effect in raising the rate. Some classes of commodities can be delayed in shipment longer than others, and some vessel owners can afford to lay up a portion of their tonnage rather than accept unremunerative rates. Generally speaking, however, the rule holds good. From every port and on every line of traffic, the rates are constantly changing in a way which would stagger a railway traffic manager, although he was deeply versed in the theory and practice of rebates and special concessions. For example, take the following table of outward rates on coal from Wales to various ports in 1899: The movement of grain rates from the United States, while less irregular than the figures quoted above, is also subject to wide variations. Examples of more extreme fluctuations are easy to find. The course of rates in the British market in 1896 offers a typical illustration of the extreme instability of ocean rates. The Economist, in its annual review of the shipping industry for 1895, reported, at the close of that year: "The tonnage afloat is enormously in excess of the world's requirements, and so long as this continues we cannot see that there will be an improvement." During the early part of 1896, this condition of extreme depression continued. Only in outbound rates to the East, where the China-Japan troubles made a brisk demand for shipping, was any profit presented. These rates advanced, and remained on a high level throughout the year. A large number of ships, finding no profitable employment at home, went out to the East. Once there, however, and the war ended, they could not get back again, for return freights were not to be had, and it was impossible to return such a long distance in ballast without the pros pect of remunerative employment. This situation left a large number of cargo vessels stranded in eastern ports, unable to get back to western waters. A large part of the world's carrying trade was thus locked up. The available supply of shipping was suddenly diminished. The tonnage afloat accessible to English shippers was no longer as in 1895, "enormously in excess of the world's requirements." Upon a straitened supply was now precipitated an avalanche of orders. Says the Economist : The corn trade in the past year assumed a novel and unexpected position; the production of the world was slightly short of the consumptive requirements, . . . two of the large producing and exporting countries (India and Australia) being actually converted into considerable importers, and several hitherto small importers making largely increased demands. The general trade of the country, as the Economist notes, maintained the improvement and expansion awakened and started more than twelve months earlier. These combined influences came to bear on the freight market almost simultaneously; shippers of nearly every description, all wanting the same thing at the same moment, with a rather short supply of the article; result, blind competition sending up the price of tonnage by leaps and bounds, in many cases 200 to 300 per cent, from the end of September to the end of November. . . . By so much as the rise was rapid, by so much was the decline equally rapid, and at the close of the year we find freights all around, in every trade, worse if anything than at the commencement.1 This experience has been repeatedly duplicated in every market. It is true that the total supply of ocean shipping will in time become available to relieve any congestion; but much time must often elapse before relief can be extended, the tonnage must be moved at once, and the ship-owners who are fortunate in being on the spot reap a rich harvest. On the other hand, vessels which have gone out in ballast to Argentine or the United States, expecting full cargoes of grain, or which have made the long 1 Commercial History and Review of 1896. Economist, vol. lv, supplement, voyage to Australia, expecting a large movement of wool, suffer the full effects of a crop failure or a small wool clip. The following table shows the fluctuations over a ten-year period in four of the leading items in the world's export trade. 76,602,285 47,121,894 66,489,529 + 48 28,585,405 -57 101,100,375 +243 26,297 -- 39 1893 191,912,635 -15 4,390,000 — 27 2 -15 - 40 Many of these fluctuations took the shipping trade by surprise, and either too few or too many boats were available. In other cases, the supply of shipping the world over was either excessive or redundant, and freights fell or rose to correspond. So much for the temporary fluctuations of ocean freight rates and tonnage. There are also movements of longer duration, corresponding to the ebb and flow of general business, but subject in peculiar measure to the influence of special forces. From 1893 to 1897, for example, the leading commercial countries were suffering from a commercial depression which caused a general decrease in the tonnage of international trade, and a still greater fall in the value of exports and imports. The effect of this situation upon the shipping industry has been already indicated. Tonnage could not be decreased, and, in fact, the tonnage of the world during these three years increased. The result was an unprecedented depression in the shipping industry. In 1893, the Economist's review reports a large number of steamers laid up and a number disposed of at forced sale. In 1894, the report was "low, unprofitable freights and declining values of property engaged; the whole of the enormous trade has brought little or no profit, and a very bare margin over working expenses, far from enough to cover depreciation." In 1895, came a year "which will not readily be forgotten by the ship owners. Our anticipations have been to the full realized; and probably a worse year than the present has not been experienced by the very oldest in the business." The condition of the trade, in 1896, as already remarked, was little better. 1 During the four succeeding years, the situation was entirely changed. The widespread industrial revival caused a large increase in the value of foreign trade; and the shipping trade, as illustrated by the rapid and extraordinary rise in the profits of the Cunard Company, became very profitable. The main support of the market, during 1897 and 1898, was the American export trade, which was characterized in the Economist's annual review of 1897 as follows: It contributed largely toward sustaining rates in the early months, and causing a material advance during the autumn and late summer in all other rates by the ready absorption and continued demand for tonnage of all descriptions from the leviathan 8,000 to 20,000-ton cargo boats, to small fruit steamers. In 1899 the advance continued. General trade, the world over, was active, and the South African War resulted in the largest withdrawal of shipping that had been known for more than a generation. An outbreak of hostilities, involving even a second-rate power, always demands the services of a large amount of shipping. Even the effect of the Greco-Turkish War was sensibly felt; the influence of the China-Japanese War has been already mentioned; and the Spanish-American War materially contributed to the prosperity of the trade in 1898. The shipping industry can, over a period of years, depend with reasonable 1 Economist, vol. liv, supplement, p. 26. 2 The combined exports and imports of the United States, Germany and Great Britain, in 1895 were valued at $6,323,207,441. In 1901, six years later, their value had risen to $8,635,362,581. A large portion of this increase was undoubtedly due to the rise of prices, but the gain in tonnage was chiefly responsible. 3 Economist, vol. lvi, supplement, p. 24. certainty upon the assistance of several wars. If international disturbances occur during a period of depression, the freight and traffic situation is relieved, and if, as in the case of the Boer War, the outbreak of hostilities comes hard upon the heels of general and abounding prosperity, the result is enormous profits for all shipowners. Not only does war increase the demand for ships, usually on terms highly favorable to the owners, but it raises the level of freight the world over by reducing the supply of tonnage. These results followed from the South African conflict. At the close of 1900, the British Government had withdrawn some 2,000,000 tons of shipping, an amount nearly equal to the total steam tonnage of Germany, and nearly double that of France. In 1900, moreover, the troubles in China required the transportation of large numbers of troops to the East, and throughout the Boer War, a large coal tonnage was kept moving to the Cape. The result, as stated in the Economist's annual review, was that The tonnage taken on time charter for all trades during the past year has been unprecedented. The rates paid by our Government for transports were 20 s. per gross register per month, and in some cases more. Many charters in ordinary trades were made for long periods at very remunerative rates. Modern boats have commanded from 7 s. to 11 s. 6 d. per gross ton, according to the trade and length of charter.1 In 1901, however, the tide turned. During the preceding four years, the supply of tonnage had been increased 4,049,260 tons, and with the close of the war, the British government rapidly released the ships which it had employed. To make matters worse, the American corn crop was a failure, and the industrial depression on the continent reduced the amount of freight movement. Rates fell 30 per cent throughout the year, and have continued to fall during 1902 and 1903, the close of 1903 finding the trade extremely depressed, with little prospect of carly improvement. We find in this hasty review of the recent history of the shipping trade an explanation of the irregularity of the profits of the Cunard Company, and can understand why the directors have 1 Economist, vol. lx, supplement, p. 28. |