Transcript The Shipping Business

The Shipping Business
Tramp & Liner Trade
Chartering & Brokering
Freight Rates
Tramp Shipping
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-- shipping service where carriers contract to
haul cargo in shipload lots between ports
designated by charterer.
Tramp ships provide convenient, timely &
economic transportation for many goods
needed in a complex industrial society.
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In established trades (i.e., grain from US, Canada,
Argentina & Australia to N. Europe, Med, Africa,
Japan & S. Asia
On new routes to alleviate temporary critical
shortages
Tramp Shipping
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Moves 4.5 billion tons of basic agricultural,
forestry, mining products & manufactured raw
materials (steel, cement, etc) world-wide
Depends on a global network of brokers,
agents & representatives to market services,
and procure & contract cargoes
Post WWII:
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Surplus Liberties & Victories dominated the
general service (bulk & break-bulk) fleets
70’s-80’s: larger “SD-14’s” (UK) & “Fortune Class
(Japan) predominate
Tramp Shipping
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Smaller general purpose Tramps face fierce
competition from:
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Larger bulkers: 30-50,000 DWT “Handi-Max” & very large
(100-159,000 DWT) special purpose, ore carriers
Container ships
Tankers outfitted for grain transport (pneumatic “vacuators”
for quick unloading)
STILL (1996): 50% of all dry-bulk ships & 20%
of all dry-bulk cargo carried by 10-30,000 DWT
vessels to service:
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Cargoes that cannot be placed in containers
Transportation of small (10-15,000 T) lots
Shallow depth ports and/or
Ports with low to moderate facilities requiring self-unloading
vessels
Liner Shipping
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-- shipping service that operates on an
established route and has published
sailing dates and published tariffs
Private carriers transport only the goods of
a single shipper (more typical of tramp
trade)
 Common Carriers transport for any and all
goods offered between the specified ports
it serves (typical of Liner Service)
[Basically, a vessel carrying the property of 2
more shippers is a common carrier]
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Liner Shipping
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Conference: An association of common
carriers operating on the same ocean route
and using a common tariff
Closed Conference: limits membership to the
specific number of carriers that will be sufficient to
to provide transportation for the proffered cargo
 Open Conference: admits membership to any
common carrier prepared to serve the trade routed
covered by the conference
[There are about 300 Conferences world-wide, most unite
10 or less Liner Companies, a few as many as 50]
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Liner Shipping
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Examples of Conferences:
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United States Atlantic and Gulf Ports/Eastern
Mediterranean and North African Freight
Conference
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TRADE: From U.S. Atlantic, Gulf and Great Lakes ports, and inland
and coastal points and ports in Greece, Egypt, Turkey, Algeria,
Cyprus, Lebanon, Malta, Morocco, Syria, Tunisia and Yugoslavia
MEMBERS: Farrell Lines, New York, NY; Lykes Bros. Steamship Co.,
Tampa, FL; Waterman Steamship Corp., New York, NY
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Israel Trade Conference
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TRADE: Between U.S. Atlantic, Gulf, Great Lakes, Pacific (including
Alaska and Hawaii) to and from Israel.
MEMBERS: Zim Israeli Navigation Co. Ltd., Haifa, Israel; Farrell
Lines, New York, NY; Lykes Bros. Steamship Co., Tampa, FL
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Liner Shipping
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Liner companies may have a variety of structures,
but all encompass the following functions:
Board of Directors
Chairman
President,
Secretary,
Treasurer
other members
President
Executive VP
Administrative
Traffic Dept
Secretary
Comptroller
Treasurer
Financial Dept.
Chartering Dept
Vessel Ops
Liner Shipping
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Traffic Department
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Inbound Freight Division
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General Freight Agent
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Sales Staff
Outbound Freight Division
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Delivery Orders
Inland Routing
Customs Brokers
Warehousing
Tracing and Claims
Booking Clerk
Manifesting Section
Chartering Department
Charters ships in & out of fleet
Liner Shipping
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Vessel Operations Department
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Marine Superintendent
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Superintendent Engineer
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Port Engineers
Supervision of Engine Personnel
Machinery maintenance – Inspections & dry-docking
Seaworthiness, Safety & Voyage Instructions
Commissary Superintendent
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Port Captains
Supervision of Deck Personnel
Deck maintenance – Inspections & dry-docking
Seaworthiness, Safety & Voyage Instructions
Supervision of Steward Personnel
Ship’s Stores Acquisition
Terminal Manager
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Facilities (equipment & stevedoring)
Administrative (receiving & delivery, security)
Ship’s Compliment
Deck Dept.
