Ship Charter Rates

25-April-2025 Daily Updated Ship Charter Rates

 

Handy Charter Rates   

• Handy open Continent to East Coast South America (ECSA) fixed around $6,500
• Handy open Continent to East Coast North America (ECNA) fixed around $9,000
• Handy open East Coast South America (ECSA) to Continent fixed around $14,500
• Handy open US Gulf (USG) to Continent fixed around $10,500
• Handy open North Coast South America (NCSA) to Continent fixed around $10,500
• Handy open South East Asia (SEA) to China fixed around $10,000
• Handy open Indonesia to Japan-Korea fixed around $10,000
• Handy open North China to South East Asia (SEA) fixed around $10,000
• Handy open Japan-Korea to Indonesia fixed around $10,000
• Handy open Brazil to Italy fixed around $10,500
• Handy open Ecuador to East Coast Canada fixed around $11,500
• Handy open Egypt to Argentina fixed around $6,500
• Handy open SW Passage via US Gulf (USG) to Ecuador fixed around $14,000
• Handy open Morocco to Brazil fixed around $6,500
• Handy open Brazil to Morocco fixed around $12,000
• Handy open Brazil to Nigeria fixed around $13,000
• Handy open Egypt to Spain fixed around $7,000
• Handy open Baltic to Turkiye fixed around $14,000
• Handy open Vietnam via Indonesia to Japan fixed around $10,000
• Handy open Philippines via Indonesia to Ecuador fixed around $13,500
• Handy open Singapore via Australia to Malaysia fixed around $10,500
• Handy open South Korea to South China fixed around $11,500
• Handy open Singapore via Adriatic to UAE fixed around $11,500
• Handy open North China to Indonesia fixed around $10,500
• Handy open Singapore to ARAG fixed around $11,500
• Handy open North China to Philippines fixed around $11,000
• Handy open Taiwan to Philippines fixed around $8,500
• Handy open East Coast India (ECI) to Bahrain fixed around $10,000
• Handy open Japan via South Korea to UK fixed around $14,000
• Handy open Argentina to Ecuador fixed around $14,500
• Handy open US East Coast (USEC) to UK fixed around $12,500
• Handy open Argentina to China fixed around $14,000
• Handy open Brazil via Argentina to China fixed around $13,500
• Handy open Brazil to US Gulf (USG) fixed around $13,000
• Handy open Brazil to Morocco fixed around $13,000
• Handy open Argentina to Morocco fixed around $13,500
• Handy open SW Passage via US Gulf (USG) to Mexico East Coast fixed around $11,000
• Handy open SW Passage via US Gulf (USG) to Morocco fixed around $10,000
• Handy open Canada East Coast to Algeria fixed around $14,500
• Handy open Canada East Coast to Italy fixed around $13,500
• Handy open US Gulf (USG) to UK fixed around $10,500
• Handy open SW Passage via US Gulf (USG) to Peru fixed around $14,000
• Handy open US Gulf (USG) to Spain fixed around $12,000
• Handy open South China via South Korea to Thailand fixed around $11,000
• Handy open Japan via South Korea to Indonesia fixed around $11,500
• Handy open Morocco to Argentina fixed around $5,500
• Handy open WCCA (West Coast Central America) to ARAG fixed around $11,000
• Handy open Peru to China fixed around $7,500
• Handy open SW Passage via US Gulf (USG) to Turkiye fixed around $11,000
• Handy open Baltic Sea to West Africa (WAFR)fixed around $11,000
• Handy open Argentina to Nigeria fixed around $13,500
• Handy open Brazil to UAE fixed around $17,000
• Handy open SW Passage via US Gulf (USG) to West Coast Central America (WCCA) fixed around $14,000

Supramax Charter Rates

• Supramax open Continent to Far East fixed around $11,000
• Supramax open Black Sea to Far East fixed around $11,000
• Supramax open East Mediterranean (EMED) to Far East fixed around $11,000
• Supramax open US Gulf (USG) to China fixed around $14,000
• Supramax open North Coast South America (NCSA) to China fixed around $14,000
• Supramax open China via Australia to China fixed around $11,000
• Supramax open China via North Pacific (NOPAC) to China fixed around $11,000
• Supramax open China to West Africa (WAFR) fixed around $11,000
• Supramax open US Gulf (USG) to Continent fixed around $14,000
• Supramax open Continent to US Gulf (USG) fixed around $9,000
• Supramax open West Africa (WAFR) via East Coast South America (ECSA) to China fixed around $13,000
• Supramax open West Africa (WAFR) via East Coast South America (ECSA) to Continent fixed around $10,000
• Supramax open China via Indonesia to East Coast India (ECI) fixed around $14,000
• Supramax open South China via Indonesia to South China fixed around $11,500
• Supramax open West Coast India (WCI) via South Africa (SAF) to China fixed around $11,000

