You are on page 1of 43

AN INTRODUCTION TO THE SHIPPING ECONOMICS

©Abdulla Wanis Tabet


2017
In this show
Ship types
1 Bulk & genaral cargoes trade
Chartering terms
2 Four shipping markets
3 Shipping cycle & Business cycle
1-1 Ship types

Commercial ships divided to:

A. Cargo fleet

bulk cargo transporters / general cargo /Specialized

B. Non-cargo fleet
Tankers
Bulk carriers
-2general cargo
1 Ro-Ro
2 Lo-Lo
3 MPP
4 container ships, which may-:
1-4large, medium , small & feeder
4-2 pure or combined carrier
3-4classified as size / age to generations
-3Specialized
1 Reefer
2 LNG carrier
3 LPG carrier
4 Chemical carrier
5 Car carrier
6 live stock carrier
7 Forest products carrier
8 Asphalt carrier…etc
B- Non-cargo ships

1Passenger :- cruise/ferries
2 Off-shore:- PSV-OSV &storage tankers
3 Dredger and cable layers
4tugs and pilot boats
5- Hospital
6 Prison
7 Library
8 training……etc
World merchant fleet as @ 1/1/2016 (ISL ,)2016
Bulk32.9%- GC 21.2% -Crude13.7% -Con10.2%-Ch10.1% -RORO-PAX8.4% -Gas3.4 %Total 51409
BULK CARGO TRADE

Bulk cargo means anything whose physical


characteristics allow it to be handled in bulk.
Bulk cargo transport : moving of one cargo as bulk
from the producer to the customer in one stage -
one B/L.
The main elements of dry bulk transport are:
1-Volume
2 Handling and stowage
3 Cargo value
4 Regularity of trade flow
Major Dry Bulks-:
Iron Ore
 Coal (Steam for Power) (Coking for Steel
Production)
 Grain (Wheat, Corn, Soya, Sorghum, etc)
 Bauxite and Alumina
Phosphates
Minor Dry Bulks-:
 Forest Products such as Packaged Timber,
Newsprint , Paper Pulp & wood chips.
 Animals Feed & fertilizer
 Sugar, Rice , salt
 Cement, gypsum & sulphur
 Steel products, steel scrap, non-ferrous metal ores.
BULK GENERAL CARGO
Service Whole ship Slot / hold / container/ pallets

Character Large quantities Small/medium quantities

Value Raw materials (cheap) Loose/ Final / semi final


products (expensive)

Freight Cheap and flexible Expensive and inflexible


negotiations negotiations

Service Tramp (1 trip for 1 cargo) Liner or tramp & stops at


different ports (common)
B/L 1 Multi

Respond Quick (charter) Stick (liner)


to S/D
Four Shipping Markets
1-2Four Shipping Markets

New Building Freight

Sale and Demolition or


Purchase Scrap
2-2Variables in the shipping market(Supply & demand)
A –Freight market
freight market including:-

Liner shipping market

Dry bulk market (charter) shipowners, charterer


Charter market(charter) & ship brokers…

Freight derivatives market


Chartering Terms
liner service is a fleet of ships, with a common ownership
or management, which provide a fixed service, at regular
intervals, between named ports, and offer transport to
any goods in the catchment area served by those ports
and ready for transit by their sailing dates.
Freight usually high and fixed because of the following
6building blocks:- service schedule ,ship costs, port
charges (including cargo working),container operations
,container costs it self and administration costs.
Bare boat charter (similar to a lease) the vessel is
chartered to a third party who to all intents and
purposes owns it for the period of the charter,
provides the crew, pays operating costs (including
maintenance) and voyage costs (bunkers, port dues,
canal transit dues, etc.), and directs its operations.
Time charter
a charterer has the use of the vessel for a specific
period.
A fixed daily or monthly payment is made for the hire
of the vessel. The charterer pays fuel, port charges,
loading / discharging fees and other cargo-related
costs and directs the ship operations.
Voyage charter a charter who provides transport for
a specific cargo from port A to port B for a fixed price
/ ton. Owner pays the port costs(excluding
stevedoring),fuel costs and crew costs.

Contract of Afreightment COA the ship owner agrees


to carry a series of parcels for a fixed price / ton.
B- New buildings market
The new building market trades is ship which does not exist.
C- Sell and purchase market (2nd Hand)
Sale & purchasing stages-:
 Putting the ship on the market
 Negotiation of price and conditions
 Memorandum of agreement
 Inspections
 The closing

Factors affecting the sale and purchase market


 Freight rates
 Age
 Inflation
 Expectations
D- Demolition market
Demolition market parties:

#The ship owner

#The scrap yards

#The broker
Prices are determined by negotiation and depend
on the availability of ships for scrap and the
demand for scrap metal.
D- Demolition market

Demolition market parties:

#The ship owner

#The scrap yards

#The broker
Prices are determined by negotiation and depend

on the availability of ships for scrap and the demand

for scrap metal.


Because the same ship owners are trading in all four markets
their activities are closely correlated by cash flow and market
sentiment , when freight rates rise or fall the changing
sentiment ripples through into the sale and purchase market
and from there into the new building market, with the
balance sheets of the companies trading in the different
markets acting as a link
1-3Shipping cycle

Market cycles are the driving force behind shipping


investment and chartering. They are the heartbeat of the
shipping market, pumping cash in and out of the business /
an economic concept that explains how shipping companies
and freight charges respond to supply and demand.

The four stages of the shipping cycle are:

peak-up - Peak - Downturn - Trough.


Shipping cycle
2-3Business cycle
Linking both cycles (relationship)
Business cycle Shipping cycle

Freight increase
D>S Expansion- Peak up No spaces
Buy new / second hand

High freight rate


D=S Peak Second hand price increase
More new building orders

Freight decrease
D<S Recession –Downturn Ship has no business
overshoot

Freight very low


Trough Short cash
Active demolition market
In brief

Freight rate links supply and demand:


*When supply is tight freight rates rise, stimulating ship
owners to provide more transport and when they fall, it has
the opposite effect.

*Time-scale is important in reaching an equilibrium price.


Thank you