In our exploration of maritime shipping finance...

...we are currently looking at what happened in the maritime shipping industry from 1950 to 2002. Now what was particularly important during this period of time was the rise of standardization by means of containerization.

Constant change was so prevalent...

...from 1950 onwards that Dr. Martin Stopford, Managing Director of Clarkson Research, divided the period up into 5 distinct periods. In an October 2002 forum, he explained that the period since 1950 can best be understood by the following phases, namely Cash (1950-1956), Charterback (1956-1970), Bubble (1970-1979), Distress (1979-1988), and Convalescence (1988-2002).

If you can remember, last time we talked about the "Cash" period (1950-1956)...

Now today we are going to look at the period directly following that. The period I am referring to was called the 

“Charterback” (1956 – 1970) period

Here shippers started to become conscious of the need to increase their fleets to grow their business. 

They needed more and larger ships...

...and were not able to finance these fleet expansions from retained earnings alone. They started to offer charters for long periods of time. That way they could get the needed investment to buy more ships. 

Charter agreements...

...in addition to the ship mortgaging, were used and accepted by bankers as security for the capital needed to buy new ships. This created a highly leveraged situation. Borrowing increased very quickly. In short, shipowners and bankers were relying on the mere presence of charter agreements to solve all potential capital repayment problems.

Shipping legislation in terms of registration procedures and costs vary from country to country. 

The “Charterback” period also represented a time when the shipping market became significantly less “nationalistic,“ as shipowners registered the multitude of new vessels under so-called “flags of convenience.“ Decisions surrounding which flag the ships would operate under was primarily cost-driven.

Can you say "potential bubble?"