Flag states play a key role in the introduction of new regulation within the shipping industry and their influence is largely determined by the size of their fleets. The top ten flagged fleets account for 74% of the world fleet in terms of GT, a sufficient volume of tonnage to ratify most IMO conventions. This month, we take a closer look at the size of the top ten flag states and the growth trends over the last decade.The world fleet totalled 1.2bn GT at the start of 2016, almost double its size at the start of 2005. Where this tonnage is flagged is important on several levels. The choice of flag is central to the legislation by which a vessel must adhere; from tax and employment obligations to environmental standards. Further, flag states are key to developing and ratifying new legislation and the importance of their fleet size is illustrated by the fact that just one more flag state signature to the Ballast Water Convention, which is around 1% short of the 35% of global GT required, could secure its entry into force.
Slower Growth At The Top
The combined fleet of the top ten flag states has grown 132% since the start of 2005 when they accounted for 61% of global GT to 897m GT at the start of 2016 (74% of the global fleet). Panama flag is by far the largest globally totalling 220m GT at the start of January. This is equivalent to 18% of the world fleet and 74% of this tonnage is Asia/Pacific owned. However, within the top ten flag states, Panama has seen relatively slower growth, achieving a CAGR of 5% between the start of 2005 and 2016. This has resulted in a decline in Panama’s share of the global fleet, down from 21% at the start of 2005. The Liberian flagged fleet is the second largest globally at 132m GT. Over half, 72%, of this tonnage is European owned and while the fleet is 40% smaller than that flagged by Panama it still accounts for 11% of the global fleet. Further, the Liberian flagged fleet grew at a faster pace than the Panama flag between 2005 and 2016 (9% CAGR) which has helped it maintain a 11% share of global tonnage.
Expansion In The Ranks
Within the top ten flag states, the fastest growth has been across the third to fifth largest flagged fleets: the Marshall Islands, Hong Kong and Singapore. Annual fleet growth has averaged 16%, 14% and 12% for each flag respectively between 2005 and 2016, though only the Marshall Islands maintained double digit fleet growth last year. Combined, the market share of these flags rose from 12% to 25% over this period. While the Marshall Island fleet largely consists of European owned tonnage (58%), Asian owned tonnage accounts for 73% and 67% of the Hong Kong and Singapore flagged fleets.
Flying The Home Flag
The remaining five flag state fleets are all around 20% of the size of the Panama flag in terms of GT and their fleet share has remained steady at around 19% over the last 11 years. For national flags China, Greece and Japan, domestic fleets account for the majority of tonnage. So, Panama remains the largest global flag state. However, faster fleet growth in the competing flag states has increased their market share while the smaller flags have seen steady growth. With the lion’s share of the global fleet, major flags remain at the heart of the shipping industry.