The Market of Tramps

8/2/2019 The Market of Tramps

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THE MARKET OF TRAMPS

C. Ferrari


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The markets of maritime transport

liners

general cargo

tramps

dry bulk

tramps

liquid bulk

GOODS

(long routes)

ferries

short routes

cruisers pleasure-boats

tourism

PASSENGERS

MARKETS OF SEABORNE TRANSPORT


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Which goods are transported by sea?

Raw material: oil, iron, coalAgricultural: grain, sugar, refrigerates

Industrial material: rubber, forest, concrete, textiles, chemical productsManufactured products: plants, machinery, cars, appliances,consumption goods

Industries

Energy + steel/metal 70% ca.


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World seaborne trade (million tons)

0

500

1000

1500

2000

2500

1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

crude oil oil products iron ore

coal grain bauxite and alumina

phosphate other cargoes estimate

Source: Fearnleys, Review 2001


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World seaborne trade (billion ton-miles)

0

2000

4000

6000

8000

10000

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

crude oil oil products iron ore

coal grain bauxite and alumina

phosphate other cargoes estimate



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World seaborne trade (average miles

per ton)

0 1.000 2.000 3.000 4.000 5.000 6.000

crude oil

oil products

iron ore

coal

grain

bauxite and alumina

phosphate

other cargoes estimate



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Quantities and transport service

Parcel Size Distribution (PSD)

Big quantitiesWhole ships

Bulk c.

Demand(tramps)

Smaller quantities LinersParts of ships

General c.

Unitization

Many goods are partly transported bulk and partly generalHalf 90: 2/3 bulk e 1/3 general differences


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Transport supply in maritimetransport: bulk vs. line

Differences in management

Bulk: different forms of availability of the ship for the shipperownershipl.t., s.t. charteringspot

Liner: much more complex (overhead, holds, timetables, routes,etc.); higher fixed costs; agreement to limit competition

(conferences, then strategic alliances)


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liner conferences: formal / informal freight tariffs

number of sailings

working conditions

why necessary ? reduction of freight costs

protection of investments

freight war

ADVANTAGES/DISADVANTAGES

LINER SHIPPING (2) TRAMP SHIPPING - CHARTEREDVESSELS (2) owner of goods determines

UNLOADING PORT

VOYAGE CHARTER: for onesingle voyage

TIME CHARTER: for a certainperiod

BARE BOAT CHARTER: for

longer periods TECHNICAL EVOLUTION

- scale increase: 300 to500,000 t

- reasons: demand long distances, such as

Suez ...

- in the ports: need forspecialized terminals

OUTSIDERSINTERMODAL TRANSPORT

DOOR-TO-DOOR SERVICE

DISTRIBUTION TERMINALS


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Maritime transport supply

Bulk: liquid dry combined

General:

loose container Roro refrig

Differences in: Hull Hold Handling Conditioning


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Rates fluctuations

Bulk freight rates (000 USD/day)

0

5000

10000

15000

20000

jan feb mar apr may jun jul aug sep oct nov dec

Panamax - Atlantic rv 70 modern Capsize - Atlantic rv 160 modern



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Rates fluctuations

Tramp market shows much fluctuations in respect ofcontainer shipping because the latter ispredominantly a time charter market

Tanker market is more volatile than the bulk market

The market for bigger ships is much more volatilethan the market for smaller ships

Individual ships when solely working in the spot

market may experience a more pronounced ratedevelopment


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Factors influencing the rate

movements

Shape of the supply curve (S)

Shape of the demand curve (D)

Changes in supply

Changes in demand


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Shape of the supply curve

Shipping costs may be divided in:

Capital costs (depreciation, interests)

Voyage costs (bunker, port/cargo handling)

Operating costs (crew wages, insurance, repair & maintenance,classification)

Voyage and operating costs are variable costs.

If a ship does not operate, shipowner bears lay-up costs (crew to look forthe vessel, port fees, etc.)

Shipowners sign a charter rate if the earnings equals:

E = O + V L

Since most shipowners have the same costs they all start to offer theirships at the same minimum rate


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Shape of the demand curve

Demand for shipping services is rather inelastic.

It is so because demand for shipping is a derived demand,so in the short term even a great increase in shipping rateshave not effects on the production functions of firms.

In the long run, firms may consider alternative means of

transport, but sea transport is much less expansive thanoverland means of transport (road, rail).


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Supply and Demand in trampshipping

Ton-miles

Freightrate

S

D4D3

D2D1

p1

p3

p4


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Changes in supply

In the short term supply is usually considered fixed (but it is notstrictly so).

In the medium-long term, supply is influenced by:

Actual fleet, its productivity (speed, load factor, port times) andchanges of productivity

Increases of fleet by newbuildings (with a time lag) and by hybridships switching from other markets

Decreases of fleet by scrapping of ships, by blocked ships (portcongestion, maintenance), by hybrid ships leaving the market

Sentiment of shipowners (which may have preferred timecharters, so limiting supply for voyage charters pushing charterrates significantly up)


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Changes in demand

There are a lot of factor influencing demand. Some factorsact either to counterbalance each other (so the effect on thecharter market is null), others add so that demand is stronglypushed up.

Economic world development

Political and social factors (wars and strikes)

Weather or natural disasters (drought, flood, earthquake)


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Prices in maritime transport markets

Prices Rates l.t. freights Freights

ContractingNo

(fixed)

Long term

contracting

Spot

Short term

TransportLiners

CruisersTramps Tramps

Competition Low High High

Regulation High Low Low

Variability

over time

Low Low High


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Prices over time

Period Supply Demand Price level

Short term Steady

Changes dueto:

SeasonsEvents

Shocks

Medium termFollowsdemand

with delay

Changes dueto:

cycles

Fluctuations

Long term Growth Growth

Follows generallevel of prices

Falls with

innovation

The Market of Tramps

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