Maritime Trade Summary

Role & Patterns of Maritime Trade

Economic Role of the Shipping Industry

• Shipping is vital for economic development, providing cheap transport that opens up wider markets.
• It enables specialization by offering affordable transport for everyday products.
• Adam Smith highlighted the importance of shipping for economic growth.

Allocating Resources

• Shipping moves resources and outputs globally, acting as a tool for efficient resource allocation.
• Efficiency in economics involves allocating resources to the best places at the lowest cost.
• Shipping is the most effective means of allocating resources worldwide.

Facilitate Trade

• Shipping allows countries to specialize based on their advantages.
• Countries can trade products through shipping.

Trade Theories

• Absolute advantage theory.
• Comparative advantage theory.
• Heckscher-Ohlin theory.

Developments of International Trade

• International trade has expanded by over $1,700\%$ in volume over the last 5 decades.
• Customs tariffs have reduced from an average of $40\%$ to $6\%$ in the past 15 years.
• Industrialized countries account for about $70\%$ of total world trade.
• The U.S. is the largest single participant in international trade.
• China and emerging economies are significant in world trade.

International Trade and Maritime (Sea) Transport

• Trade patterns influence transport patterns.
• Import and export activities rely on maritime transport.

Seaborne Trade Proportion

• Over $80\%$ (in volume) of world trade is transported by sea, despite the expansion of land and air transport.
• Seaborne trade accounts for over $60\%$ (in value).

Foundation of a Globalized Economy

• Shipping is essential for globalization.
• Without shipping, societies would remain separated, hindering cultural exchange and economic potential.
• No nation can be fully self-sufficient.
• Industry shipped more than $7.1$ billion tons of goods.

Seaborne Trade

• Shipping is an economic activity directly dependent on international trade (derived demand).
• Global trade statistics are of great interest to the world shipping industry.
• International trade statistics are based on the value of trade, but shipping is mainly interested in volumes and weights of cargo.

Seaborne Trade Data & Information Sources

• Fearnleys (e.g., Fearnleys Review).
• Clarkson Research Studies (e.g., Shipping Review and Outlook).
• Simpson, Spence & Young (SSY).

Seaborne Trade Commodities

• Crude oil: $17\%$. Containerized: $15\%$. Iron ore: $13\%$. Minor bulks: $15\%$. Coal: $12\%$. Petroleum products: $9\%$. Gas & chemicals: $6\%$. Grain: $4\%$. Other dry: $9\%$.

Major Modes of Shipping

• Liner: A ship that regularly sails on a fixed route following a schedule with regular ports of call.
• Tramp: Ships that do not follow a schedule or have regular routes, offering tramp services.

Major Seaborne Trade Routes

• Crude Oil Trade.
• Iron Ore Trade.
• Coal Trade.
• Grain Trade.

Seaborne Crude Oil Trade Routes

• Mid East - N. America.
• W. Africa - N. America.
• Mid East-Europe.
• Med - Med.
• W. Africa - Europe.
• W. Africa - Asia.
• US Gulf - Asia.
• Mid East - Asia.

Major Seaborne Dry Bulk Trade Routes

• Major Coal Trades:
  • Australia-Japan.
  • Australia-W. Europe.
  • S. Africa-W. Europe.
  • Colombia-W. Europe.
• Major Grain Trades:
  • U.S. Gulf-Latin America.
  • U.S. Gulf-Japan.
  • U.S. Gulf-Asia.
  • Argentina - Brazil.
• Major Iron Ore Trades:
  • Australia-Japan.
  • Australia-China.
  • Brazil - China.
  • Brazil - W. Europe.

Shipping: A Vital Industry to World Trade & Economy

• Shipping is the primary method of carrying commodities over huge distances.
• Most environmentally friendly mode.
• Shipping is the cheapest and most cost-effective means of transport for bulky cargoes.
• Major cities and industries have developed on seashores to take advantage of shipping.
• Highly dynamic and international.
• Facing changes and transformations with many opportunities.

