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The market of liner shipping Claudio Ferrari Organization of maritime transport 18th century - colonies military and commercial sailing vessels industries international maritime trade raw materials and finished products sea adventure uncertain duration of voyage

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organization of maritime transport
Organization of maritime transport
  • 18th century - colonies
  • military and commercial
  • sailing vessels
  • industries
  • international maritime trade
  • raw materials and finished products
  • sea adventure
  • uncertain duration of voyage
  • no possibilities of communication
slide3

INVENTIONS

    • steam engines
    • wireless telegraphy
  • FORMS OF OPERATION
    • liner shipping: stipulations
    • tramp shipping & chartered vessels: characteristics
    • use of liner shipping and tramp shipping
evolution of ships types
Evolution of ships types
  • general cargo vessels: units, port, efficiency
  • bulk vessels: raw materials, distances
  • specialized vessels: scale increase / Suez Canal - higher costs
  • mainport concept / distribution centre
  • consortia - liner shipping - expensive vessels / transmission of information / acquisition
  • intermodal transport
which goods are transported by sea
Which goods are transported by sea?
  • Raw material: oil, iron, coal
  • Agricultural: grain, sugar, refrigerates
  • Industrial material: rubber, forest, concrete, textiles, chemical products
  • Manufactured products: plants, machinery, cars, appliances, consumption goods
  • Industries
    • Energy + steel/metal 70% ca.
world seaborne trade billion ton miles
World seaborne trade (billion ton-miles)

Source: Fearnleys, Review 2001

quantities and transport service
Quantities and transport service

Parcel Size Distribution (PSD)

Whole ships

Bulk c.

Demand

(tramps)

Big quantities

Parts of ships

General c.

Smaller quantities

Liners

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

Unitization

slide9

Transport supply in maritime transport: bulk vs. line

  • Differences in management
  • Bulk: different forms of availability of the ship for the shipper
    • ownership
    • l.t., s.t. chartering
    • spot
  • Liner: much more complex (overhead, holds, timetables, routes, etc.); higher fixed costs; agreement to limit competition (conferences, then strategic alliances)
slide10

LINER SHIPPING (1)

TRAMP SHIPPING - CHARTERED VESSELS (1)

  • fixed departures to fixed regions (goods follow vessel)
  • fixed freight rates & conditions (liner terms)
  • specialization
    • container vessels
    • general cargo vessels
    • ro/ro vessels
    • multi-purpose vessels
      • expensive vessels owing to specialization
        • information processing is expensive
        • goods acquisition in own hands
      • gigantic investments
        • shipping companies co-operate - creation of POOLS and CONSORTIA
        • shipping companies involved - now FINANCIAL GROUPS
  • vessel follows the goods
  • freight: to be discussed and depends on market conditions (supply & demand)
  • specialized vessels for a cer-tain type of goods are used between regions where there is a demand for vessel space
  • transport of
    • bulk goods
      • cereals & derivatives
      • coal
      • ores
    • gases
    • frozen products
    • oil
    • cars
    • wood
slide11

TRAMP SHIPPING - CHARTERED VESSELS (2)

LINER SHIPPING (2)

  • owner of goods determines UNLOADING PORT
  • VOYAGE CHARTER: for one single voyage
  • TIME CHARTER: for a certain period
  • BARE BOAT CHARTER: for longer periods
  • TECHNICAL EVOLUTION
    • scale increase: 300 to 500,000 t
    • reasons:
      • demand
      • long distances, such as Suez ...
    • in the ports: need for specialized terminals
  • liner conferences: formal / informal
    • freight tariffs
    • number of sailings
    • working conditions
  • why necessary ?
    • reduction of freight costs
    • protection of investments
  • freight war
  • ADVANTAGES/DISADVANTAGES

OUTSIDERS

INTERMODAL TRANSPORT

DOOR-TO-DOOR SERVICE

DISTRIBUTION TERMINALS

the present scenario 2
The present scenario (2)

Source: Erasmus University, Rotterdam

factors influencing the rate movements
Factors influencing the rate movements
  • Shape of the supply curve (S)
  • Shape of the demand curve (D)
  • Changes in supply
  • Changes in demand
shape of the supply curve
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 for the 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 their ships at the same minimum rate
shape of the demand curve
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 rates have 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 than overland means of transport (road, rail).

economies of scale
Economies of scale

Source: Stopford

scale economies
Scale economies
  • They depends on savings per TEU on:
  • Capital
  • Operating expenses
  • Port & terminal costs
  • Bunker costs

Cost/TEU

Ship size

If the ship load factor is below 80%

vanishes any potential benefit of size scale

trends in liner shipping
Trends in liner shipping
  • Growth in worldwide and Asian container shipping market
  • Larger Vessel Sizes
  • Fewer port calls
    • Leads to fewer and larger ports
    • Hierarchy of ports in distribution system
  • Concentration/cooperation
    • Slot chartering: carriers charter each other’s capacity
    • Consortia: coordinate schedules on particular route
    • Alliances: coordinate all schedules
    • Mergers and acquisitions
    • 18 companies control 71% of container slot capacity
  • Expanding activities into Southern Hemisphere, but east-west movements still dominate north-south movements by far
the challenge of growth
The challenge of growth

Source: Stopford

slide33

Refrigerated

Flatrack

Tank container