Port and Shipping Studies

Module -1

BANGABANDHU SHEIKH MUJIBUR RAHMAN MARITIME UNIVERSITY

Presented By: Fayyaz Khundker, Managing Director

Ocean Network Express Bangladesh Ltd. (ONE)

Date: 17-Dec-2021 Venue: IBBBS, Bangabandhu Sheikh Mujibur Rahman Maritime University,
Extended Campus, Dhaka.
 Fayyaz Khundker
• Masters of Business Administration, Institute of Business
Administration, Dhaka University
• 30 Years of Service in Shipping and Logistics Industry in Bangladesh
and Overseas
• Worked for MNCs and JV companies like: James Finley PLC, Shaw
Wallace BD, P&O Nedlloyd, Maersk Line, NYK Line, ONE Line.
• “Chartered Fellow” of The Chartered Institute of Logistics and
Transport (FCILT)
• Married with two children
• Interest: Sports!
Notes:
• Please keep Mobile phone silent
• Please ask question after end of each topic
• If I cannot answer, shall reply through email at later stage
• Please provide your email id to my colleague Mr. Maruf Andalib
• No need to write elaborate notes, I shall share the presentation by
email
• My email id – fayyaz.Khundker@one-line.com (please feel free to
drop me an email anytime).
 Topics to be Covered
• Different Mode of Transportation
• Types of Shipping
• Geography of Maritime Transport
• Major Commodity Trade in The World
• Liner Shipping: Containerization and Future Trend
• Alliance & Consortium
• Pricing: Component of Freight and Surcharges
• Shipping Fundamentals
Different Mode of Transportation
 Different Mode of Transportation
• Transportation is used for the movement of people, animals, and
Cargo.
 Different Mode of Transportation
• 3 Different modes of transportation
are Air, Sea and Land Transportation.
• Land Transportation includes
Rail, Road and Off-Road Transport
 Air Transportation:
• Typically on airplane, which is heavier than air flight vehicle.
• Air transport is the fastest method of transport.
• Commercial jets reach speeds of up to 955 kilometers per hour
(593 mph)
• This celerity comes with higher cost and energy use
• Air cargo is any property carried or to be carried in an aircraft.
• Air cargo comprises air freight, air express and airmail.
 Land Transportation
• A mode of transport or movement of people, animals, or cargo from one location to
another on land.
• The two main forms of land transport are:
• Rail Transport:
• Rail transport is where a train runs along a railway or railroad
• Modern high-speed rail is capable of speeds up to 350 km/h (220 mph)
• In Bangladesh average speed is up to 25~30 km/h

• Road Transport:
• Road transport offers a complete freedom to road users to transfer the vehicle from one lane to the other and
from one road to another
• This flexibility of changes in location, direction, speed, and timings of travel is not available to other modes of
transport.
• It is possible to provide door to door service only by road transport.

• Off-road Transport: Moving people or articles on land without the use of paved roads.
 Sea Transportation:
• A transport by water of passengers or goods (cargo).
• The advent of aviation has diminished sea travel for passengers, but
still popular for short trips and pleasure cruises.
• Water transport is highly cost effective with regular schedulable
cargoes, such as trans-oceanic shipping of consumer products.
• Containerization revolutionized maritime transport starting in the
1970s.
• Sea Transport: In today's shipping market have evolved into three
separate but closely connected segments: bulk shipping, liner
shipping and specialized shipping
 RECAP: Mode of Transportation
• 3 Different modes: Air, Land and Sea Transportation
• Air Transportation: Fastest transit/ Typically expensive/ Express
delivery- FEDEX/ UPS/ TNT/ DHL
• Land Transportation: By Rail/ Road- Freedom of users to transfer the
vehicle from one lane to the other and from one road to another.
• Sea Transportation: Highly cost effective with regular schedulable
cargoes.
• 3 Separate but closely connected segment-
• Bulk (large quantity)
• Liner (Small quantity/ Container)
• Specialized Shipping (Reefer/ LNG/ Chemical)
Types of Shipping
 Types of Shipping
• Many ways you can send items or goods from A ➔ B
• Either nationally or internationally
• Each has different restrictions, requirements, costs
• Freight shipping: The thing you’re putting on a truck, train, ship or
plane to move from A ➔ B
• Freight can be sent via road, rail, sea or air, depending on the
destination to get it to its destination as cheaply as possible
 Types of Shipping
DIFFERENT TYPES OF SHIPPING SERVICE

LINER TRAMP
SERVICE SERVICE

SINGLE VOYAGE CONSECUTIVE TIME TRIP BAREBOAT

CHARTER VOYAGE CHARTER CHARTER CHARTER CHARTER
 Types of Shipping
LINER (Container) Shipping Industry Segment
Shipment Origination, Provide and Load &
Provide Inland
routing and capacity operate Unload
Containers Delivery
procurement vessels Shipments
Key • Sales • Ownership of • Ownership of • Terminal • Control of
Activities • Shipment containers vessel Control Trucks/
Routing • Storage and • Operation • Terminal Transport
• Capacity maintenance Vessel Operation • Container
Procurement • Repositioning • Container Handling
• Customer Handling • Managing
Service Railroads
• Billing
• Tracking