Journey of Cargo

• Goods carried on board for freight are called cargo.
• Goods that are carried on a ship but do not earn freight are not called cargo.
• Any description of goods, shipped on board for transportation from point 'A' to point 'B' is cargo irrespective of its quantity.

Cargo

• Cargo is a term used to denote goods or produce being transported generally for commercial gain, usually on a ship, plane, train, van or truck.
• Nowadays containers are used in all intermodal long-haul cargo transport.

Parties Involved in Cargo Journey

• Exporter/Shipper.
• Freight Forwarder.
• Sea Broker.
• Carrier.
• Consignee.
• Distributor.
• Retailer.
• End User.

Journey

• Shipper (exporter).
• Cargo booking.
• Cargo agent/Freight forwarder.
• Consolidation & loading.
• Sea Carrier.
• Carriage (by sea).
• Freight forwarder/Cargo agent.
• Deconsolidation.
• Consignee (importer).
• Distributor.
• Retailer.
• End-user.

Freight

• The revenue earned from carrying cargo is known as freight.
• Freight is ship-owner or carrier's reward for service provided to the shipper.
• Normally freight is the term used for payment under 'Bill of Lading'.
• In case of 'Charter Party', the reward is 'charter hire' and not the freight.
• In the modern times cargo space is sometimes (loosely) termed as 'freight'.
• Freight is a term used to classify the transportation of cargo and is typically a commercial process.

Shipper

• An entity engaging a carrier for shipment of cargo on board a vessel may be termed as a shipper.
• Shipper is a common term used for the owner of the cargo at the load-port.
• Shipper hands over the possession of cargo to ship-owner, agent or Master of carrying vessel.
• Someone who prepares goods for shipment, by packaging, labeling, and arranging for transit, or who coordinates the transport of goods.

Carrier

• Carrier is the term used for identifying the transporter in a contract of transport.
• Under common law, a contract of carriage binds the carrier with responsibilities for safekeeping, utmost care and proper dispatch of cargo.
• Carrier may or may not be a ship-owner but assumes responsibilities as such.
• NVOCCS (Non vessel owning common carriers) either charter the whole ship or cargo space on board a vessel.

Common Carrier

• A common carrier is an organization that transports persons or goods and offers its services to the general public.
• Private carriers do not offer a service to the public and provide transport on an irregular or ad-hoc basis.
• Common carriers typically transport persons or goods according to defined routes and schedules.
• Airlines, railroads, bus lines, cruise ships and freight companies may be common carriers.

Broker

• A broker is an intermediate entity, who helps conclude the deal.
• Broker brings the shipper and carrier together, facilitates the contract of carriage, and earns commission on the concluded deal.
• Broker is an independent party but normally has his principal's interest in mind.

Ship-broking

• Ship-broking is an activity which forms part of the international shipping industry.
• Shipbrokers are specialist intermediaries between ship-owners and the charterers, who use ships to transport cargo.

Booking of Cargo

• Marketing of freight (cargo space) on board a ship may directly be done by a shipping company or done through an agent/broker.
• The activity undertaken for consolidation of cargo, booking of cargo space and issuing cargo documents to the shipper is known as 'freight forwarding' and such an agent is known as cargo agent or 'freight forwarder'.
• The cargo agent at discharge port hands over possession of cargo to 'consignee'.

Freight Forwarder

• A freight forwarder is an individual or company that dispatches shipments via asset based carriers and books or otherwise arranges space for those shipments.
• Freight forwarders typically arrange cargo movement to an international destination.
• They have the expertise that allows them to prepare and process the documentation and perform related activities pertaining to international shipments.

Consignee

• An entity to whom cargo is consigned to.
• Every 'bill of lading' must contain the details of consignee, whom the cargo needs to be delivered.
• Consignee may or may not be the receiver of cargo.
• If the freight is not pre-paid, consignee may be required to pay the freight before cargo is delivered to him.

Distributor

• A distributor is the middleman between the manufacturer and retailer.
• After a product is manufactured it is typically shipped (and usually sold) to a distributor.
• The distributor then sells the product to retailers or customers.

