The Shipping Business
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The Shipping BusinessTramp & Liner TradeChartering & BrokeringFreight Rates
Tramp Shipping-- 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.In established trades (i.e., grain from US, Canada, Argentina & Australia to N. Europe, Med, Africa, Japan & S. AsiaOn new routes to alleviate temporary critical shortages
Tramp ShippingMoves 4.5 billion tons of basic agricultural, forestry, mining products & manufactured raw materials (steel, cement, etc) world-wideDepends on a global network of brokers, agents & representatives to market services, and procure & contract cargoesPost WWII:Surplus Liberties & Victories dominated the general service (bulk & break-bulk) fleets 70s-80s: larger SD-14s (UK) & Fortune Class (Japan) predominate
Tramp ShippingSmaller general purpose Tramps face fierce competition from:Larger bulkers: 30-50,000 DWT Handi-Max & very large (100-159,000 DWT) special purpose, ore carriersContainer shipsTankers 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:Cargoes that cannot be placed in containers Transportation of small (10-15,000 T) lotsShallow depth ports and/orPorts with low to moderate facilities requiring self-unloading vessels
Liner Shipping-- shipping service that operates on an established route and has published sailing dates and published tariffsPrivate 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]
Liner ShippingConference: An association of common carriers operating on the same ocean route and using a common tariffClosed Conference: limits membership to the specific number of carriers that will be sufficient to to provide transportation for the proffered cargoOpen 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]
Liner ShippingExamples of Conferences:United States Atlantic and Gulf Ports/Eastern Mediterranean and North African Freight ConferenceTRADE: 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 Israel Trade ConferenceTRADE: 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
Liner ShippingLiner companies may have a variety of structures, but all encompass the following functions:
Liner ShippingTraffic DepartmentInbound Freight DivisionDelivery OrdersInland RoutingCustoms BrokersWarehousingTracing and ClaimsGeneral Freight AgentSales StaffOutbound Freight DivisionBooking ClerkManifesting SectionChartering DepartmentCharters ships in & out of fleet
Liner ShippingVessel Operations DepartmentMarine SuperintendentPort CaptainsSupervision of Deck PersonnelDeck maintenance Inspections & dry-dockingSeaworthiness, Safety & Voyage InstructionsSuperintendent EngineerPort EngineersSupervision of Engine PersonnelMachinery maintenance Inspections & dry-dockingSeaworthiness, Safety & Voyage InstructionsCommissary SuperintendentSupervision of Steward PersonnelShips Stores AcquisitionTerminal ManagerFacilities (equipment & stevedoring)Administrative (receiving & delivery, security)
Vessel Management CompaniesCompanies offering full management services or a combination of specialized expertise including:Crewing Regulatory Compliance Condition Surveys PurchasingCharteringBrokering and InsuranceShipyard Selection
Terminal RequirementsFeasibility Studies Vessel SelectionVessel Activation Route Proposals Weather InformationLocal RegulationsHotel Operations
Layers of corporate structure proliferateVessels individual corporations with single owner, & multiple operatorsSingle operator of ships with different ownersOwner/operators wholly owned subsidiaries of conglomerates
CharteringCHARTER-The hiring of a vessel for either: 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 demandCHARTERER-The entity hiring the vessel from the shipowner.CHARTER-PARTY-The contract between the owner and the charterer, stipulating in detail each partys responsibilities in the transaction.Charta Partita is Latin for a letter divided.
CharteringThere are three basic types of Charter PartiesVoyage CharterContract of carriage in which the charterer pays for the use of a ships 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 ships agency) while payment for cargo handling charges are subject of agreement between the parties. Time CharterThe 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.
CharteringThere are three basic types of Charter PartiesVoyage CharterTime CharterBare-Boat CharterThe 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
Weight & MeasureThere is tonnage and there is tonnageDeadweight 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.Light Weight Tonnage Displacement of empty vessel (no fuel, stores, cargo, etc.)Deadweight Items The difference between DWT and LWT including Cargo DeadweightGross Tons The entire interior volume of the vessel (including deck houses and excluding certain spaces exempted by statute) in 100s of cu. ft. (1 g.t. = 100 cu.ft.)Net Tons Volume remaining after non-earning spaces have been deducted from the Gross Tonnage.
Weight & MeasureThere is tonnage and there is tonnageGross & 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.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 the prices charged for the services of ocean carriers. Determined by ship operators to reflect:The cost of providing the carriage includingVessel operationCargo handling, port fees & tariffsExchange rates among international currenciesThe value of this service to the shipperThe ability of the merchandise to support the expense of being shippedEconomic conditions in general subservient to The Law of Supply & Demand includingCompetition among carriers on the same routeCompetition among ports
Freight Rates 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 factorCarriers charge by weight or measure whichever generates the most revenueBut what about the type of cargo? (nails vs. oranges vs. computer parts?)
Freight Rates Class Rates assigned to groups of unrelated cargos that are found to require approximately the same revenue for their transportClass D (dangerous cargo) is the highest rate followed by Class 1 through 8, with Class 8 the cheapestThere are deadweight cargo and cubic cargo rates in each classFuel surcharge computed to reflect fuel price fluctuations without redefining class rate scalesCommodity Rates negotiated compromise falling between class rates Applicable to specifically described cargoes (e.g., Paper: wrapping, not corrugated, other than cellulose film)Commodity rates take precedent when both class & commodity rates are offered
Freight Rates Through Rates are charged for shipments origin