Competitor • Container • Container • Container • Container • Truckers

Types Carriers Carrier Carriers. Carriers • Container
• Forwarders/ • Container • Outsourced/ • Captive Carriers
NVOCCs Leasing Third party terminal (limited)
Companies operators
• Third-party
terminal
operators
 How to Move Goods by Sea
• Many different types of ship are used to transport goods around the world
• The differences between them reflect the varied needs of international traders
• different types of ship are used to carry different types of cargo, or to carry cargo
in varied ways.
• Container ships (or 'box ships') carry their cargo packed into standard 20' or 40'
containers that are stacked both on and below deck. Smaller 'feeder' ships carry
containers on coastal and inland waters.
• Roll-on/roll-off (ro-ro) vessels carry both road haulage and passenger vehicles.
• General cargo ships carry loose-packaged cargo of all types.
• Bulk carriers carry unpackaged goods - usually large volumes of single-commodity
goods such as grain, coal, fertilizers and ore.
• Tankers carry liquids (such as oil and gas) in bulk.
 How to Move Goods by Sea
• Merchant ships primarily do business in two different ways:
• Liner vessels operate on fixed routes, to fixed schedules and usually with a
standard tariff.
• Liner trades are dominated by container ships, roll-on/roll-off carriers and
general cargo ships.
• Tramp/ Charter vessels operate entirely according to the demands of the
person chartering them.
• Their ports of loading and discharge are set by the charter, as is their cost,
which depends on immediate supply and demand conditions.
• Most tankers and bulk carriers operate in the charter markets.
 RECAP: Types of Shipping
• Containers are standardized so they will fit on container ships easily and
are stackable/ Very cost effective method
• International shipping refers to items or goods being delivered between
countries
• Container ships carry their cargo packed into standard 20' or 40’
• Ro-Ro vessels carry both road haulage and passenger vehicles
• General cargo ships carry loose-packaged cargo of all types
• Bulk carriers carry unpackaged goods
• Tankers carry liquids (such as oil and gas) in bulk
• Liner vessels operate on fixed routes
• Charter vessels operate entirely according to the demands of the person
chartering them
Geography of Maritime Transport
 Maritime Geography and Routes
• Maritime transportation has always been the
dominant support of global trade since 3,200 BCE
originated from Egyptian Costal.
• By 1,200 BCE Egyptian ships traded as far as
Sumatra, representing one of the longest maritime
route of that time
• By the 10th century, Chinese
merchants frequented the South China Sea and the
Indian Ocean, establishing regional trade networks
• Spain, Portugal, England, the Netherlands and
France, would be the first to establish a true global
maritime trade network from the 16th century.
• Shipping activity focused around the
Mediterranean, the northern Indian Ocean, Pacific
Asia and the North Atlantic, including the
Caribbean. Thus, access to trade commodities
remains historically and contemporarily the main
driver in the setting of maritime networks.
 Maritime Geography and Routes
• In the mid 19th century, trade networks expanded considerably as ships
were no longer subject to dominant wind patterns, thanks to Steam
Engine!
• with the opening of the Suez Canal, the second half of the 19th century
saw an intensification of maritime trade to and across the Pacific.
• In the 20th century, maritime transport grew exponentially as changes in
international trade and seaborne trade became interrelated.
• Seaborne trade accounted for 89.6% of global trade in terms of volume
and 70.1% in terms of value.
• Maritime shipping is one of the most globalized industries in terms
of ownership and operations.
World Maritime Route
 Chokepoint
• Chokepoints are narrow channels along
widely used global sea routes that are
critical to global energy security.
• The Suez Canal is located in Egypt and
connects the Red Sea and the Gulf of
Suez with the Mediterranean Sea.
• Almost 93% of bulk carriers and 100% of
container ships have been able to transit
the Suez Canal since 2010.
• The cape isn't technically a chokepoint,
but its status as a major global trade
route qualifies it as chokepoint as it's
responsible for about 9 percent, or 5.8
million barrels/day, of all the maritime oil
trade.
 Maritime Traffic
• maritime transport supports a considerable traffic by establishing
commercial linkages between continents.
• Railway and road transportation are simply unable at such a geographical
scale and intensity.
• The global maritime shipping industry is serviced by about 100,000
commercial vessels of more than 100 tons falling into five broad categories:
• Container Vessel
• Bulk carriers
• General cargo
• Roll on-Roll off
• Passenger vessels
 Container Vessel
• Container ships are cargo ships that carry all
of their load in truck-size intermodal
containers.
• They are a common means of
commercial intermodal freight transport and
now carry most seagoing non-bulk cargo.
• Container ship capacity is measured in (TEU).
• Typical loads are a mix of 20-foot and 40-foot
(2-TEU) ISO-standard containers
• Today, about 90% of non-bulk
cargo worldwide is transported by container
ships
• The largest modern container ships can carry
24,000 TEU (HMM Algeciras).
 Bulk carrier
• A merchant ship specially designed
to transport unpackaged bulk
cargo, such as grains, coal, ore, and
cement.
• Today, bulk carriers make up 15–
17% of the world's merchant fleets
• Mammoth ore ships able to carry
400,000 metric tons of
deadweight (DWT)
• Crews can range in size from three
people on the smallest ships to
over 30 on the largest
 General Cargo/ Break Bulk