Retailer

• Retailer sells commodities to consumers (including businesses).
• Retailing consists of the sale of goods or merchandise, from a fixed location such as a department store or kiosk, in small or individual lots for direct consumption by the purchaser.
• Retailing may include subordinated services, such as delivery.
• Purchasers may be individuals or businesses.
• A retailer buys goods or products in large quantities from manufacturers or importers, either directly or through a wholesaler, and then sells smaller quantities to the end-user. Retail establishments are often called shops or stores.

End User

• An end-user is the person who uses a product.
• The end-user or consumer may differ from the customer, who might buy the product, but doesn't necessarily use it.

Contracts of Carriage

• Billing of lading.
• Charter parties.

Bill of Lading

• The standard form of contract is a bill of lading, which in international shipping law is simply a contract for the carriage of goods entered into between the shipper and the carrier that is not a charter party.
• It is always a term of that contract that the carrier must deliver the goods to a specific receiver.

Charter Parties

• Time charter.
• Voyage charter.
• Bare boat charter.
• Contract of affreightment.
• (Charter Party is contract of carriage but unlike B/L, it is neither receipt of cargo nor title of goods).

BIMCO

• Baltic and International Maritime Council.
• Started in Denmark in 1905.
• The world’s largest private shipping organization with over 2,000 members in 130 countries.
• Covers 62% of the world’s shipping tonnage.
• Aims to protect the interests of the international maritime industry.
• BIMCO's expertise in drafting various contracts such as bill of lading, charter parties, ship-management contracts, ship acquisition and other shipping related contracts is widely acknowledged by major shipping companies, charterers and oil majors.

Maritime Logistics and Management

Types of Ships

• Marine Operation Vessel
• Types of Terminals

General Cargo Vessel

• A general cargo ship is designed to transport a variety of different types of cargo.
• Unlike specialized ships, general cargo ships can transport a wide range of goods.
• General cargo ships can carry both packaged and unpackaged cargo, such as boxes, pallets, bags, barrels, crates, drums, or bulk materials, such as grains, coal, or ore.
• General cargo ships can also carry refrigerated cargo, such as food or pharmaceuticals, or heavy or oversized cargo, such as machinery or equipment.

Container Vessel

• A container ship carries its load in standardized containers.
• Containerization is the process of using containers to transport goods efficiently and securely.
• Container ships are one of the main modes of commercial intermodal freight transport.

Advantages of Container Vessel

• They reduce the loading and unloading time of cargo

• They increase the efficiency and productivity of cargo handling

• They reduce the transportation costs of cargo

• Containers can be easily moved between different modes of transport without breaking the cargo seal.

• This also reduces the risk of damage, or loss of cargo.

• Containers can be stacked, stored, and tracked easily.

• This also reduces the need for warehouse space and labor.

• Containers can carry a large amount of cargo in a standardized way.

• This also reduces the fuel consumption and emissions of ships.

• Container ships vary in size, capacity, and design depending on their trade routes and functions.

  • Ultra Large Container Vessel (ULCV) - more than $14,500$ TEU
  • New Panamax - $14,500$ TEU
  • Post-Panamax - $10,000$TEU
  • Panamax - $5,000$ TEU
  • Feedermax - $3,000$ TEU
  • Feeder - $1,000$ TEU

Geared Container Vessel

• Geared: a vessel equipped with its cranes or other cargo-handling equipment

Dry Bulk Vessel

• A bulk carrier ship carries its load in bulk form, which means that the cargo is not packaged or containerized, but loaded directly into the ship's holds.
• Bulk carriers are designed to transport large quantities of dry goods, such as grains, coal, iron ore, cement, and other commodities.

Advantages of Bulk Vessel

• They reduce the handling and packaging costs of cargo

• They increase the efficiency and productivity of cargo transportation

• The cargo is loaded and unloaded directly from the ship's holds.

• This also reduces the risk of damage or loss of cargo.

• They can carry a large amount of cargo in a single voyage.