Engine Dept
Steward’s Dept.
Modern Tanker (Compliment of 14-20)
Licensed:
Captain
Chief Mate
2nd Mate
3rd Mate
Licensed:
Chief Engineer
1st Engineer
2nd Engineer
3rd Engineer
Unlicensed:
AB’s (2-3)
Unlicensed:
DEMac’s (2-3)
Unlicensed:
Steward/Cook
Messman/BR (1-2)
Passenger Ship (Compliment of 500-1500; QM2 ~ 1250)
Licensed:
Captain
Staff Captain
Chief Mate (1-2)
2nd Mate (2-3)
3rd Mate (3-6)
Licensed:
Chief Engineer
Staff Chief
1st Engineer (1-2)
2nd Engineer (2-3)
3rd Engineer (3-12)
Unlicensed:
AB’s (6-12)
OS’s & Deck Maint Staff
Unlicensed:
DEMac’s (6-12)
Engr Maint Staff
Unlicensed:
Chief Steward
Galley Staff
Dinning Staff
Housekeeping Staff
Chief Purser
Cruise Staff
Vessel Management Companies
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Companies offering full management services or a
combination of specialized expertise including:
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Crewing
Regulatory Compliance
Condition Surveys
Purchasing
Chartering
Brokering and Insurance
Shipyard Selection
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Terminal Requirements
Feasibility Studies
Vessel Selection
Vessel Activation
Route Proposals
Weather Information
Local Regulations
Hotel Operations
Layers of corporate structure proliferate
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Vessels individual corporations with single owner, & multiple
operators
Single operator of ships with different owners
Owner/operators wholly owned subsidiaries of conglomerates
Chartering
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CHARTER-The hiring of a vessel for either:
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a specified period of time or
a specific voyage or set of voyages.
A chartered vessel is technically a private carrier which
predominates in tramp trade, but liner companies often
charter vessels or lease vessels to charter depending on
cargo demand
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CHARTERER-The entity hiring the vessel from the shipowner.
CHARTER-PARTY-The contract between the owner and the
charterer, stipulating in detail each party’s responsibilities in the
transaction.
Charta Partita is Latin for a “letter divided.”
Chartering
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There are three basic types of Charter Parties
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Voyage Charter
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Contract of carriage in which the charterer pays for the
use of a ship’s cargo capacity for one, or sometimes more
than one, voyage.
the ship owner pays all the operating costs of the ship
(including bunkers, canal and port charges, pilotage,
towage and ship’s agency) …
while payment for cargo handling charges are subject of
agreement between the parties.
Time Charter
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The hire of a ship for a specified period of time.
The owner provides the ship with crew, stores and
provisions, ready in all aspects to load cargo and proceed
on a voyage.
The charterer pays for bunkering and all voyage related
expenses including canal tolls and port charges.
Chartering
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There are three basic types of Charter Parties
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Voyage Charter
Time Charter
Bare-Boat Charter
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The leasing of an empty ship for a specified period of time
for a specific fee in this arrangement,
the ship owner virtually relinquishes all rights and
responsibilities in respect of the vessel and the charterer
becomes the de facto owner for this period.
The charterer is generally responsible for all operating
expenses including crewing and insurance.