• Break Bulk cargo are goods that
must be loaded individually, and
not in intermodal containers nor
in bulk.
• Break bulk cargo also suffered from
greater theft and damage.
• There are many sorts of break bulk
cargo but amongst them are:
• Bagged cargo/ Baled goods/ Barrels
and casks/ Corrugated boxes/
Wooden shipping containers/ Drums/
Paper reels/ Motor vehicles/ Steel
girders
 Roll on- Roll off (RORO)
• The vessels designed to carry
wheeled cargo, such
as cars, trucks, semi-trailer
trucks, trailers, and railroad cars.
• Types of RORO vessels
include ferries, cruise ferries, barges,
and RoRo service for air deliver
• Automobiles that are transported by
RORO are often called a pure car carrier
(PCC) or pure car/truck carrier (PCTC).
• RORO cargo is typically measured
in lanes in metres (LIMs).
 Roll on- Roll off (RORO)
• Calculated by multiplying the
cargo length in meters by the
number of decks and by its
width in lanes
• On PCCs, cargo capacity is often
measured in RT
• 1 RT is approximately 4m of lane
space required to store a 1.5m
wide (1966 Toyota Corona) or in
car-equivalent units (CEU).
 Passenger Vessel/ Cruise ship
• A merchant ship which primarily carries
passengers on the sea.
• Passenger ships include ferries, which are
vessels for day to day or overnight short-
sea trips moving passengers and vehicles
• Also called Cruise Ship used for pleasure
voyages when the voyage itself, the ship's
amenities, and sometimes the different
destinations along the way
• There have been nine or more new cruise
ships added every year since 2001.
 RECAP: Maritime Transport
• Chokepoint: Chokepoints are narrow channels along widely used global sea
routes that are critical to global energy security.
• The global maritime shipping industry are divided into five broad categories:
• Container Vessel: Common means of commercial transport. capacity is measured
in TEU. About 90% of non-bulk cargo transported worldwide. Modern ships can
carry over 24,000 TEU.
• Bulk carriers: Designed to transport unpackaged bulk cargo, such as grains, coal,
ore, and cement. Bulk carriers make up 15–17% of the world's merchant fleets.
Crew rage varies from 3 to 30 from smallest to largest vessels.
• Break bulk/ General cargo: cargo is transported in bags, boxes, crates drums,
or barrels. Was the most common form of cargo for most of the history. Has
suffered from greater theft and damage.
 RECAP: Maritime Transport
• Roll on-Roll off: Designed to carry wheeled cargo, such
as cars, trucks, semi-trailer trucks, trailers.
• Often called a pure car carrier (PCC) or pure car/truck carrier (PCTC)
• RORO Cargo typically measured in lanes in metres (LIMs)
• PCC Cargo typically measured in RT/ 1 RT is approximately 4m of lane
space required to store a 1.5m wide or in car-equivalent units (CEU).
• Cruise/ Passenger Ship: Primarily carries passengers on the sea. Also
used as troopships and often are commissioned as naval ships.
Major Commodity Trade in The World
 Competitive Advantage in Commodity Trade
• Commodity Trade: the international trade in primary goods. Such goods
are raw or partly refined materials whose value mainly reflects the costs of
finding, gathering, or harvesting them. They are traded for processing or
incorporation into final goods.
• Examples include crude oil, cotton, rubber, grains, and metals and other
minerals.
• Manufactured products, such as machinery and clothing, on the other
hand, comprise products whose value reflects largely the cost of
manufacturing processes.
• Competitive advantages are conditions that allow a company or country to
produce a good or service of equal value at a lower price in a more
desirable fashion. These conditions allow the productive entity to generate
more sales or superior margins compared to its market rivals.
 Major Commodity Trade in The World
• For most economies in the world, their leading export and import trading
partner in terms of value is either the European Union or China
• To a certain degree, the United States and Japan also
• Individually for each European Union member trade with all other
European Union members collectively is greater than any other trading
partner
• Both the European Union and the United States have China as their largest
origin of imports.
• China's own largest source of imports is European Union.
• In other parts of the world the European Union or the United States is the
largest trading partner.
 Top Trading Commodities
• Crude Oil
• LNG
• Iron Ore
• Coal
• Grain
• Metal (Bauxite, Scrap and Nickel)
• Chemicals
• Office and Telecom Equipment
• Automotive
• Clothing and Textile
 RECAP: Major Commodity Trade
• Competitive advantage: conditions that allow a company or country to produce a
good or service of equal value at a lower price in a more desirable way.
• For most economies their leading export and import trading partner in terms of
value is either the European Union or China.
• Both the European Union and the United States have China as their largest origin
of imports.
• China's own largest source of imports is European Union
• BD Prime export share is with EU, followed by USA of which 91% commodity is
Textile/ RMG.
• BD Imports mainly comes from Intra Asia region followed by EU
• Top 3 Import Commodity of Bangladesh: Textile, Capital Machinery and Metal
Liner Shipping: Containerization and Future Trend
Containerization
 Video Link
https://hubblecontent.osi.office.net/contentsvc/videohostpage/video?
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6-
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lcid=1033&app=3&ver=16&build=16.0.14701&platform=Win32&strea
msso=true&appCorrelation=55C20FAC-36CA-4C25-A392-
320E5EBFCDC2&url=https%3A%2F%2Fwww.youtube.com%2Fembed%
2FBQhSuUgsLs4
DIFFERENT TYPES OF CONTAINERS
20’ Dry container - Size : L- 20’ x W- 8’ x H- 8’6”