• This also reduces the fuel consumption and emissions of ships.

• Bulk carriers vary in size and capacity, depending on the type and amount of cargo they carry and the ports they can access.

  • Capesize - over $120,000$ DWT
  • Post-Panamax - $120,000$ DWT
  • Panamax - $80,000$ DWT
  • Supramax - $65,000$ DWT
  • Handymax - $60,000$ DWT
  • Handysize - $40,000$ deadweight tons (DWT)

Tanker Vessel

• A tanker ship carries its load in liquid or gas form, such as oil, chemicals, or liquefied natural gas.
• Tanker ships are designed to transport large quantities of these substances efficiently and securely.
• Tanker ships are one of the main modes of commercial intermodal freight transport and carry a significant share of the global energy trade.

Advantages of Tanker Vessel

• They reduce the handling and packaging costs of cargo

• They increase the efficiency and productivity of cargo transportation

• The cargo is loaded and unloaded directly from the ship's tanks.

• This also reduces the risk of damage or loss of cargo.

• They can carry a large amount of cargo in a single voyage.

• This also reduces the fuel consumption and emissions of ships.

• Bulk carriers vary in size and capacity, depending on the type and amount of cargo they carry and the ports they can access.

  • Oil tanker - $5,000$ to $500,000$ DWT
  • Gas carrier - up to $270,000$ cubic meters
  • Chemical tanker - up to $50,000$ DWT

Roll-on Roll-off Vessel

• A RoRo ship carries its load in wheeled vehicles, such as cars, trucks, trailers, etc.
• Roro stands for roll-on/roll-off, which means that the vehicles can drive on and off the ship by using ramps and doors.
• This is different from Lolo (lift-on/lift-off) ships, which use cranes to load and unload the cargo.
• Roro ships are designed to transport large quantities of vehicles or other wheeled cargo efficiently and securely.
• Roro ships are one of the main modes of commercial intermodal freight transport and carry a significant share of the global vehicle trade.

Advantages of Roll-on Roll-off Vessel

• They reduce the loading and unloading time of cargo

• They increase the efficiency and productivity of cargo transportation

• The vehicles can drive on and off the ship without breaking the cargo seal.

• This also reduces the risk of theft, damage, or loss of cargo.

• The vehicles can be stacked, stored, and tracked easily.

• This also reduces the need for warehouse space and labor.

• They improve the flexibility and diversity of cargo transportation

• Vehicles can carry various types of cargo, from cars to heavy machinery, and can be customized to suit different needs.

• RoRo ships vary in size and capacity, depending on the type and amount of cargo they carry and the ports they can access.

  • PCC (Pure Car Carrier)
  • RoPax (Roro and Passenger)
  • ConRo (Container and Roro)
  • PCTC (Pure Car and Truck Carrier)

Passenger Vessel

• A passenger ship is a merchant ship whose primary function is to carry passengers on the sea.

Marine Operation Vessel

• Tug operations
• Pilotage service
• Supply of water, bunker

Tugboat (tug)

• The tug is a small vessel designed to tow or push large ships.
• Tugs have powerful diesel engines and are essential to docks and ports to maneuver large ships into their berths.

Pilotage (pilot boat)

• Pilot boat is a vessel used to transport marine pilots to and from ships that require pilotage services. Marine pilots are highly trained professionals with expert knowledge of local waters
• This service is crucial for ensuring the safety and efficiency of maritime operations, especially in areas with high traffic or potential hazards.

Supply of water, bunker

• The supply of water and bunker (fuel) to a ship can be carried out by another vessel. These types of vessels are designed to transport and deliver fuel and other supplies to ships, either at port or while at sea.
• This method also allows ships to refuel and resupply without needing to dock, which can save time.

Types of Terminals

• General cargo terminal
• Container terminal
• Dry bulk terminal
• Liquid bulk terminal
• Roll on-roll off terminal
• Cruise and ferry terminal

Four Interacting Cycles

• VESSEL, QUAY, YARD and GATE.
• CONSIGNEE and SHIPPER.

