Panama and Liberia are locked in a spirited contest for the coveted title of the world's premier flag state, with their maritime registries competing for supremacy.
Recent assessments have portrayed a nuanced picture of this rivalry, with Liberia momentarily seizing an advantage in one dimension, while Panama appears to retain its status as the reigning registry giant, albeit by a slim margin, after two decades at the helm.
As the intensity of this competition escalates, both flag states are proactively fortifying their positions to address the evolving challenges confronting shipowners.
In a landmark development, Clarkson Research, a renowned authority in market analysis, unveiled its findings in July, indicating that Liberia had inched ahead when gauged by total gross tonnage registered.
While both flags boasted an impressive 16% market share, Clarkson's calculations placed Liberia marginally ahead, with an estimated 246.5mn tons in gross tonnage. Nevertheless, Liberia lagged behind in terms of the number of vessels, with just over 5,000 ships in its registry compared to Panama's robust tally of more than 8,200 vessels.
Panama acknowledged this revelation, which garnered widespread media attention, while concurrently highlighting its ongoing modernization efforts, including a long-overdue culling of its registry.
As part of this initiative, Panama has systematically removed 216 ships since 2021 for delinquency or violations of international standards. Notably, Panama has spearheaded a focused campaign targeting fishing vessels, resulting in the removal of 182 such vessels, constituting nearly 500,000 tons. An additional 97 fishing vessels, amounting to almost 60,000 gross tons, are currently being cancelled.
This monumental endeavour complements the scrapping of 6.5mn gross tons linked to issues involving Iran, North Korea, or vessels implicated in international sanctions.
However, IHS Markit has recently published its own market assessments, which affirm Panama's continued dominance, registering a total of 249.8mn gross tons. Once again, the discrepancy in total tonnage between the two registries is a mere one percentange point.
"We certainly aspire to ascend to the position of the world's largest commercial shipping registry in the very near future," asserted the Liberian International Ship & Corporate Registry, the body responsible for administering Liberia's flag. They further underscored their commitment to being recognized as a preeminent flag on the global stage.
The data underscores Liberia's impressive growth in ship registration, with a nearly 6% increase in gross tonnage in 2023. Meanwhile, Panama highlights the addition of 5.9mn tons in the first half of 2023, a figure that considers the net gain after the aforementioned registry purging. Crucially for Panama, this includes a staggering 4mn gross tons contributed by 152 new ships this year alone, and a total of over 1,500 new vessels amounting to 50mn gross tons over the past four years.
It is worth noting that Panama's legacy fleet, on average, skews older, with Clarkson calculating an average vessel age of over 19 years, compared to Liberia's fleet, which averages under 13 years.
Panama attributes the ageing profile of its fleet as a contributing factor to its recent relegation to the grey list by the Paris Memorandum of Understanding (MoU). The Panama Maritime Authority (AMP), the governing body overseeing Panama's registry, points out that among the 374 ships reported as detained by the MoU, 104 were over 30 years old, with 35 vessels surpassing the 40-year mark. Additionally, the sheer volume of ships in Panama's registry necessitates a higher number of inspections.
Over the past four years, the AMP has concentrated its efforts on modernising the registry, collaborating closely with government officials to streamline administrative processes. They proudly note achieving their highest retention rate and cancellation ratio, while continually working with the government to shape the registry's future. Panama's new administration has actively sought to reverse a trend identified in 2020, one that foresaw a loss of market leadership by the end of 2022 if immediate measures were not taken.
Liberia, too, has introduced a suite of new laws and procedural enhancements, with a discernible impact on activities such as mortgage recording, coupled with reduced costs.
Both flag administrations heavily invest in their systems, ushering in a wide array of new technologies and processes designed to assist shipowners in navigating forthcoming regulatory changes, primarily aimed at emissions reduction and environmental protection.
Additionally, there is a renewed emphasis on inspections and regulatory compliance following the disruptions induced by the pandemic. Against the backdrop of a complex geopolitical landscape, both flags report heightened vetting processes and share information to identify ships leaving one registry in pursuit of another.
The captivating rivalry between Panama and Liberia shows no signs of abating, with both flags maintaining a substantial lead over other flag states. The Marshall Islands occupies the third position, commanding a 12% market share.
The ebb and flow in registry size between these flag states are poised to mirror broader shifts in the maritime industry. Notably, China has eclipsed Greece as the world's foremost ship-owning nation, based on gross tonnage, and the upcoming years are expected to witness the retirement of older vessels in favour of newbuilds, driven by imperatives of efficiency and emissions reduction, in line with the industry's evolving standards such as the IMO's CII and EEXI, which took effect this year.