40’ Dry container - Size : L- 40’ x W- 8’ x H- 8’6”

40H’ Dry container - Size : L- 40’ x W- 8’ x H- 9’6”

40H’ Dry container - Size : L- 45’ x W- 8’ x H- 9’6”

41
SPECIAL CONTAINERS
20’ Open top container - Size : L- 20’ x W- 8’ x H- 8’6”

20’ Open top container - Size : L- 40’ x W- 8’ x H- 8’6”

20’ Flat rack container - Size : L- 20’ x W- 8’ x H- 8’6”

40’ Flat rack container - Size : L- 40’ x W- 8’ x H- 8’6”

42
 SPECIAL CONTAINER
Tank Container:

• ISO standard tank containers are

suitable for transporting and
storing chemicals/ Liquids. All
tanks are insulated and equipped
with steam heating as a standard.
• Tank containers can also be
equipped with washing systems
and glycol heating, which enables
continuous heating and storing of
the product in the adjusted
temperature.
 SPECIAL CONTAINER
Ventilated Container:

• Ventilated container is a
shipping container that offers a
ventilation system due to its
lateral openings that permit air
flow and circulation.
• One of the main products
transported in the ventilated
container is coffee, which is why
it may also sometimes also be
known as the “coffee container”.
 REEFER CONTAINER
20’ Reefer Container
TEMPERATURE - For any reefer cargo temperature is one of
the important thing and through out the voyage same
temperature need to be maintained.

TYPE OF REEFER CARGO – Generally 2 types of reefer cargo

a) Frozen cargo b) Chilled cargo

Hotstuffing - A hot-stuffing is when cargo is put into the

container at a higher temperature than stated in the B/L, and/or
40’H Reefer Container the temperature of the cargo increases during the stuffing to a
temperature above set-point .
* What happens when the temperature of the cargo is higher
than the optimal storage temperature? - Shelf life and quality
may be affected!
PRE-COOLING OF THE CARGO
The expression "pre-cooling" is the commonly used term for
bringing the temperature of the cargo down to the required
carrying temperature. In general, all pre-cooling should be performed by the shipper using
his facilities. When stuffing of the container is done in the field and no pre-cooling has taken
place, the term used is "Hotstuffing".
A reefer container and the reefer machinery is basically dimensioned to maintain a
temperature, however it does have the capacity to slowly bring the temperature down to set
point. This will usually take considerable longer than if the product is pre-cooled in an
industrial pre-cooler, and as such there may be a risk to the quality of the product.
45
 7 Key Trends
Here are the 7 trends to be weary of:
• Growing protectionism
• Technological advances
• Excessive capacity
• Consolidation
• Vessel sizes and alliances
• Determining the value of shipping
• Environmental agenda
Future Trend of Shipping
 Video Link
https://hubblecontent.osi.office.net/contentsvc/videohostpage/video?
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rn2EFXlQ47kVJ26ZWZGgW4q0B_L5qtkBzQmOIw5SDUfTzs_2VsyrYSQbt
7NwAsPrV4lHVAOfa&lcid=1033&syslcid=1033&uilcid=1033&app=3&ve
r=16&build=16.0.14701&platform=Win32&streamsso=true&appCorrel
ation=55C20FAC-36CA-4C25-A392-
320E5EBFCDC2&url=https%3A%2F%2Fwww.youtube.com%2Fembed%
2FvY_-Rn4SIpw
 OVERALL TRENDS IN GLOBAL PORTS
• Improvements in global port cargo throughput:
• A widely used indicator providing insights into the functioning of ports and
their ability to attract business is volumes handled by ports.
• Performance of leading global ports between 2011 and 2016 found that bulk-
handling terminals captured most of the expansion gains of all ports,
including container- and bulk-handling ports
• In Singapore, port volumes between 2011 and 2016 increased, and the first
liquefied natural gas bunkering terminal was opened in 2017.
• Preliminary analysis suggests that port volumes increased in 2017 reflecting
global economic recovery and growth in seaborne trade.
 OVERALL TRENDS IN GLOBAL PORTS
• Tracking and measuring port performance:
• Global trade, supply chains, production processes and countries’ economic
integration are heavily dependent on efficient port systems and supporting
logistics
• It is becoming increasingly important to monitor and measure the
operational, financial, economic, social and environmental performance of
ports.
• Port performance measurement component consist of 26 indicators across six
areas: finance, human resources, gender, vessel operations, cargo operations
and environment.
 RECAP: Containerization and Future Trend
• All containers are numbered and tracked using computerized systems
• Container Type: DRY/ Reefer/ Open Top/ Flat Rack (OOG)
• 7 Key trends that impacting shipping future:
• Growing protectionism
• Technological advances
• Excessive capacity
• Consolidation
• Vessel sizes and alliances
• Determining the value of shipping
• Environmental agenda
• Tracking and measuring port performance
Alliance & Consortium
 Consortium/ Consortia
Consortia: Agreements/ arrangements between liner shipping
companies aimed primarily at supplying jointly organized services by
means of various technical, operational or commercial arrangements.
• Consortia started to be established by liner conference members in
the 1960s, following containerization, as a supplementary mean
which along with global/strategic alliances and other cooperative
arrangements.
• Gradually started to replace conferences, particularly in the United
States and European trades where legislative changes narrowed the
scope of the antitrust immunity enjoyed by conferences.
 Consortium/ Consortia (Cont.)
The objective is to:
• Bring about cooperation in the joint operation of a maritime transport service.
• Which improves the service that would be offered individually by each of its
members in the absence of the consortium.
• To rationalize their operations by means of technical, operational and/or commercial
arrangements
• Unlike conferences, consortia do not set common freight rates.
• They enable their members to mitigate risks stemming from fluctuations in
demand for shipping services
• They aim to provide lower-cost services, enhanced frequencies and a wide
variety of destinations.
 Consortium/ Consortia (Cont.)
• They can be composed entirely of independent lines, by members of
the same conference, or by both conference and non-conference
members.
• Vessel sharing agreements for instance, are a consortium
subcategory, and have become a frequent form of cooperation
between liner shipping companies.
• They aim to maintain a commercial presence on a specified loop or
maritime route whilst withdrawing a ship and redeploying it by
reserving space on the vessel of a partner company.
• The partner in turn proceeding in the same way on another loop.
 Shipping Alliances
• Strategic/ global alliances are another form of cooperation between liner
shipping companies, which became operational in the 1990s.
• Normally consist of a small group of carriers which have as their purpose to
establish:
• On a global basis.
• Cooperative agreements involving substantial asset sharing.
• Operational cooperation.
• While maintaining individual marketing and commercial identities.
• Normally an alliance covers at least two of the major East/West trade
routes – Europe/ Asia, Asia/United States, or United States/Europe.
• In many jurisdictions they are treated as just another type of consortium or
carrier agreement, and enjoy general exemptions from the effect of
competition laws.
 Shipping Alliances (Cont.)
A Shipping Alliance (also known as Ocean Alliance) is a group of ocean
carriers joining forces to create a cooperative agreement forming a
strategic alliance covering various trade routes through cooperation
between its members on a global level.
• Shipping lines can rationalise their resources
• Shipping alliances have instigated creation of mega ships and mega
ports
• Lines are able to offer more global coverage
 Why Shipping Alliances
• Operational costs in shipping account for over 67% of the total cost of
running a shipping line operation. Out of this, 46% relate to Bunker costs
and 21% relate to port charges, both of which are variable costs.
• Under the current economic conditions, they cannot provide a service
coverage by working alone as it will mean tying up their ships on a specific
route for weeks and the other routes remaining unserved.
• To cut these variable costs, and the best way of doing this is through the
usage of common resources such as ships, port terminals and networks
around particular routes.
• Entering into alliances seems to be the right fit for everyone, as larger
shipping lines can rationalize their resources in an alliance whereas the
smaller lines can enjoy the extended service coverage without have to
invest in increasing their fleet size.
 What Does a Shipping Alliance Do/ Don’t
A shipping alliance behaves pretty much in a similar way as a liner operation of an
individual shipping line, but provides more coverage and scope.