Ultramax Charter Rates

• Ultramax open Continent to Far East fixed around $11,500
• Ultramax open Black Sea to Far East fixed around $11,500
• Ultramax open East Mediterranean (EMED) to Far East fixed around $11,500
• Ultramax open US Gulf (USG) to China fixed around $14,500
• Ultramax open North Coast South America (NCSA) to China fixed around $14,500
• Ultramax open China via Australia to China fixed around $11,500
• Ultramax open China via North Pacific (NOPAC) to China fixed around $11,500
• Ultramax open China to West Africa (WAFR) fixed around $11,500
• Ultramax open US Gulf (USG) to Continent fixed around $14,500
• Ultramax open Continent to US Gulf (USG) fixed around $9,500
• Ultramax open West Africa (WAFR) via East Coast South America (ECSA) to China fixed around $13,500
• Ultramax open West Africa (WAFR) via East Coast South America (ECSA) to Continent fixed around $10,500
• Ultramax open China via Indonesia to East Coast India (ECI) fixed around $14,500
• Ultramax open South China via Indonesia to South China fixed around $12,000
• Ultramax open West Coast India (WCI) via South Africa (SAF) to China fixed around $11,500
• Ultramax open West Coast India (WCI) via UAE to Bangladesh fixed around $12,000
• Ultramax open North China via GOA to ARAG fixed around $16,500
• Ultramax open West Coast India (WCI) to Bangladesh fixed around $11,000
• Ultramax open Bangladesh to West Coast India (WCI) fixed around $15,000
• Ultramax open Indonesia to Thailand fixed around $15,500
• Ultramax open Vietnam via Sri Lanka to Malaysia fixed around $12,500
• Ultramax open Japan via North Pacific (NOPAC) to Japan fixed around $12,000
• Ultramax open Argentina to ARAG fixed around $18,500
• Ultramax open West Africa (WAFR) to China fixed around $13,500
• Ultramax open Indonesia to East Coast India (ECI) fixed around $15,500
• Ultramax open Iraq to Bangladesh fixed around $11,000
• Ultramax open Brazil to China fixed around $14,500 + $450,000 BB
• Ultramax open Latvia to Turkiye fixed around $13,000
• Ultramax open West Coast India (WCI) via UAE to Bangladesh fixed around $11,000
• Ultramax open Iraq via UAE to Bangladesh fixed around $11,000
• Ultramax open South Africa (SAFR) to Pakistan fixed around $14,000 + $140,000 BB
• Ultramax open North China to UAE fixed around $12,500
• Ultramax open Bangladesh via West Coast India (WCI) to East Coast India (ECI) fixed around $13,000
• Ultramax open West Coast India (WCI) via Oman to East Coast India (ECI) fixed around $14,000
• Ultramax open Thailand via Indonesia to Thailand fixed around $13,500
• Ultramax open Vietnam via Indonesia to Brunei fixed around $14,000
• Ultramax open South Africa (SAFR) to China fixed around $17,000 + $170,000 BB
• Ultramax open West Coast India (WCI) to China fixed around $14,000
• Ultramax open UAE to Bangladesh fixed around $17,000

Panamax Charter Rates

• Panamax open Continent via East Coast South America (ECSA) to Continent fixed around $9,500
• Panamax open Continent to China fixed around $16,500
• Panamax open China via Australia to China fixed around $12,000
• Panamax open China via North Pacific (NOPAC) to China fixed around $12,000
• Panamax open China to Continent fixed around $9,000
• Panamax open Singapore via Argentina to China fixed around $12,500
• Panamax open Spain via Colombia East Coast to China fixed around $16,500
• Panamax open South China via Australia to West Coast India (WCI) fixed around $13,000
• Panamax open North China via Australia to West Coast India (WCI) fixed around $13,000
• Panamax open Japan via Australia to Japan fixed around $13,000
• Panamax open Argentina to Eritrea fixed around $15,500 + $550,000 BB
• Panamax open Argentina to China fixed around $15,000 + $500,000 BB
• Panamax open Argentina to Malaysia fixed around $14,500 + $450,000 BB
• Panamax open East Coast India (ECI) via Argentina to China fixed around $13,000
• Panamax open Taiwan via Australia to South Korea fixed around $13,500
• Panamax open Vietnam via Australia to Japan fixed around $12,000
• Panamax open Argentina to ARAG fixed around $17,000
• Panamax open North China via North Pacific (NOPAC) to China fixed around $11,000
• Panamax open East Coast India (ECI) via Argentina to East Coast India (ECI) fixed around $13,500
• Panamax open Japan via Australia to Japan fixed around $12,500
• Panamax open North China via Australia to West Coast India (WCI) fixed around $14,000
• Panamax open Taiwan via Indonesia to Philippines fixed around $9,500
• Panamax open North China via Australia to China fixed around $11,500
• Panamax open Taiwan via Australia to Vietnam fixed around $13,500
• Panamax open Hong Kong via Indonesia to South China fixed around $11,500
• Panamax open Japan via North Pacific (NOPAC) to Japan fixed around $11,000
• Panamax open Hong Kong via Australia to South China fixed around $12,000
• Panamax open ARAG via Colombia East Coast to Turkiye fixed around $10,500
• Panamax open UAE via Argentina to China fixed around $14,500
• Panamax open Argentina to ARAG fixed around $19,500
• Panamax open North China via Australia to South China fixed around $12,000
• Panamax open Morocco via Guinea to Germany fixed around $11,000
• Panamax open East Coast India (ECI) via Argentina to South China fixed around $14,000
• Panamax open East Coast India (ECI) via Brazil to Japan fixed around $13,500

Period Charter Rates

• Handy open Far East chartered out around $11,000 for a long period (1 year)
• Supramax open Far East chartered out around $11,500 for a long period (1 year)
• Ultramax open Far East chartered out around $13,000 for a long period (1 year)

 

Bulk Carrier Charter Rates Week 17

Supramax Daily Charter Rates USD/Day

Supramax Atlantic RV US Gulf/China China/Indonesia RV
(USD/Day)  11,736 14,743 12,097

 

