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The market of liner shipping

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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The market of liner shipping

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  1. The market of liner shipping Claudio Ferrari

  2. 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

  3. INVENTIONS • steam engines • wireless telegraphy • FORMS OF OPERATION • liner shipping: stipulations • tramp shipping & chartered vessels: characteristics • use of liner shipping and tramp shipping

  4. 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

  5. World merchandise trade by major product group, 1950-01 Source: WTO, 2002

  6. 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.

  7. World seaborne trade (billion ton-miles) Source: Fearnleys, Review 2001

  8. 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

  9. 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)

  10. 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

  11. 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

  12. Growth of container trade Source: Stopford

  13. Effects of containerisation.1. Market widening Source: Stopford

  14. Effects of containerisation.2. Price reduction: an example Source: Stopford

  15. Liner shipping: the leading actors

  16. New trades

  17. The present scenario (1)

  18. The present scenario (2) Source: Erasmus University, Rotterdam

  19. Empty container volumes and imbalances on the East/West trades Source: Drewry, 2004

  20. Freight rates

  21. Factors influencing the rate movements • Shape of the supply curve (S) • Shape of the demand curve (D) • Changes in supply • Changes in demand

  22. 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

  23. 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).

  24. Economies of scale Source: Stopford

  25. Economies of scale - draft Source: Stopford

  26. 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

  27. Scale economies in practice Source: Stopford

  28. 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

  29. The growing size of containerships Source: Stopford

  30. The challenge of growth Source: Stopford

  31. Is the growth sustainable? Source: Stopford

  32. Containers: what we are speaking of? Dry container Open top

  33. Refrigerated Flatrack Tank container

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