MARITIME TRANSPORTATION MANAGEMENT

1. MARITIME TRANSPORTATION MANAGEMENT

2. OVERVIEW • There are over 140,000 ship and 170,000 ship owner and manager entries in maritime transportation industry. • Ships are the least regulated mode of transportation. • Ship represents a large capital investment that translates into a large cost per day. • Port time is expensive and presents diseconomies of scale (port operations, the optimal size of ship). • Generally, the longer a trade route is, the larger the share of sea-days in a voyage, and the larger the optimal ship size will be.

3. OVERVIEW • Factorseffectthe optimal ship size; • theutilization of shipcapacity at sea (the “tradebalance”), • loadingandunloadingrates at theports, • thevariouscostsassociatedwiththeship. • A ship is a long-terminvestment. Theuseful life of a shipspans 20–30 years. • Duringthe life of a ship a lot of market volatilitymay be encountered (eg; fluctation in freightrates • Intheshortruntheownermay • reducethedailyvariableoperatingcostbyslowsteaming (reduction in fuelconsumption) • theownermaylayuptheshiptillthe market improves.

4. OVERVIEW • Lay up a ship significantly reduces its daily variable operating cost. • When the market is depressed,owners scrap older ships. • The value of a scrapped ship is determined by the weight of its steel (the “lightweight” of the ship) • there is high supply of ships for scrap • the price paid per ton of scrap drops.

5. SHIP MANAGEMENT • Shipmanagementconcernsallactivitiesrequiredtooperatetheshipseffectively, exceptprovidingequityfinance. • TheBalticandInternationalMaritimeCouncil (BIMCO) SHIPMAN contract is oftenusedbetweenshipownerandmanager. • Thecontractdefinestheshipmanagementservices; • Crewingmanagement • Technicalmanagement • Insurancearrangementsforhullandmachinery, andprotectionandindemnity (P&I) insurance. • Commercialmanagement • Otherservices

6. SHIP MANAGEMENT • The operational expenses are used to keep the ship in operation and vary per ship. • Manning is the largest component of operational expenses OPEX. Expenses for ship finance and voyage operations are not OPEX. • The ship manager is paid for its services with the annual management fee (roughly 5% of annual operational expenses). • The ship owner is obliged to indemnify the ship manager against any third-party claims.

7. SHIPPING INDUSTRY Therearedifferentclassifications in theindustry; regularity of service cargo ship charter type

8. SHIPPING INDUSTRY Thetype of merchantvesselemployed on a traderoute is determinedbasicallybythetrafficcarried. Therewere 3 maindivisions; • Liner • Tramps • Specializedvessels (tankers) • A trampmay be put on a linerberthtocompeteforlinercargoes. Converselylinersmay at timescarrytrampcargoes.

9. MARITIME TRANSPORTATION INDUSTRY DIVISION AS PER TRAFFIC CARRIED

10. INDUSTRY DIVISION ACCORDING TO SHIP TYPES • Reasonforthedivision; allshipshavespecificroutesandallroutes has specifictradeandeconomicissues. • Shipsmainlydividedinto 3 groups as; • Drycargoships (BulkShips,Containers,RO/RO etc) • Tankers • Others • Drybulkshipsandtankersareoperating in tramptrade. • Containerships, MPV,Ro/Ro,Reeferoperates in linertrade.

11. History of Liners • Scheduledtradingbeganwiththeadvent of steampower in 1820s. • Whenshipsbecameindependentfromthewindandweremuchvulnerabletoadverseweather, timetabling of servicesbeganto be possible as steampowerbecamemorereliableandvesselslarger • In 1860s regularscheduledserviceswere a feature of manymaintraderoutes. • Linertradeshipsoperating on fixedrouteswith a fixedschedule. • Rawmaterials,manufacturedgoodsmainlycarriedbycontainershipswhichoffer; • veryreliable, • tightlyscheduledandfrequentservices • with a highlevel of cargosafety.

12. LINERS • Operate on fixed routes and fixed sailing schedules,serving a group of ports. • Involves an adequately sized fleet and a fairly large shore establishment. • Compose ¼ of seaborne trade. • Generally, cargoes loaded in containers. • Enables unitization and carry heterogenous products • General Cargoes: mainly consumption goods; clothes, TVs,computers.

13. Liners • After 90s container trade developed rapidly. • Decrease after global crisis in 2008. • Vessels are not loaded with one shipper’s cargo • Even vessels are not full, voyage is completed as per schedule. • Supplied vessel capacity is important. • Joint voyage planning, sharing vessel,common use of port equipments; to keep in accordance with the voyage determined and rigth planning of capacity.