General Cargo Operations

• Traditional method of handling.
• Use ship or shore cranes.
• Transit sheds and forklifts.
• Non-standard units.
• Low productivity.
• Use for non-standard cargoes.

Container Handling Operations

• Standard sizes, Twenty/Forty-foot Equivalent Units (TEUs/FEUs), Special sizes.
• Packing is done beforehand.
• Use of specialized handling cranes.
• Leads to higher efficiency and productivity.
• Allows automation.

Bulk Operations

• Normally for cargo in bulk.
• Specialized equipment, grabs, conveyors.
• E.g. Iron, coal, manganese, cement.

Liquid Bulk Operations

• For liquids e.g. oil, chemicals.
• Specialized equipment, pipelines, tanks.
• Tough safety standards to prevent fire and explosion.

Roll on-roll off

• Vehicles are driven to and from RoRo vessels.
• Yard as vehicle parking space.

Four Major Shipping Markets

Introduction

• Market Defined: The central point of a market is an exchange room where traders agree to meet and transact business…but the locality is not necessary.
• Shipping Markets Categorized
  • Newbuilding Market: where a shipowner orders a ship
  • Freight Market: where a shipowner charters a ship and concludes a Forward Freight Agreement (FFA)
  • Sale and Purchase Market: where a shipowner buys or sells a 2nd-hand ship
  • Demolition Market: where a shipowner scraps a ship

Parties Involved

• Freight Market: shippers (demand side) interact with ship owners (supply side)
• Newbuilding Market: ship owners (demand side) interact with ship builders (supply side)
• Sale and Purchase Market: ship owners interact with ship owners, and ship owners are both the demand and supply side of this market
• Demolition Market: scrap dealers (demand side) interact with ship owners (supply side)

Products Traded

• Freight market trades sea transport.
• Sale and purchase market trades second-hand ships.
• Newbuilding market trades new ships.
• Demolition market deals in scrap ships.

Relationships of the Four Markets

• The freight market interacts with demolition, sale and purchase, and newbuilding markets through shipowners and their decisions related to freight earnings, ship sales, new orders, and demolition.

The Freight Market

• The freight market is where sea transport is bought and sold.
• Fixing a ship: The ship concerned is perceived to be fixed when a ship is chartered or a freight rate is agreed.
• Liner shipping involves fixed schedules and published freight rates.

Four Types of Contractual Agreement

• Voyage Charter
• Contract of Affreightment (COA)
• Time Charter
• Bare Boat Charter

Voyage Charter

• Shipowner contracts to carry a cargo specific in nature and volume from the port(s) of loading to the port(s) of discharge in a specific ship for a negotiated price per ton.

Contract of Affreightment (COA)

• Shipowner contracts to carry regular quantities of a specific cargo on a particular route or routes over a given period of time using ships of his choice within specified restrictions for a negotiated price per ton.

Time Charter

• An agreement between shipowner and charterer to hire the ship, complete with crew, operated by the shipowner under instructions from the charterer, for a fee per day, month or year.

Bare Boat Charter

• Hires out the ship without crew or any operational responsibilities, for a fee, usually for long-term.

The Charter Party

• Once a deal has been ‘fixed’, a charter- party is prepared setting out the terms on which the business is to be done.

Freight Market Reporting

• The freight rates at which charters are fixed are dependent upon market conditions and the free flow of information reporting the latest developments play a vital role in the market.

Freight Market Reporting

• Dry cargo market report
• Tanker market report
• Liner and specialist ship chartering
• Freight rate statistics
  • Voyage rate statistics
  • Time charter rates
  • Worldscale Index (W/S): for tanker freight rate - Tanker industry uses this freight rate index as more convenient way of negotiating freight rate per barrel of oil on many different routes
  • Baltic Dry Index (BDI): weighted average freight rate in the dry bulk market - BDI is the average of the Baltic Handymax Index (BHMI), the Baltic Panamax Index (BPI) and the Baltic Capesize Index (BCI).