House Committee on the Merchant Marine and Fisheries. Hearings on the Bill Creating a Shipping Board, a Naval Auxiliary, and a Merchant Marine. (1916.) Senate Committee on Commerce. Hearings on Regulation of Ocean Freight Rates, Requisition of Vessels, and Increasing the Power of the Shipping Board. (1918.) Senate Committee on Commerce. Hearings on Establishment of an American Merchant Marine. (1919-20.) CHAPTER XXVII THE FINANCES OF SHIPPING COMPANIES Unsteady character of steamship profits. The central fact of shipping finances is that the earnings of shipping companies are unsteady in the highest degree. This is only natural in view of the risk attached to the shipping business. The shipowner feels the pangs of adversities which affect the many industries and trades served by him. When the shipowner has good times, they are very good; but his bad times are equally bad. And these extremes follow each other in abrupt succession. Only two years ago ocean rates were riding the crest of a tidal wave of war time prosperity. To-day, 5,000,000 tons of shipping are swinging idly at anchor in ports and harbors throughout the world. Les extrèmes se touchent and the shipowner must make hay while the sun shines. The tramp owner feels the effect of this situation more keenly than the liner company; for charter rates, as we have seen, fluctuate considerably more than liner rates, the latter being more or less steadied by rate agreements. On the other hand, the tramp has the advantage of being able to withdraw from operation when business becomes too dull. The liner must "carry on," sometimes even at a loss, unless good will acquired with much effort and at great expense is to be sacrificed. On pages 541-542 are two tables from "Fairplay" of January, 1920, which give the earnings of a selected group of cargo boats over a period of 16 years and the earnings of a selected group of passenger lines for a period of 14 years: 1905. 1906. 1907. 1908. 1904. 7,594,278 3,157,128 10,753,752 1915. 1916. Divi Profit on dend on Per Depreciation Depreciation Voyages Capital Cent. Written at 5 Off Per Cent £ £ £ £ 393 1,184,353 Average 10,861,154 6,312,179 16,464,837 492 1,687,384 2,949,300 993,485 9.15 1,185,829 881,431 20,475,208 15,980,466 31,848,723 805 3,174,507 909,015 4.46 1909. 934,297 4.56 4.10 800 3,546,987 21,088,366 12,430,700 12,622,243 43,306,771 11,856,852 Average.. 27,143,343 15,893,089 56,199,652 646 3,602,910 4,383,983 12.97 860 4,272,835 2,450,681 9.03 We note that in the case of the cargo boats, profits fluctuate from about £640,000 for 393 vessels or £1,632 per vessel (or about 11s. per gross ton) in a poor year to almost £11,000,000 for 499 vessels or £21,977 per vessel (or about £5 11s. per gross ton) in an exceptionally good year. That means a tenfold increase. To be sure, the war exaggerated the fluctuation, but shipping is a worldwide business and it would be hard to find any period of fourteen or sixteen years which has not been disturbed by some war in some part of the world. It should be mentioned here that some of the cargo boats included in these statistics operate at least at times on a time schedule so that the table does not refer to tramps only. If we compare the dividends paid by the cargo boat companies during the 14 years 1906-1919 and those paid by the passenger lines during the same period, we find the following: The range in the case of the cargo boats extends all the way from 1.89 per cent to 19.24 per cent or again a tenfold increase. Liner rates fluctuate less and the line business requires a more conservative financial policy. The lowest dividend rate during the period was 4.10 per cent and the highest 14.09. Fluctuation far less violent than that of the cargo boat earnings. It is interesting to note that in spite of this difference in the relative stability of the dividend rate, the average for the periods under consideration is just about the same for the two classes of shipping concerns namely 9.15 and 9.03 per cent respectively. This refers to return and capital invested. If however, we compare the return on the basis of net tons a very different picture appears. The Sub-Committee of the Imperial Defense Committee by which the war risk insurance scheme was framed, accepted, after examination by the Board of Trade, the following estimates of the annual earnings |