• Shipping alliances allow better • Do not share commercial

allocation of the shipping lines’ information such as cargo
resources, which naturally information, shipping rates,
reduces operational costs. customer information etc.
• allows the expansion of service • Those still remain under the
coverage, optimizes the ports of control of the partners within
call and ultimately achieves the alliance and are not shared.
economies of scale.
The benefits of alliance operations end at the sea and do not cover arrangements
that the individual lines may have with port terminals, hauliers, depots, CFS etc.
 Major Alliances
There are three major alliances
approved for operation by the
FMC:
• The Alliance: Hapag-Lloyd, Yang
Ming, Hyundai and ONE (K-Line
+ NYK + MOL)
• The Ocean Alliance: CGM, CMA,
Evergreen, Cosco Shipping and
Orient Overseas Container Line
• The 2M Alliance: Maersk and
Mediterranean Shipping Co.
Capacity Deployment by Alliances
 How Does it Benefit?
• Due to the size of the shipping alliances and the volumes they control, alliance
have some serious negotiation power over ports and thus can pressure them for
more favorable conditions and improved services.
• For example, Ocean Alliance (28%) and the 2M Alliance (35%) control about 63%
of the world’s TEU movements.
• Such a size allows these alliances:
• To negotiate better tariffs at ports.
• Push for volume discounts.
• These cost savings enable the lines to stay competitive.
• The cost savings are even passed on to customers.
• To accommodate those mega ships, port terminals and canals such as Panama
Canal and Suez Canal have had to expand.
• This trend is expected to continue with mergers and acquisitions and realignment
of the alliances.
 RECAP: Alliance and Consortium
• Alliance consist of a small group of carriers which have as their
purpose to establish:
• On a global basis.
• Cooperative agreements involving substantial asset sharing.
• Operational cooperation.
• Alliance covers at least two of the major East/West trade routes –
Europe/ Asia, Asia/United States, or United States/Europe.
• 3 Major Alliance: The Alliance/ The Ocean Alliance/ The 2M Alliance
 RECAP: Alliance and Consortium
• Consortium: Arrangements between liner shipping companies aimed
primarily at supplying jointly organized services by means of various
technical, operational or commercial arrangements.
The objective is to:
• Bring about cooperation in the joint operation of a maritime transport
service.
• Which improves the service that would be offered individually by each of its
members in the absence of the consortium.
• To rationalize their operations by means of technical, operational and/or
commercial arrangements
Pricing: Component of Freight and Surcharges
Shipping Freight
 Determining Freight Rates
Pricing Consideration

Variable Space
Routing
Costs available

Type, Vol.. Fixed

Of Cargo Costs

Return Equipment
Cargo available

Competition Impact on
Strategy future market
 What is Freight? What are the Elements?
"Freight" includes all charges payable to the Carrier in accordance with the applicable
Tariff(s) and this Bill, including storage, demurrage and detention.
• These are the costs incurred by the merchant (e.g. customer / cargo owner) in moving
goods, by whatever means, from one place to another under the terms of the contract of
carriage.
• In addition to transport costs this may include such elements as packing, documentation,
loading, unloading and transport insurance.