Also called a Demise Charter
Chartering
VOYAGE
TIME
DEMISE
Basis of charter hire
Cargo Tonnage
Ship Capacity
Ship Capacity
Duration of Charter Party
Specif. voyage(s)
Period of time
Period of time
Port to port
By area
By area
Maintenance of Seaworthiness
owner
owner
charterer
Possession, command,
operation & navigation (demise)
owner
owner
charterer
Employer of crew
owner
owner
charterer
Master under direction of
owner
charterer
charterer
Fuel costs, Port & Harbor fees
owner
charterer
charterer
Hull & Machinery Insurance
owner
owner
negotiable
Protection & Indemnity (P&I)
owner
owner
charterer
End of voyage
Monthly
Monthly
Freight
Hire
Hire
Responsibility
Geographic Limits
Payment to shipowner
Legal term for compensation
Weight & Measure
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There is tonnage and there is tonnage
 Deadweight Tonnage (DWT) – The displacement of a
fully loaded vessel in Long Tons (2240 lbs) or Metric Tons
(1000 Kg) including structure, fuel, water, stores, cargo,
passengers & crew.
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Light Weight Tonnage – Displacement of “empty” vessel
(no fuel, stores, cargo, etc.)
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Deadweight Items – The difference between DWT and
LWT including Cargo Deadweight
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Gross Tons – The entire interior volume of the vessel
(including deck houses and excluding certain spaces
exempted by statute) in 100’s of cu. ft. (1 g.t. = 100 cu.ft.)
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Net Tons – Volume remaining after “non-earning” spaces
have been deducted from the Gross Tonnage.
Weight & Measure
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There is tonnage and there is tonnage
 Gross & Net Tonnage – are legal terms used to
determine port & canal transit fees and classify the “size” of
vessels for certain legal activities and regulations. They are
intended to be a measure of the “earning capacity” of the
vessel.
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As an analogy consider “Gross Income” which the IRS defines
as the total of what you make but exempting certain items (.e.g,
contributions to an IRA) and “Taxable (Net) Income” which is
Gross Income minus deductions (either standard or itemized).
Calculation of Gross and Net Tonnage can be as complicated as
a 1040 Tax Form and there are “loopholes” for getting certain
spaces exempted or deducted that actually may be used to carry
cargo.
Originally the “tun” was a cask for carrying 250 gal. of wine. It
weighed 2240 lbs and occupied 57 cu. ft. of space.
Freight Rates …
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… the prices charged for the services of ocean
carriers. Determined by ship operators to reflect:
 The cost of providing the carriage including
 Vessel operation
 Cargo handling, port fees & tariffs
 Exchange rates among international currencies
 The value of this service to the shipper
 The ability of the merchandise to support the
expense of being shipped
 Economic conditions in general
… subservient to
 The Law of “Supply & Demand” including
 Competition among carriers on the same route
 Competition among ports
Freight Rates …
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Charge carriage by weight ($/100 lbs) or volume
($/cu.ft.)?
 It depends …
 If 1 LT (2240 lbs) of cargo occupies less than 40
cu.ft., charge by weight. (deadweight cargo)
 If 1 LT (2240 lbs) of cargo occupies more than 40
cu.ft., charge by volume. (cubic cargo)
 The weight (in LT) of 40 cu.ft. is the stowage factor
 Carriers charge “by weight or measure” whichever
generates the most revenue
But what about the type of cargo? (nails vs. oranges
vs. computer parts?)
Freight Rates …
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Class Rates – assigned to groups of unrelated cargos that are
found to require approximately the same revenue for their
transport
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Class D (dangerous cargo) is the highest rate followed
by Class 1 through 8, with Class 8 the cheapest
 There are deadweight cargo and cubic cargo rates in each
class
Fuel surcharge computed to reflect fuel price fluctuations
without redefining class rate scales
Commodity Rates – negotiated compromise falling between
class rates
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Applicable to specifically described cargoes (e.g., Paper:
wrapping, not corrugated, other than cellulose film)
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Commodity rates take precedent when both class &
commodity rates are offered
Freight Rates …
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Through Rates – are charged for shipments
originating with one ocean carrier but transferred to
connecting carriers at intermediate ports
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Usually the originating carrier issues the Bill of Lading,
collects all charges, and divides the revenue with the other
carrier(s) as per the through rate agreement
Sometimes the Through Rate is lower than the combination of
rates of each of the participating carriers
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Similar to a flight from Chicago to NY via Atlanta being
cheaper than the sum of the legs or, possibly, a direct
flight.
However, sometimes through rates are the sum of the
connecting carriers’ charges plus a transfer fee.