14. SHIP TYPES IN LINER TRADE AND THEIR CAPACITIES (2008)

15. TRAMP • Bulk; unscheduled and irregular shipments • Terms: Common trader, general trader, free maritime transportation, unscheduled trader • Ready to carry all types of dry bulk cargo from any origin port to destination port at any time and to provide the legacy and safety of the voyage. • Cargo based. • Low value cargoes: coal,grain,ores, timber; carried in complete shiploads.

16. TRAMP • Many of the cargoes are seasonal. • Homogenous characteristic, handled and carried in bulk forms. • Ships:Mid sized, unequipped and unassigned for regular trade; with two to six holds,sub-standard. • Often family owned companies tend to merge. • Engaged under a document called a charter party; on a time or voyage basis.

17. History of Tramps • In the ancient times, Romans import grain from North Africa in bulk and threfore they built a special vessel fleet. • Since 19th century the world trade volume increases; parallel to this bulk cargo transportation increased in order to reach economies of scale. • The trade almost doubled after 90s till today. • Main reason; economic growth of China, India and South East Asia at the end of 20th century. • Today 80 % of seaborne dry cargo trade is bulk. • Mostly bulk ship carries only one commodity at a time and called bulk carrier. • They vary in size; a few hundred tonnes cargo carrying up to 300.000 tonnes

18. General Factors Effect Dry Bulk Transportation Demand • Internationaltradevolume • Internationaltradestructure • Worldwidegeographicaldistribution of rawmaterials,agriculturalandindustrialproducts, finishedand semi-finishedgoodsproductionandconsumptionplaces. • Essentials that form the market areespecially market of thecargo, transportationroutesandvesselsused in maritimetransportation. • It’simportanttounderstandthecharacterisrics of thecargo, itsown market andspecificroutes of thetransportation.

19. FIGURES • Dry bulk cargo compose; 57% in tons, 47% in ton-miles basis of tramp trade volume. • 33% of total maritime transportation in both tons and ton-miles basis. • Only dry bulk vessels compose 34% of total world fleet.

20. SPECIALIZED VESSELS • Cargo ships designed for carrying a particular commodity as a result of demand. • Ore carriers, sugar carriers and the tankers can be the samples. • The world’s tanker fleet is divided between tramp operators (under a charter party) and those owned by oil companies eg; BP VLGC). • The larger proportion is owned and operated by oil companies and employed on regular routes; operation in this respect similiar with liner operator.

21. SPECIALIZED VESSELS • Most independently owned tankers are on long-term charter to the oil companies. • There is a worldwide network of tanker routes; • Crude oil is transported from the oilfields to refineries; • Petroleum and fuel oil from refineries to distribution centers (DCs) and bunkering ports

22. TANKERS • Cargoshipsdesignedtocarrycrudeoil, petroleumproducts,naturalgasandchemicalsubstances, liquefiednaturalgas (LNG), liquefiedpetroleumgas (LPG), vegoils,winesetc • As a Tramp form, tankershavenecessarytechnologicalinfrastructuretocarrysuchgoods. • Tankerscover 1/3 of worldseabornetrade in tonscarried. • Oilcrises,wars,politicalissues in world arena effectsthisindustrymorethantheothermaritimetransportationindustries. • Therefore, comparedtoothers tanker trade is fluctuatingcomparedtoothers.

23. TANKERS • Countries that export and import are distinct • Importers; China, Japan and other Asian countries,European countries, US • Exporters;Saudi Arabia and other Middle East countries, Iran, Iraq, United Arab Emirates and Kuwait; Latin America, North Sea countries like England and Norway. • Routes are certain and long. • Has a freight system; WORLDSCALE.

24. TANKERS • The long distances between production and consumption areas effects the demand on transportation of the crude oil. • Middle East countries with the 60% petroleum reserves are far from the consumption areas. • From Cape of Good Hope to Europe: 12.000 miles; to Japan 6.000 miles • Long routes, petroleum (as an important input) demand increase also increases the tanker trade in ton-miles.

25. FIGURES • Tankers compose; %43 in tons, 53% in ton-miles basis of tramp trade. • 38% of total maritime transportation in ton-miles basis. • Considering dry bulk as 33% of total maritime transportation; in ton miles basis tanker has the highest portion. • Tanker fleet accounts for 36% of world fleet.

26. LINER AND TRAMP COMPARISON

27. DRY BULK SHIPS AND CAPACITIES

28. DRY BULK SHIPS AND THEIR CARGOES

30. Vessels have their names according to their characteristics. • Panamax; the largest vessel that may pass Panama Canal safely. • Capesize has the highest capacity and can not pass Suez Canal. • Therefore trade route determined round Cape of Good Hope.

31. TANKER CLASSIFICATION **AFRAMAX: Average Freight Rate Assessment – Tanker freight tariff system.

32. TANKERS AND THEIR CARGOES

33. Types of Tankers