Elements of these costs include:

• Freight - The amount of money due for the carriage of goods, payable either in advance
or upon delivery.
• Charge - An amount to be paid for the carriage of goods based on the applicable rate of
such carriage, or an amount to be paid for a special or incidental service in connection
with the carriage of goods.
• Surcharge - An additional charge added to the usual or customary freight.
 Freight Factors (Cont.)
How does an ocean carrier calculate the level of freight to charge its
customers depends on factors which can affect the freight such as:
• Weight: Carriers spend energy (fuel) to move a mass (the container),
and so it costs more to move a heavier box. Just because a 40’
container is double the length of a 20’, it cannot bear double the
weight. The container would need to be double the strength for that
to be true. In fact the elongated shape of a 40’ means that it can bear
slightly less weight (26,600 kg) than a 20’ (up to 28,200 kg).
Consequently, heavier cargoes tend to be shipped in 20’ containers,
with 40’ units utilized for more lightweight merchandise.
 Freight Factors (Cont.)
• Need for special equipment: Some Cargo
cannot be shipped in a ‘standard’ dry
container.
• They need special equipment such as an
open-top container (OT), flatrack (FR),
platforms (PL) or refrigerated container (RF /
reefers).
• Such requirements are likely to incur extra
freight costs. In addition, with reefers, the
carrier has a more direct responsibility
towards the cargo, the containers must be
monitored, in optimum condition at all times
and they draw power during transit.
• Also, where flatracks or platforms are used –
typically for out-of-gauge cargo – the ocean
freight will be negotiated each time based
upon the particulars of that ship/voyage.
 Freight Factors (Cont.)
• Value of the contents: As a general rule (there may be occasional
exceptions), ocean freight rates are likely to be more expensive for
higher value cargoes, reflecting liabilities and insurance concerns.
Thus a container of pharmaceutical products is likely to cost more to
ship than a container of waste paper.
• Availability of vessels in a given trade zone: Inevitably in a free
market, where there is a lot of competition between carriers in a
given trade zone/ lane, ocean freight rates tend to be lower. Similarly
if the volume of cargo exceeds the total capacity of vessels in that
trade zone, the tariff tends to be higher.
 Freight Factors (Cont.)
• Type of inland transport – The ocean freight can also be affected by
who/how the cargo is to be transported inland. In other words it
depends whether the carrier or the merchant effects and bears the
responsibility for inland transport of cargo in containers i.e. a
differentiation between the logistical and legal responsibility.
• The two main designations for haulage are Carrier (or line) haulage
and Merchant haulage. With Carrier haulage the shipping line
arranges the haulage, while with Merchant haulage the customer
makes the arrangements.
 Various Surcharges
Traditionally, ocean carriers charged an ocean freight, plus two surcharges:
• The Terminal Handling Charge (THC) at the port of load and
• The THC at the port of discharge.
The THC is the sum ports-charge carriers operate at their facilities.
Other potential surcharges include:
• Currency Adjustment Factor (CAF): This is an adjustment applied by the
carriers on freight rates to offset losses or gains resulting from fluctuations
in exchange rates of tariff currencies. For instance, carriers might have own
tariff set in one currency, say, the US Dollar, while accepting payments all
over the world in all sorts of currencies.
 Various Surcharges (Cont.)
• Bunker Adjustment Factor (BAF): Inevitably fuel price is a significant factor
in ocean transport (bunker being the term for fuel used by merchant
vessels). An adjustment applied to offset the effect of fluctuations in the
cost of bunker fuels.
• Lump-sum: This is an agreed sum of money, which is paid in one full
settlement incorporating the ocean freight and all application surcharges.
This term is often used in connection with charter parties. A freight can
either be broken down into Ocean Freight + CAF + THC + CSC + BAF + EIS,
etc.., or simply a lump-sum incorporating all the elements into one simple
figure.
• Minimum charge: The lowest amount which applies to the transport of a
consignment, irrespective of weight or volume. This is mostly applied to
breakbulk cargo.
 FCL or LCL for Your Ocean Freight?
• FCL shipping is a type of ocean
freight and the term FCL refers
to full container load. Shipping
FCL does not mean you need to
have enough cargo to fill an
entire container you may ship a
partially filled container as FCL.
• You are paying freight for the
entire container, so a half-filled
or full container is the same
price.
• When shipping LCL, cargo is
consolidated with other
shippers' goods to fill a
container. The price of your
shipment is determined based
on volume and weight.
• You will pay freight only for your
volume and weight.
FREIGHT RATES AND MARITIME TRANSPORT COSTS
• In 2017 and early 2018, the global shipping industry saw improvement in
most market segments except tanker market.
• Container freight rate levels increased, and averages surpassed
performance in 2016.
• Driven mainly by a significant increase in transported volumes, freight rates
and revenue, as well as proactive operational management discipline.
• During the year, consolidation, whether in the form of alliances or mergers
and acquisitions, persevered in the container industry.
• In 2017, the bulk freight market recorded a remarkable surge, which
translated into clear gains for carriers.
RECAP: Component of Freight and Surcharges
• Freight includes all charges payable to the Carrier in accordance with the
applicable Tariff(s) and this Bill, including storage, demurrage and
detention.
• These are the costs incurred by the merchant. Elements of these costs
include: Freight/ Charge/ Surcharge
• Factors which can affect the freight are: Weight/ Special equipment/ Cargo
value/ Vessel availability/ Type of Inland transportation
• Surcharge Includes: OTHC/ DTHC/ CAF/ BAF/ ISPS/ Congestion Surcharge
etc.
• FCL Shipment: You are paying freight for the entire container, so a half-
filled or full container is the same price
• LCL Shipment: You will pay freight only for your volume and weight
Shipping Fundamentals
 The Bill of Lading (B/L)
Serves 3 main purposes:
• Receipt of Goods- Evidencing when the cargo was received and their status on receipt in terms of
marks, apparent order and condition and number, quantity or weight
• Evidence of Contract of Carriage- Between the Carrier and the Shipper.
• Title to the Goods- Illustrates right to possession. The person presenting an original bill of lading is
entitled to delivery of the cargo at the place of destination. Provided that bill of lading properly
endorsed to the lawful holder.
Most common Bill of Lading types:
• Straight B/L: A non-negotiable bill under which the Carrier will deliver the shipment to only to the
named Consignee in the bill and upon confirmation of identification
• To Order B/L: A document that is issued to the order of a Shipper or Consignee for the delivery of
cargo. This bill of lading can be transferred by endorsement to third parties. It is important that
the chain of endorsements are checked and verified if necessary
• Negotiable B/L: A negotiable document that can be transferred by its Consignee to a third party
through signing (endorsement) and delivering it to another Consignee. The Shipper has the power
to endorse the bill of lading and give orders as to whom the cargo should be delivered. Any
person to whom the bill of lading is intentionally passed can claim to be the proper holder of the
bill of lading
 The Bill of Lading (B/L)
• Combined Transport B/L: This type of bill of lading is issued for a shipment which is using
more than one mode of transportation (i.e. ocean, air, land, etc.).