Panamax Daily Charter Rates USD/Day

Panamax Atlantic RV Continent/China China/Continent Pacific RV
(USD/Day) 9,873 17,121 9,141 12,134

 

 

1 Year Time Charter Rates (USD/Day)

Handysize 38K Supramax 58K Ultramax 64K Panamax 75K Kamsarmax 82K Capesize 180K Newcastlemax 208K
11,000 11,500 13,000 11,500 13,000 19,000 23,000
Handysize Period Time Charter Rate USD/Day

Supramax Period Time Charter Rate USD/Day
Ultramax Period Time Charter Rate USD/Day
Panamax Period Time Charter Rate USD/Day
Kamsarmax Period Time Charter Rate USD/Day
Capesize Period Time Charter Rate USD/Day
Newcastlemax Period Time Charter Rate USD/Day

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dry Bulk Shipping

Dry bulk trades have been transformed over the past three decades. The average size of ships engaged in dry bulk trades has doubled in size. Dry bulk trades have in fact evolved from the tramp shipping market. Tramp markets were served by small, general-purpose ships. Historically, general-purpose ships were steaming the ports in search of business, spot market cargoes. Shipowners use a global network of shipbrokers to seek cargoes for their ships. Shipbrokers perform a fundamental function in providing information to both shipowners and charterers. As cargo lot sizes and ship sizes have increased, there is a tendency for significant charterers to use long time charters, consecutive voyage charters, and contracts of affreightment. Despite the growth in these types of contracts, there is still a huge volume of spot charters and spot ship chartering is a very competitive market.

The dry cargo market can be defined using two basic methods:

  • Tramp Ship
  • Tramp Market Characteristics

Tramp Ship

In 1959, Hector Gripaios defined the tramp ship as a “deep-sea tramp ship carry any cargo between any port at any time, always providing that the venture is both legal and safe”. In 1972, Prof. Metaxas’ book “The Economics of Tramp Shipping” was published. Prof. Metaxas defined the tramp ship as “ship with a tonnage of 4,000 DWT or above, which in the long-run does not have a fixed itinerary, and which carries mainly dry cargo in bulk over relatively long distances and from one or more ports to one or more ports is an ocean or deep sea tramp”. Both tramp ship definitions emphasize the fact that tramp ships have no fixed pattern of employment. The minimum ship size and deep-sea nature of the tramp ship is introduced by Prof. Metaxas.

Tramp Market Characteristics

Defining the dry cargo market with specific ship characteristics have some drawbacks. In the dry bulk shipping market, cargo volumes and average lot sizes have increased since the 1970s. Hence, the average size of most ship types dramatically increased. Modern dry bulk ships are more specialized than the old tramps and dry bulk ship size reached up to 400,000 DWT. On the other hand, larger ships require larger capital requirements, shipowners are only prepared to risk the commitment to such large ships if shipowners have long-term contracts. Handysize, handymax, panamax, capesize bulk carriers are more specialized and are often employed on contracts of affreightment (COA). Contracts of affreightment (COA) permits the shipowner to meet the charterer’s requirements by using more than one ship. The modern definition of the dry bulk market would need to include the development of these long-term contracts. Freight rates for these long-term contracts are still influenced by the spot market. Dry cargo definition that is based upon market characteristics might be more applicable.

In dry cargo markets, most shipping contracts between charterers and shipowners become well known to all the market participants through shipbroking companies. Therefore, all participants in dry cargo markets know the prevailing levels of freight rates and can make decisions accordingly.

Dry cargo markets include many types of contracts such as spot fixtures, consecutive voyages, contracts of affreightment (COA), time charters. Dry cargo markets’ clearest definition may be found in the market characteristics rather than in the particular specification of the ship.

The dry bulk freight market is a very competitive market and very close to the perfectly competitive market model. Important features of a perfectly competitive market model:

  1. Every supplier seeks to maximize profits
  2. Numerous buyers and sellers in the market
  3. The service offered by each shipping company is exactly the same as every other company
  4. Easy exit from and entry to the market.
  5. Full information is available to all participants in the market place

The dry cargo market fulfills all of the features of a perfectly competitive market model. Shipowners and charterers seek to maximize their profits. A large number of shipowners and charterers in the dry bulk market. No single shipowner or single charterer of the dry bulk market can influence the behavior of freight rates. Dry bulk freight rates cannot be fixed. Dry bulk freight rates are driven by overall demand and supply conditions. All shipping companies in the dry bulk market offer the same service, same cargo space, and safe transportation of cargo in a timely manner. Assuming that the analysis is based on ships of an acceptable standard. Entry and exit from the dry bulk market are fairly easy. Easy does not mean costless. A person can enter the dry bulk market by buying a secondhand ship or by ordering a newbuilding ship and becomes a shipowner. New shipowners would not suffer a cost disadvantage from entering the dry bulk market. On the other hand, if the shipowner earns unsatisfactory profits and sees no long-term prospects for recovery, then the shipowner can put the ship up for sale and exit dry bulk market. If the shipowner would incur a loss when selling the ship, this could be a barrier to exiting. If many shipowners cannot make profits, and buyers are few, shipowners can either lay up or scrap the ship. If the ship is scrapped, a dry bulk market exit occurs. Entry and exit are easy in dry bulk market because existing shipowners have no way of preventing such a process. In the dry bulk market, full market information is available to all participants by Baltic Exchange. Shipbrokers act as information transmitters. Shipbrokers ensure that all dry bulk market players are kept fully informed of any event that might affect the market.

One crucial characteristic of a competitive dry bulk market is that shipowners have no individual influence over market freight rates. Profit is made in the margin between revenues and costs. The only element that shipowners have control over cost. Competitive markets tend to be driven by cost trends, rather than by demand features.

Dry Bulk Market Trends Over the Past 30 Years

Over the past 30 years, the total volume of cargo has more than doubled at an annual average compound growth rate of 4.5% per year. Demand growth is much more uneven on a year-to-year basis over the past 30 years. The highest rate of growth to be observed occurred in 2010, at 12.1%. 2010 growth rate is about three times the long-term average. Since 1995, ship tonnage growth rate has fluctuated between -2.8% and 12.1%. Over the past 30 years, shipping demand growth tends to move in cycles of good years, medium years, poor years, and back again. In other words, freight rates rate peaks, declines, becomes negative, recovers again. Shipping cycles exist around a rising trend in the total volume of cargo moved.

In the period 1999-2015, the growth rate of tonne-mile demand has varied between -2.7% and 13. 1%. In the period 1999-2015, tonne-mile demand increased by 5.2% per year compound, on the other hand, cargo tonnes moved grew by 4.5% per year. Differences in the growth of tonnage demand and tonne-mile demand imply that journey distances have fluctuated. The average haul has declined from 5,508 miles in 1999 to 5,437 in 2015. In the period 1999-2015, the growth rate of the dry bulk fleet has averaged 5.7% per year. In sum, between 1999-2015, supply capacity has exceeded demand. Ship supply capacity should properly be measured in terms of tonne-mile. Furthermore, the laid-up fleet has been steadily declining since 1992.

Cost Structure of Tramp Ship Operators

Tramp ship operators have to identify and split their costs between fixed and variable costs in the short run. In the shipping business, most variable costs related to producing shipping output, in other words undertaking a voyage. The distinction between avoidable (variable) and unavoidable (fixed) costs is also useful when making operational decisions.

Ship Lay-up Decision

Tramp ship operators to lay up a ship or to continue to trade is a complex decision. If the trip loses money i.e. freight revenues are less than the total costs, then the ship could not be laid up. Because lay-up is not a costless activity, lay-up costs money. During the lay-up, some costs will be reduced. On the other hand, the ship has to be maintained, provided with some power, anchored safe lay-up position, and skeleton crew provisions must be provided. Unavoidable (fixed) costs will be incurred by the shipowner whether the ship trades or lays-up. Fixed costs are common in both situations whether the ship trades or lays-up. Hence, fixed costs cannot affect the outcome of the lay-up decision. For example, the shipowner estimates that daily operating costs are $12,000 for a ship in a trading condition and $5,000 in lay-up. $4,000 of this cost is assumed to be the capital cost of owning the ship. Capital cost is a fixed cost and unavoidable. Therefore, capital costs can be canceled out. Relevant costs become $8,000 per day when trading and $1,000 per day when laid up. Assume that the shipowner is now offered a voyage business which takes 40 days and voyage-related costs of $400,000 in the period. On a total cost basis, the owner will require $880,000 in revenues. If the ship has a 44,000 DWT carrying capacity, this implies a rate of $20 per tonne of cargo delivered. But suppose the market rate is only $18. Should the shipowner lay up the ship?. If the shipowner lays up the ship, the shipowner faces extra costs of $40,000 (40 days x $1,000 lay-up costs per day). If shipowner takes business, shipowner gain $792,000 ($18 x 44,000 metric tons ) in extra revenues . But they spend operating costs of ($8,000 x 40 days) + $400,000 = $720,000. Therefore, the shipowner gains $72,000, compared to the loss of $40,000 resulting from lay-up. Shipowners should take a voyage charter business, even though the rate is less than the full cost of the trip. On the other hand, the same conclusion would be reached if the capital costs of $4,000 per day had been included. Here above example ignored any additional lay-up costs itself. Including lay-up costs would emphasize that trading will often take place at market rates which are less than the long-run costs.

In order to decide to lay up a ship, the shipowner should develop a model of the breakeven level of freight rates needed to maintain trading. Here above hypothetical lay-up example has implicitly assumed that the shipping company has one ship in operation. On the other hand, a large number of dry shipowners operate large fleets. As the number of ships operated by a company increases, unit costs decrease. Tramp operators tend to have a higher proportion of their costs as variable costs when compared to liner ship operators.

The distinction between short-run fixed and variable costs is not clear cut. Short-run fixed and variable costs depend on:

  • nature of the problem
  • type of ship
  • time period

Here above lay-up example, some items of daily operating costs could be avoided (variable costs). On the other hand, if the shipowner was considering between two trading options, the entire daily running cost could not be avoided and becomes a fixed cost. Shorter the time period under consideration, the greater the proportion of costs that will be fixed costs. Once a ship is at its loading berth (voyage is commenced), practically all costs become fixed costs (unavoidable).

Breakeven Analysis in Determining Minimum Freight Rates

In order to determine the minimum freight rates, breakeven analysis is a very well-known method to present information on revenue and costs. In the breakeven analysis, the normal procedure is to calculate the load factor (level of utilization) required to breakeven point.

  • Profit: actual load factor (utilization level) exceeds the calculated number
  • Loss: actual load factor (utilization level) below the calculated number

In liner shipping, ships operate on a timetable and liner ships have to sail whether or not ships are fully loaded. Therefore, defining the load factor (utilization level) may well be significant in liner shipping. On the other hand, usually in dry bulk shipping, dry bulk ships are full cargo loaded (high utilization levels). Dry bulk ships do not operate on a timetable and sail whether or not they are fully loaded.

Instead of applying the model to working out the breakeven load factor, it can instead be employed to work out the breakeven rate. The Breakeven rate is the freight rate which will ensure that a full cargo load will generate sufficient revenue to cover costs. Dry bulk freight rates are quite volatile. Therefore, it is useful to calculate the minimum freight rate required to breakeven the point.

Freight Rates Breakeven Analysis is based on the following assumptions:

  1. The basic unit of analysis is the ship
  2. Costs and revenues are assumed to be linear
  3. Plentiful market players. Shipowners and charterers cannot influence the market freight rate on their own.
  4. The actual freight rate is taken as fixed since no individual has any ability to alter freight rates. Market players are price takers

The slope of the Total Revenue line represents the market price; since total revenues rise in line with volume carried, the price is constant all the way along the Total Revenue line. Total fixed costs are the same, no matter what cargo quantity is loaded. Total variable costs are the difference between total costs and total fixed costs. At the cargo quantity level (Q) where total revenue equals total cost (Total Cost = Total Revenue = Equilibrium Point) is the Breakeven Freight Rate. This cargo quantity (Q) is called the Breakeven Quantity because it is at this point that total revenues cover both variable and fixed costs.

In a shipping company, the lower the proportion of variable costs to fixed costs, the greater the scope for the freight rate to fall below the long-run total cost. This is one of the factors that explain the sharp fluctuations that are observed in freight rates in the dry cargo trades when contrasted with liner trades. Dry bulk companies have high variable costs, liner companies have high fixed costs. In depressed markets, dry bulk shipowners may well accept short-run trip charters at rates well below those required to cover their long-run costs, if the proportion of variable costs are low.

Modeling Dry Cargo Shipping Market

The shipping market can be separated into specific segments. During modeling and analyzing the dry cargo shipping market, the following assumptions are made:

  1. Each shipowner is seeking to maximize profits (or minimize losses)
  2. Each charterer is seeking the lowest freight rate (consistent with an acceptable quality of service offered by the shipowner)
  3. A large number of fixtures and all market participants are informed
  4. Perfect competition

There is a downward-sloping relationship between the cargo volumes required to be moved and the level of freight rates, other things being equal. The higher the freight rate, the smaller the demand for cargo movements and vice versa. Demand for dry cargo tonne-miles is a derived demand. Derived demand price elasticity basic principles:

  • Final products’ price elasticity
  • Existence of close substitutes
  • The proportion of transport costs in the final product

Derived demand price elasticity example: grain. Grain movements are driven by:

  • Production trends in different regions of the world
  • Drought, weather conditions, and crop yields
  • Changing patterns of food consumption

Gain is used to making bread, pasta. Furthermore, the grain is used to feed animals to produce meat. Final products such as bread, pasta, meat all have a low price elasticity of demand. Most empirical evidence suggests that bread, pasta, meat are price inelastic. Major grain exporters are located in South America, US Gulf, and Australia. Therefore, grain has to be moved by sea, because air transport is a very expensive alternative and not feasible. Currently, freight rates are about 6% of the final price of most traded commodities. Market demand is likely to be extremely inelastic with respect to changes in freight rates. The shipping demand curve can be represented as an almost vertical line. An extremely inelastic shipping market conclusion is for the shipping market as a whole. In some trade routes, the demand on that route might be more sensitive to changes in that route’s freight rate. Shipowners always seek out trade routes that are more profitable. On the other hand, the ability to switch a ship from one route to another at relatively short notice implies that freight rates should not get too out of line with each other.

Shipping Supply

In the dry bulk shipping business, under competitive conditions, shipowners should never accept a freight rate that is less than the Average Variable Cost (AVC). Furthermore, different ships have different costs, because of different ages, flags, or crew costs. Assume that all average variable costs of all bulk carriers on the market were known and that a ranking could be organized starting with the dry cargo bulk ship with the lowest average variable cost to the highest. If shipping freight rates were high enough and cargo volumes large enough, all these dry bulk carriers would be employed. Now, if the shipping freight rate is steadily reduced, ships with high variable costs (avoidable) will cease trading first. As freight rate is lowered more, more dry bulk carriers are forced into idleness, until none is trading. Capital costs should play no role in the lay-up decision in the short run since capital costs have to be met whether or not the ship is being traded. Older ships will tend to have higher operating costs than newer ships, so the majority of laid-up ships are the older ships of the fleets. In the short-run period, ships’ variable costs can be altered by varying the ship’s speed. Lower ship speed means lower output and lower costs. When demand is low and so freight rates are low, the loss of shipping output is more than offset by the benefits of slow steaming. The shipping supply curve becomes steeper in slope as maximum tonne-mile production is attained. Because:

  • Additional tonne-miles being created near full capacity are being created by the more inefficient ships in the fleet the ones with higher variable costs. High variable cost ships add a lot to costs without adding that much extra to output
  • Speed increases are a limited way of raising output. Extra costs of fuel consumption increase more rapidly than the extra output

The shipping supply curve eventually becomes vertical which represents the notion of full capacity utilization. In the short term, no more shipping output can be obtained from the existing fleet.

Equilibrium Freight Rate

The shipping market is defined as the interaction of supply and demand. Demand and supply both together determine the equilibrium freight rate (P) and quantities (Q) moved at that freight rate. Shipping demand conditions are affected by the volume of world trade, which is driven by overall economic activity, and changing degrees of openness towards trade by individual nations. As demand volumes increase, there is a relatively small rise in the market freight rate and a large rise in tonne-miles produced at the beginning. But, as demand volumes keep increasing, the increase in demand is translated into large increases in freight rates, because supply is very limited supply becomes very inelastic. This model can be used to examine short-run fluctuations in shipping market conditions, but not the long-run period. Because, in the short-run period, the existing stock of ships is limited. But, in the long-run period, altering the stock of ships (newbuilding and scrapped ships) shifts the equilibrium point. In the short-run period, when demand increase, freight rates move up very sharply and supply does not increase much. Existing shipowners make large profits and this situation encourages shipowners to order new ships. In the second-hand market, the value of existing ships also rises. Shipping market players expect that profits are going to be healthy in the future. Increased number of newbuilding orders will translate into a rightward shift in the supply curve in the long term and this will lead to a fall in freight rates if demand remains the same. In the short-run period, when demand decrease, this situation cause reduction in supply and a rise in ship lay-ups. In the short-run period, when some ships will be trading at freight rates which do not cover full costs. Operating slightly below variable costs is acceptable in the short-term, but it is not sustainable in the long-term. Therefore, some ships will be laid up or scrapped. The scrapping of ships leads to help raise freight rates if the supply shifts far enough.

Higher or lower freight rates create incentives to increase or to decrease tonne-miles supplied through the following mechanisms:

  • higher or lower freight rates encourage a higher or slower ship speed
  • higher or lower freight rates will encourage shipowners with high variable cost ships to scrap or lay-up

In the long-run period, fluctuations in freight rates and lay-up numbers encourage shipowners to:

  • Embrace or reject newbuilding orders
  • Progress or delay scrapping ships

Expectation of Shipowners

A key factor influencing shipowners’ decision to scrap or order new ships is the expectations of future levels of freight demand and freight rates. Future expectation is crucial in determining how the shipping market reacts to short-term changes in demand and freight rate levels. If shipowners are optimistic about the future freight rates and demand, falling rates in the short term may not lead to a longer-term reduction in shipping capacity. If shipowners are pessimistic about the future freight rates and demand, any short-term market downturns may lead to a shortage of capacity if demand grows at an unexpected place. Shipowners’ future expectations can be very volatile. Volatility helps to explain the sudden increases and sudden falls of freight rates, particularly when political events, wars, or other events can have strategic impacts on dry cargo markets.

Here above fright rate model implies:

  • A strong positive correlation between demand growth and new orders when the present stock of ships is highly utilized with low levels of lay-up
  • Freight rates should be sensitive to short-run market conditions. Freight rates reflect both present market and future expectations
  • Exceptional events such as wars, political event, embargoes, closure of canals generate significant increases in freight rates when the present stock of ships is highly utilized
  • A strong positive correlation between freight rates and new orders, with periods of high rates associated with higher than average orders, lower than average lay-ups, and scrapping

In the period between 1947-1984, based on a notional value of 100 for 1965, without inflation effects, later shipping booms would look larger and the earlier shipping booms look smaller. There are substantial periods of demand growth in which freight rates do not fluctuate all that dramatically. In these flat periods:

  • Plenty of ship capacity available to meet any increase in demand
  • Expansion of demand is matched by the correct expansion of capacity, brought about by accurate expectations generating the correct level of ordering

Shipping spikes are generated by external events that are not completely anticipated by the shipping market. Shipping spikes are generated by external events such as wars or war-related events. For example, the 1973 shipping crises. Growth in demand for shipping services was very high in the late 1960s and early 1970s. Many shipowners ordered new large ships. However, in September 1973, the shipping boom came to a halt with the six-day Arab-Israeli war. Suez Canal closed and the Arab oil embargo on countries seen as pro-Israel triggered a 400% rise in the price of crude oil delivered a huge shock to the Western economies that had been previously growing quite rapidly. Western economies’ growth faltered and income fell in 1974. Lower economic growth means lower growth in the demand for shipping.

Shipping rate peaks of 1970 and 1973 correspond to two of the years of highest annual growth of tonne-mile demand:

  • 1970 Annual tonne-mile demand growth 3%
  • 1973 Annual tonne-mile demand growth 2%

Shipping demand actually fell by 2.3% in 1975. In 1984, demand grew at 10.2%, but there is no peak in the freight rates in 1984. The difference in the two situations is due to laid-up tonnage. In 1970 and 1973, very little tonnage was laid-up. However, in 1984, over 20% of the fleet was laid up. In 1984, an increase in demand was easily met from existing ship capacity and no peak in freight rates.

In 1970 and 1973 peaks, demand is at or near full ship capacity, so further increases triggered to generate large freight rate increases as supply response was very small. But, in 1984, there was plenty of spare capacity and significant increases in demand were met with no corresponding rise in freight rates. The shipping volatility index, based on 1985 = 100, shows that the average freight rate has risen sharply since 2003, and so the volatility of the freight rate. The dramatic change in the shipping market has been since 2003. Since 2003, intra-year shipping volatility jumps from around 3% to figures which range between 14% and 33%.

The dramatic increase in freight rates and volatility between 2003-2008:

  • Tonne-mile demand rose at a remarkable rate between 2003-2008 (over 6% per year)
  • Fleet capacity did not grow as fast, ships have to work harder and freight rates spiked
  • An increase in freight rates did not solve the problem
  • Gross profit margins were very large

Between 2003-2008, such huge earnings caused the scrapping of dry cargo ships to more or less disappear and generated a record number of newbuilding orders. Future freight rates are therefore being affected by the delivery of new tonnage and prospective future demand growth. The dramatic increase in freight rates also affected the price of secondhand tonnage and secondhand prices became very high. Between 2003-2008, in certain cases, a secondhand ship became more expensive than its newbuild equivalent due to delivery time. This is called ready ship premium.

Reasons for a dramatic increase in freight rates and volatility between 2003-2008:

  • In 2001, China entered the WTO (World Trade Organization). China became a major player in international trade. China’s economy has grown at 10% per year compound for many years. China’s demand for steel China became the world’s largest steel producer which increased the demand for steel shipping
  • Production of steel requires iron ore and coking coal. China’s demand for both iron ore and coal rose dramatically
  • Rapid growth in world trade has stimulated increased manufacturing. Manufacturing triggered the demand for raw materials and also trade has been liberalized.
  • Many other economies have grown rapidly such as India
  • Shortages of suitable ships caused to move cargoes into two bottoms. Shortage of ship supply as cargo demand shifted. Transportation costs rose.

Dynamic Shipping Model

Here above freight rate model concentrated upon demand and supply conditions. The only additional factor is the role of shipowners’ future expectations. Shipowners’ future expectations help to determine shipowners’ ordering, scrapping, and operational decisions. In order to determine the shipowners’ future expectations, we need to look at past events. Historical data and recent trends can be projected forward to estimate the shipowners’ future expectations as to future demand conditions.

Newbuilding ordering in the early 1970s can be seen as a response to the widely-held view that the market was going to continue to grow as rapidly in the second half of the 1970s as it did till 1973.

If a shipowner anticipates a prosperous period, the shipowner needs to order as early as possible, because newbuilding ship construction takes around two years if there is an available slot at the shipyards. There are two possible outcomes:

  • Shipowner’s future expectations are fulfilled, shipping demand grows as every shipping market player is expected it to and the capacity is met
  • Shipowner’s future expectations turn out to be incorrect and the unexpected happens. New ships have been ordered and a large number of them have been delivered. The shipping market is oversupplied.

In 1973, shipping market conditions were a nightmare for shipowners but profitable for charterers. The shipping market was in turmoil with large numbers of ships and little growth in shipping demand. In 2010, a similar situation occurred, following the 2008 financial crisis. Annual deliveries of new bulk carriers continued to increase until 2011 when 97.7 million DWT was delivered. The scrapping of dry bulk ships also increased, peaking in 2012 at 32.5 million DWT. The key difference between the 1970s and 2010s shipping crises is that laid-up and idle tonnage remained at low levels in 2010s, with shipowners opting to slow steam in order to absorb some of the surplus tonnages. Dry freight markets continue to be depressed since 2012, notwithstanding seasonal and other temporary improvements. In both cases, the 1970s and 2010s shipping crises, a contributory factor to the over-ordering of newbuilding ships are that shipping finance was widely available during a period of growth and high freight rates. Estimating demand and supply conditions in the next decade would therefore make very little sense if an analyst just examined demand and supply in the current year.

The current shipping supply available is the consequence of past decisions by shipowners.

Shipping market players never really learn from previous mistakes and keep ordering new ships. Overbuilding will impact on earnings in all shipping markets. The crucial factor is to order early and not to be the last shipowner to order. In the shipping business, once freight rates increase and the shipping market starts to move, other shipowners join in and herd behavior will eventually result in tonnage oversupply. Therefore, the shipping market generates its own dynamic behavior model over time, as the shipping market continually readjusts to new demand conditions. Poor market conditions influence newbuilding decisions and orders became relatively scarce. On the other hand, if demand conditions alter for the better this lack of new investment may itself generate another shipping cycle.

Dry cargo markets appear to move through cycles of boom, recession, slump, recovery, and back to boom again. Shipping cycles are partly generated by the cyclical growth in shipping demand. However, shipping cycles are also a result of the fact that supply adjustment is a slow process. Shipping analysts have suggested that there are cycles of different periods observable in the shipping market. These different shipping cycles are overlaying each other. Seasonal pattern of demand as being the shortest cycle. On top of that, world demand growth appears to cycle over 5-7 years. Ship supply cycles are longer, on average 13 years. On top of that, very long cyclical patterns of around 50 years. Viewing the shipping market as a dynamic model, as a process in which demand conditions and supply responses change over time, gives a much richer picture of the way the shipping market operates. In sum, ship supply responds to a change in demand, often spread out over several periods.

Freight rates are the outcome of a bargaining process, based on their expectations of future demand and supply, rather than simply the balance of supply and demand at a particular place and time. Shipowners and charterers form expectations of future freight rates and bargain over the deviation of future rates from the latest fixture. The final outcome is influenced by the relative bargaining power of each shipowner and charterer. If the charterer has more power freight rate deviation will be lower than latest fixture. If the shipowner has more power freight rate deviation will be higher than the latest fixture. Many factors can affect the relative bargaining power of shipowners and charterers, but economic conditions are the single most important factor in most situations. In improving economic conditions, shipowners have bargaining power. In worsening economic conditions, charterers have the bargaining power. In bargaining power, information is also an important factor especially when information is comprehensive, accurate, timely, and cheap. Therefore, the role of the shipbroker is crucial in central to the discussion on bargaining between shipowners and charterers. Despite all the improvements in communications and technology, shipbrokers continue to have a role in assimilating information for shipowners and charterers.

Dry Bulk Chartering

What is Ship Chartering?

Chartering refers to the act of contracting a vessel or a portion of a vessel for the transportation of goods by sea. This may occur on any type of vessel and for any type of cargo, including bulk, general, or specialized cargo, among others.

Chartering plays a crucial role in the shipping industry and is central to its economic framework. The Ship Chartering Market is comprised of Shipowners seeking to charter out tonnage and Charterers looking to charter in tonnage for transportation services.

The demand for shipping arises from the need to transport cargo on behalf of Shippers and Traders. This demand is satisfied by the Chartering Market, which manages the transportation requirements. Shipowners seeking to fill ship capacity with cargo will do so through the Chartering Market. Additionally, the Ship Chartering Market caters to the needs of Ship Operators, who may not possess cargo per se but operate ships and offer shipping services.

The complex and efficient Ship Chartering Process can fulfill the demand for ship transport. It begins with the parties in need of tonnage and is executed by the Shipowner who provides that capacity.

The Ship Chartering Market connects the supply of ships in the global merchant fleet with the demand for seaborne trade. It caters to the transportation needs of all types of seaborne cargo and ships.

The Dry Cargo Market and the Tanker Market experience the most intense ship chartering activity. Other types of ships can also be chartered by Ship Operators and Charterers requiring specialized transportation capacity, but chartering activity in these markets tends to be less intense due to the prevalence of long-term chartering contracts.

The ship chartering process is facilitated by the Shipbroker, who acts on behalf of the Principal (Shipowner or Charterer). The Shipbroker is a skilled individual with experience in the ship chartering process, as well as a network of contacts and associates instrumental in efficiently executing it.

The Shipbroker communicates relevant information and receives information on ship positions and cargoes, analyzing all data. Additionally, the Shipbroker assists in Chartering Negotiations, which entail the placement of cargo orders and ship positions by Charterers and Shipowners, respectively, and the exchange of offers and counteroffers until an agreement is reached. Following the chartering negotiations and agreement, the Shipbroker may be responsible for drafting the Charterparty (a maritime contract between a Shipowner and a Charterer) agreed upon by the parties.

The ship will sail on the agreed routes or be placed at the disposal of the Charterer for a Voyage Charter or Time Charter. In a Voyage Charter, the Charterer must pay Freight, while in a Time Charter, the Charterer is obligated to pay Hire. Shipbrokers may also engage in post-fixture work or work related to the performance of the Charterparty.

What are the main types of Ship Chartering?

Merchant vessels are in existence for the purpose of transporting cargoes. With the exception of certain oil companies, ship owners have little proprietary interest in the goods being transported by their ships. Consequently, they rely on others to hire or charter their ships to generate income. The two principal forms of ship chartering are Voyage Charter and Time Charter.

Under Voyage Charter, the ship is chartered to transport cargo from a designated port or ports and transport it to another specified port of discharge, or a range of discharge ports, in exchange for the payment of freight.

On the other hand, under Time Charter, the charterer hires the ship for a predetermined period of time, and pays hire for each day, hour, and minute that the ship is at their disposal. The most widely used dry cargo time charter is the New York Produce Exchange Form (1946).

 

What is Voyage Charter?

A Voyage Charter or Spot Charter involves engaging a ship for a single voyage, where the vessel is tasked to transport cargo from a specific load port or ports to a discharge port or ports within a mutually agreed area.

The Shipowner bears the responsibility for all operational expenses of the ship, including additional expenses incurred during the voyage, such as port charges and bunkers, with the exception of cargo-handling expenses, which are generally covered by the charterer.

In dry bulk chartering, some charterparties may specify overtime costs for loading or unloading the cargo, including who is responsible for paying the additional charges. Typically, the crew members are under the Shipowner’s responsibility, while the charterer is responsible for compensating the stevedores.

However, in tanker chartering, the issue of cost does not arise, as the cargo is pumped into the ship by the shore and, therefore, the shipper effectively covers the expenses. The ship’s pumps are then utilized to discharge the cargo, which incurs a cost for the Shipowner.

 

What is Voyage Charterparty? 

The Voyage Charterparty constitutes a contract between the Shipowner and a Charterer who seeks the services of a vessel. The primary aim of this agreement is to procure the use of a ship and its crew to transport a consignment of goods from one port to another on behalf of the charterer.

In exchange for providing the vessel to the charterer, the owner receives Freight, and in certain cases, demurrage. Freight refers to the compensation earned by the owner for providing the vessel and carrying the charterer’s cargo. The amount of Freight is typically determined by the quantity of cargo loaded and will be negotiated based on the owner’s estimate of the time required for the voyage.

However, the Shipowner cannot accurately predict the time that the vessel will spend in port loading and discharging cargo. Consequently, a fixed period known as Laytime is allowed for these operations, and provision is made for the payment of liquidated damages in case the laytime period is exceeded, which is referred to as Demurrage.

From an English legal perspective, there is no prescribed form that the Voyage Charterparty must adhere to. In fact, this agreement may even be oral and need not be in writing. However, given the potential uncertainty and misunderstanding that oral agreements can give rise to, written contracts are preferred, and various Standard Form Voyage Charterparties have been developed and are commonly utilized.

In the realm of dry bulk chartering, the GENCON Voyage Charterparty is a widely employed contract.

 

What is Freight?

In the context of Voyage Chartering, