Competition Between Panama and Liberia to Be the Largest Flag State

Panama and Liberia are vying for the title of the largest flag state for their registries. Based on data at the end of July, Liberia appeared to have pulled ahead in the competition, while Panama is taking steps to maintaining its 20 years as the largest registry. As the competition intensifies, both flag states are taking working to enhance their position and to reflect the new challenges emerging for shipowners.

Clarkson Research released its market analysis in July and for the first time, it appeared that Liberia had edged ahead on the measure of total gross tonnage in the registry. While both flags were shown to have a 16 percent market share, Clarkson calculated that Liberia was just over one percent ahead in gross tonnage at 248.9 million tons. IHS Markit reported that Liberia reached 252 million gross tons as of the end of July.

The difference based on gross tonnage is between one and two percent separating the two registries. Liberia however remains behind in the number of ships at just over 5,000 to Panama’s more than 8,200 vessels in its registry.

Panama acknowledged the number which received wide coverage in the media while noting as part of its modernization effort it was undertaking a long-deferred purging of the registry. They said targeting delinquent ships or ones in violation of international standards, 216 ships had been removed from the registry since 2021 and highlighted an initiative focusing on fishing vessels that has removed 182 vessels representing nearly 500,000 tons. Another 97 fishing vessels representing nearly 60,000 gross tons are also in the process of cancelation. This is in addition to 6.5 million gross tons that were canceled for issues related to Iran, North Korea, or vessels included on the list of international sanctions.

“We certainly have set sights on becoming the largest commercial shipping registry in the very near future,” confirms Liberian International Ship & Corporate Registry which administers the flag while noting, “but more importantly, our team is working diligently with our partners to be recognized as a top flag.”

The data shows that Liberia’s ship registry grew nearly six percent in gross tonnage in 2023. Panama also highlights that it added 5.9 million tons in the first half of 2023, which is more than two percent net of the purging. Critically for Panama, it includes 4 million gross tons, or 152 new ships this year, and over 1,500 new ships representing 50 million gross tons over the last four years. Panama’s legacy fleet means its average is older, calculated by Clarkson at over 19 years to under 13 years for the Liberian flag.

Panama cited the age of its fleet as one contributor to why the Paris MoU lowered the flag to its grey list recently. The AMP which administers Panama’s registry said 104 of the 374 ships the MoU reported as detained were over the age of 30 and that 35 vessels were over 40 years old. The larger number of ships in the registry they noted also means that there is a higher total number of inspections of Panama ships.

Over the past four years, the AMP highlights that they have focused on modernizing the registry. They have been working with government officials to simplify the administration, highlighting that they achieved their best retention rate and cancelation ratio as they continue to agree on steps with the government for the future of the registry. The new administration in Panama has been working to reverse a trend they identified in 2020 that showed that if immediate actions were not taken, Panama would lose market leadership at the end of 2022.

Liberia has also released a series of new laws and procedural improvements. They note the impact on actions such as mortgage recording while also lowering costs.

Both flag regimes are investing in their systems highlighting the introduction of a broad range of new technology and processes to help shipowners address the coming changes in regulations primarily aimed at emissions and the environment as well as the renewed focus on inspections and compliance by regulators after the interruptions caused by the pandemic. The current geopolitical environment is also challenging the flags with both reporting that they have increased their vetting process and they have an information sharing agreement to identify ships leaving one registry that are seeking to transfer flags.

The competition between Panama and Liberia will continue with the two flags remaining dramatically ahead of other flag states. The Marshall Islands is third with a 12 percent market share. The shifts in the size of the registry between flag stats will likely continue to reflect broader changes in the industry. China has passed Greece as the country with the largest ship ownership, based on the gross tonnage, and the next few years are likely to see older ships replaced by newbuilds as operators seek greater efficiency and lower emissions to meet the industry’s new standards such as the IMO’s CII and EEXI which became effective this year.