• Through B/L: Similar to a multimodal/combined transport bill, but covers different
distribution centres as well as various modes of transportation.
• Seaway Bill: A sea waybill is not negotiable but functions similarly to a bill of lading. It is
a receipt and evidence the contract of carriage, but it is not a document of title. The sea
waybill shows only the name of the Shipper and Consignee, and usually presentation is
not required for delivery.
• Switch Bill: A “Switch” bill of lading is the second set of bills of lading that may be issued
by the Carrier (or Agent) at its discretion in exchange for the first set of bill of lading
originally issued when the shipment was effected.
• Multiple Originals: Bills of lading are normally issued in sets of three, possibly four. The
bills usually state on their face that production of any one original will be acceptable, and
all others are then deemed null and void, even if they have not been collected.
 Information in the B/L
• It should be noted that the Carrier
/Master is not obligated to state any
information that he suspects to be
inaccurate or has no reasonable
means of checking.
• Among other things, the essential
information contained in the bill of
lading will normally show:
• The Shipper
• The Consignee or bearer or to order
• Notify Address
• Ship
• Port of Loading
• Port of discharge
• Shipper’s description of the cargo
(value, count, weight, size,
markings/numbers, etc.)
• Gross weight / quantity of cargo
• Condition of cargo
• Date of shipment
• Freight
• Any special instructions for shipping
• Terms and conditions of carriage
• Place where the bill of lading has been
issued
 Representations in a B/L
• A bill of lading will normally contain information / particulars about the
cargo in terms of marks (to identify the cargo), apparent order and
condition and number, quantity or weight.
• Container weights: The Shipper must provide to the Carrier the Verified
Gross Mass of the container to the Carrier within certain amount of the
time, and in any event prior to loading.
• Condition of the cargo: If the Shipper has packed the container it will not
normally be possible for the Carrier to inspect the cargo’s apparent order
and condition to ensure the bill of lading is accurate in its description of the
cargo. In those circumstances, the bill of lading should reflect only the
Shipper’s own remarks, with the condition of the cargo unknown to the
Carrier.
 Dating B/Ls
• “Shipped” bills of lading: A “shipped” bill of lading (which is used for
conventional type vessel ) acknowledges that cargo has been received,
loaded and shipped on board.
• “Received” bill of lading: Is used for Container shipping, merely
acknowledges that the cargo has been received for shipment, but have yet
to be loaded/shipped. Received for shipment Bills of Lading will be issued
and dated not earlier than the date of acceptance of the cargo by the
Carrier.
• A “shipped” bill of lading should always be dated for the actual date of
loading, or the date of completion of loading.
• The Shipper may request the Agent to sign pre-dated or post-dated bills of
lading. In no circumstances should he agree to do so.
Incoterms
 Incoterms
Below are short descriptions of the 11 rules from the Incoterms® 2010 edition:
• EXW (EX Works): means that the seller has only to place the goods at the disposal of the buyer, at
the seller’s premises or at another named place. Seller does not have any other obligation. Any
other task of export & import clearance, carriage and insurance is to be arranged by the buyer.
• FCA (Free Carrier): means that the seller delivers the goods to the carrier or another person
nominated by the buyer at the named place. The parties must specify as clearly as possible the
point in the named place of delivery. The risk passes to the buyer at that point.
• FAS (Free Alongside Ship): means that the seller delivers when the goods are placed alongside
the vessel at the named port of shipment. The seller is obliged to clear the goods for export. From
the moment, when the goods are alongside the ship, all costs and risks pass to the buyer. This
term can be used for ocean transport only.
• FOB (Free On Board): means that the seller delivers when the goods pass the ship’s rail at the
named port of shipment. The buyer has to bear all costs and risks to the goods from that
moment. The seller must, also, clear the goods for export. This term can be used for ocean
transport only.
 Incoterms
• CFR (Cost and Freight): means that the seller delivers when the goods pass the
ship’s rail in the port of shipment. Seller pays the cost & freight necessary to bring
the goods to the named port of destination. Also, seller must clear the goods for
export. But, the buyer has to bear the risk of loss or damage, as well as any
additional costs due to events occurring after the time of delivery. This term can
only be used for ocean transport.
• CIF (Cost, Insurance and Freight): means that the seller delivers when the goods
pass the ship’s rail in the port of shipment. Seller pays the cost & freight
necessary to bring the goods to the named port of destination. Seller must clear
the goods for export. Risk of loss & damage same as CFR. The seller also contracts
for insurance cover against the buyer’s risk of loss of or damage to the goods
during the carriage. The seller is obliged to obtain the minimum marine insurance
protection. If the buyer wants to have more insurance protection, it will need
either to agree as much expressly with the seller or to make its own extra
insurance arrangements.
 Incoterms
• CPT (Carriage Paid To): means that the seller delivers the goods to the carrier or
another person nominated by the seller at an agreed place. The seller must
contract for and pay the costs of carriage necessary to bring the goods to the
named place of destination. After that moment, the buyer bears all costs. The
seller must, also, clear the goods for export. This term may be used irrespective
of the mode of transport (including multimodal).
• CIP (Carriage And Insurance Paid To): is the same as CPT with the exception that
the seller must obtain the minimum marine insurance protection. If the byer
wishes to have more insurance protection, it will need either to agree as much
expressly with the seller or to make its own extra insurance arrangements.
 Incoterms
• DAT (Delivered At Terminal): means that the seller delivers when the goods, once unloaded from
the arriving means of transport, are placed at the disposal of the buyer at a named port or place
of destination. “Terminal” includes a place, whether covered or not, such as quay, warehouse,
container yard or road, rail or air cargo terminal. Seller pays for carriage to the terminal, except
for costs related to import clearance. In addition, seller bears all risks involved in bringing the
goods to and unloading them at the terminal at the named port or place of destination.
• DAP (Delivered At Place): means that the seller delivers when the goods are placed at the
disposal of the buyer on the arriving means of transport ready for unloading at the named place
of destination. The seller pays for carriage to the named place, except for costs related to import
clearance and bears all risks prior to the point that the goods are ready for unloading by the
buyer.
• DDP (Delivered Duty Paid): means that the seller delivers the goods when the goods are placed
at the disposal of the buyer. The goods must be cleared for import on the arriving means of
transport ready for unloading at the named place of destination. The seller bears all the costs and
risks involved in bringing the goods to the place of destination. In addition, the seller is obliged to
clear the goods for export and import. The seller has also to pay any duty for both export and
import and to carry out all customs formalities, including the payment of taxes and custom fees.
 Barriers
Trade Barriers of Shipping Lines
Government Orders Which Completely Prohibit Trade With Other
EMBARGOES Country.

QUOTA A limit on the amount of goods that can be imported or exported.

TARIFF Extra tax put on the business.

NETWORK The Complex logistics network.

Lack of qualified and competent employees with the experience

EMPLOYEE BASE required.

COMPETITORS Competition among existing shipping lines. Intense rivalry can limit
RIVALRY profits & lead to competitive moves.
Shipment Cycle
 Export Process Flow Shippers C&F agent
Send Container to passed the Document
Customer service
Customer give Shippers Off dock
Accept booking
Booking

If Factory load, release

container to Shippers
premises Cargo Stuffing complete

Shipper Send
cargo to off dock

Customer send the Bill of

Lading Instruction to carrier

Send container to
Carrier issue Bill of
Port
Lading to customer
Container on board
and feeder sailed

92
 Customer Ask Import Process Flow Load on the Feeder
Delivery

Arrival in HUB
Arrival at Port

Load on the vessel

Customer service check
documents and issue
Delivery order

Customer service
Accept booking

Customer give Release container to

Send container to
Booking Shippers premises
Port 93
 Source of Data
• UNCTAD (United Nations Conference on Trade and Development)
• WTO (World Trade Organization)
• Bangladesh Bank
• MLO Website (ONE/ MSC/ OOCL)
• Youtube
• Wikipedia
Thank You
Questions?