupled with IMO’s inability to support¹² the use of an alternative “New Zero Fuel” caused a reduction in orders for newbuildings and a widely-spread uncertainty. The 2025 world orders for ships fell to 2531 ships of 122.5 m dwt (48,400 dwt average size) from 3832 ships and 187.2m dwt in 2024 (average size 48,852 dwt).

The fall in orders also caused the disappearanceof the economies of scale... The 2025 figure was ~65% of that in 2024 in number of ships (in dwt). This means that shipowners decided to pursue economies of scale provided that they grew. The above decision will lead the industry to lower profit in 2025 and thereafter.

In addition, it is better to pay a fixed % of dividends, equal, or slightly, higher, than the interest rate of a 12 months bank deposit, every year, plus a risk %. Shareholders are entitled to improve their standard of living reasonably, out of their equity in the company, but their big money has to come from a shipping boom or by a successful game with company’s assets...

Shipowners are recommended to grow, from y to y, when demand moves faster than supply, so as to have an increasing level of freight rates. Clever shipping companies had to multiply their earning assets by taking perfectly timed decisions, but why have they failed recently to do that? As Figure 5 and Figure 6 showed, this has not been achieved between 2005 and 2012, when both the owners of the world crude oil Tankers and of Bulk carriers ordered ships along with a falling demand...

One explanation of the above is that shipowners were led by the “fear not to be left behind”, when everyone else in the industry used to build ships... This is when a wrong psychology comes-in. This was a wrong strategy. This confirms the idea that enterprises do not always act rationally. As[13]argued people are not always rational.

In shipping, a shareholder expects from company’s manager to minimize costs, while he/she is sympathetic when the manager fails to maximize company’s net profit... Managers after all: (1) should have the ability to manage “cleverly” company’s “financial flows” and “budgets”; (2) to deal with “currency issues”; (3) to deal with “interest rates” and (4) to deal with, the increasingly used, new instruments and “derivatives” related to the “futures freight market trading”. Greeks are very conservative in dealing with this last one ([8]).

¹My doctoral student Miss Psifia M-E forecast the last 11 monthly levels of the trip freight rates index of the dry cargoes, using the nonlinear ordinary least squares method, from Oct. 2002 to August 2003, and she found: 204/203, 215/204, 215/214.5, 216/221, 216/215, 216/212, 226/208, 235/230, 230/233, 230/233, 229/228.4 (using 417 monthly observations), where the first are the actual ones. The forecasting period of about one year was determined by the maximum “Lyapunov coefficient”: (λ₁)⁻¹ = 1/0.094 = 10.64—11 months. Forecasting the freight rates almost a year ahead is not at all a bad effort. Near the end of the first 11 months, we may forecast the next 11 ones.

²An attractor is a set of points in—a phase space—towards to which the trajectories asymptotically rend to, in time, for a wide set of initial conditions. The points are thus “attracted” by a very strange object. The chaotic attractors, which for certain authors are also strange, have a “fractal” dimension (<1. The strange attractors are better known: for their sensitivity to initial conditions; for a no-normal frequencies distribution—not entirely random; for a form of periodicity; and for a similarity under different scales (self-similar) like the braches of a tree and the tree.

³σ is a letter from the Greek alphabet standing for the standard deviation, which stands also for the square root of the variance in a distribution.

⁴These are the ships of which their exact voyage is decided by the charterer and not by the owner.

⁵Depreciation as being a cost has to be minimized; but as being a saving has to be maximized... It depends on the level of company’s gross profits. It is better to determine its % after the company decided how much profit to retain. The decision of how much profit to pay to shareholders (dividends) has its priority, but the prior decision of all is to repay company’s long term debt. Thus the order of payments can be as follows (recommended): Attain first an as high Gross Profit as POSSIBLE given demand and supply → Repay part of company’s total long term debt → decide how much of the profit to retain (*) → decide depreciation → AND THEN decide the level of dividends. (*) Have a plan for what and how many ships you should buy or build in future and save 40% at least of their expected rock bottom price.

⁶The coefficient of the freight rate elasticity of Supply is defined as the % change in the dwt quantity supplied divided by the % change in the freight rate.

⁷Ten books from 1975 to 2004; a total of 55 publications till 2006.

⁸A manager had to manage many ships. The “blind” initial management period when the communications between managers and his/her ships were impossible or extremely long, gave its place to rather immediate satellite communications. The use of mobile phones and faxes also improved control in a rather more effective way than correspondence, cables & telexes.

⁹This is called a “Marine identification and communications system”—MICE.

¹⁰The “Seven Magnificents” are: Alphabet, Amazon, Apple, Microsoft, Meta, Nvidia & Tesla; also, Moonshot AI, OpenAI, Anthropic, Google, Alibaba, Baidu & Tencent.

¹¹A new type of steel invented. In fact, in shipbuilding we need a new cheaper and stronger material than steel. Ships nowadays are very expensive requiring an amount approaching the $150 – 190 m per vessel... This requires high freight rates for them to be efficient.

¹²The IMO’s decision on “net-zero framework” (NZF) postponed for 2026. Shipping industry consumes 350 m tons of fuel p.a.