Transcript MARITIME TRANSPORT SYSTEM - Univerza v Ljubljani

MARITIME MARKET
STRUCTURE
Marina Zanne, M.Sc.
[email protected]
Introduction
Provision of maritime transport services involves 4 markets:
• freight market
• liner shipping market
• dry bulk market
shipowners, charterers,
• tanker market
brokers,
• freight derivatives market
• newbuildings market
• second hand ships market (sale & purchase market)
• demolition (scrap) market
The concept
of 4 markets
Stopford M. (2009): Maritime
economics, p. 179
The freight market - Introduction
• at least 5 different ship types are used in liner market
• there are different sizes of bulk ships and tankers
Stopford M. (1997): Maritime economics, p. 390
The freight market - Introduction
Name
Handysize
Size in
Ships
DWT
10.000 to 35.000 34%
Handymax
35.000 to 59.000 37%
Panamax
60.000 to 80.000 19%
20%
Capesize
80.000 and over
62%
10%
Traffic[19]
18%
Length
Beam
Seawaymax
226 m
24 m
Panamax
Aframax
Class
ULCC
Typical Min
DWT
Typical Max
DWT
7,92 m
10.000 DWT
60.000 DWT
228,6 m 32,3 m
12,6 m
60.000 DWT
80.000 DWT
253 m
11,6m
80.000 DWT
120.000 DWT
16 m
120.000 DWT
200.000 DWT
20 m
200.000 DWT
315.000 DWT
320.000 DWT
550.000 DWT
44,2m
Suezmax
VLCC (Malaccamax)
Draft
470 m
60 m
The freight market – The liner market
• scheduled service at publically known tariffs; many
loading and unloading ports on the round trip; high
speed & high regularity  shippers can easily plan
delivery times and costs
• small quantity of high valued cargo (minor bulk & general
cargo; less than 2.000-3.000 tons)
• contract for freight transport – bill of lading
(Hague/Hague-Visby & Hamburg Rules)
• routes: from developed to developed countries
The freight market – The liner market
• 30% (in 2000) of cargo transported by sea is general
cargo  mainly it is transported in containers with liner
services  value of this cargo was 80% of all cargo tr.
• cargo: manufactures, semi-manufactures, minor bulk
• evolution from cargo liners to containerized transport
• scheduled services started from 1870s (steamships) 
liner service on the Far East route
• until 1960s multi-deck ships with own cargo handling eq.
were used (cargo liners)  these ships were able to
carry general cargo and bulks (reason: unbalanced trade
on routes)
The freight market – The liner market
• liner and tramp ships (twin deckers) were similar and
thus it was able to use them interchangeably  the
construction of specialized ships  to improve
productivity & make the service more efficient (ro-ro,
reefer ships etc.).
• labour and capital intensive service  lack of cargo 
cost, complexity and poor delivery of liner service 
ships were spending cca 50% of time in ports (in the
1960s)  unification of cargo  paletization,
containerization (integrated transport system)  higher
productivity
The freight market – The liner market
Example: Productivity comparison
Priam class cargo liner (22.000 DWT)
vs.
Liverpool Bay container ship (47.000 DWT, 2.961 TEU)
The cargo liner spent 149 days (in a year) in ports = 40%
The container ship spent 64 days (in a year) in ports = 17%
9 cont ship = 74 cargo liners
In 1975: 14,1 million TEU
In 2007: 466 million TEU
Growth: 10,4% per year
The freight market – Dry bulk market
• tramp shipping; no fixed or published schedule; ships are
employed on spot or chartered
• bulk commodity can be transported as bulk cargo or
general cargo
• usual way: one cargo, one ship,
one
loading and one unloading port
• empty trips
• low value cargos
• low speed ships
• perfectly competitve market
• economy of scale
Stopford M. (2009): Maritime economics, p. 429
The freight market –
Dry bulk marketParcel
size distribution
• Mix of cargoes – mix of
routes – mix of needs in
dry bulk market
Stopford M. (2009): Maritime
economics, p. 59
The freight market – Dry bulk market
Costs
included in
the charter
fee/freght rate
$/day
$/t
Stopford M. (2009): Maritime economics, p. 182
The freight market – Tanker market
• crude oil, oil products, chemicals, liquid gases &
specialist cargoes
• main customers: energy, chemical and agricultural
business
• economies of scale
• subcontracting; fleet is owned by oil companies or long
time chartered by the same companies; seasonal
requirements are fulfilled on spot market
• in a way similar to liner shipping (constant routes), in a
way to tramp shipping (empty rides)
• Worldscale – the instrument for setting the freight rates
in tanker market
The freight market – Tanker market
Total capacity
75.000 t
Average service speed
14,5 knots
Bunker consumption
Steaming
55 t/day
Other
100 t per round voyage
In port
5 t per port
Grade of fuel oil
380 centistokes
Port time
4 days for a voyage from one loading to another
discharging port
Fixed hire element
12.000 $/day
Bunker price
116,75 $/t
Port costs
Most recent available
Canal transit time
30 h per Suez transit
The freight market –
Summary (PSD)
Stopford M. (1997): Maritime
economics, p. 16
The freight market
– Summary (PSD)
Stopford M. (1997): Maritime
economics, p. 393
The freight market – Freight derivatives
market
• derivatives contract – legally binding agreement in which
two parties agree to compensate each other, with the
compensation depending on the outcome of a future event
 to share the risk of a volatile market and remove the “all
or nothing” situation  the playing safe option (ex freight
futures)
• making derivatives work in practice is not easy:
• a reliable base index is required,
• assurance that on settlement date the parties will meet
their obligations,
• lack of counterparties.
The freight market – Freight derivatives
market
Stopford M. (2009): Maritime economics, p. 194
Newbuildings market
• highly competitive market
• cca 30 countries have significant merchant shipbuilding
industry  changeable history (in 1960s Europe’s share
was 66%, now it’s less than 10%, Asia’s share grew from
22 to 84%)
• it takes several years to deliver a ship
• shipbuilding market cycles  volatility of supply &
demand for ships
• the prices of ships fluctuate significantly  difficulties in
planning (risk of filling the order book with ships
contracted at low prices  until these ships are
delivered their market price can double)
Newbuildings market
• Price of new ships depends on demand for new ships
and the available avaiable shipyard capacity and is
influenced with freight rates, second-hand prices, market
expectations and credit availability.
Stopford M. (2009): Maritime economics, p. 630
Newbuildings market
Stopford M. (2009): Maritime economics, p. 635
Sale & purchase market
• cca 1.500 change the owner every year; price mostly
depends on the freight market situation, age of ship etc.
• ship for sale need to free of any mortgages or liens and
are usually out of charter
• why selling?
• replacement of vessels at certain age
• the ship became unsuitable for his business
• expectation of falling prices
• “distress sale” - sale needed to meet the day-to-day
commitments
• why buying?
• needs a specific ship/capacity, feels that is the right
time to acquire a ship
Sale & purchase market
• shipbrokers; often the ship is offered to sveral brokin
companies
• full details of ship are mandatory; hull, machinery,
equipment, class, survey status etc.
• put the ship on the market,
• negotiation of price/conditions,
• memorandum of agreement; price, deposit, where,
when at what terms etc.; rights and obligations
• inspections; physical ins. (drydocking/underwater),
classification society records,
• closing; simultaneous delivery of ship and transfer of
funds
Sale & purchase
market
Stopford M. (2009): Maritime
economics, p. 204, 205
Sale & purchase market
Disusion:
• When the freight rates are good (high freight rates) what
is the relations between the prices of newbuild and
secon-hand ships?
• What are the advantages of second-hand ship over a
new ship and viceversa?
The demolition (scrap) market
• recycling industry
• ship is usually scraped when operating costs are higher
than ship’s value
• Ship owners – brokers – (intermediaries) - demolition
yards (China, Pakistan, India, Bangladesh)
• Scrap metal is used as a raw material for mills or it is
used in construction
• The price depennds on the demand of the local steel
markets  when the shipping (freight) market is in
depression a lot of ships is scrapped  low price of
scrap metal
Sources & further reading
• Stopford M.: Maritime economics, London, Routledge
(2009), Chapter 5
• The tramp shipping market, Clarkson Research Studies,
2004
• Freight derivatives market – FAQ,
http://www.exchange.imarex.com/ffa-trading/freightderivatives-market-faq/
• The End of Break Bulk Liner Shipping,
http://www.merchantnavyofficers.com/brakebulkliners2.h
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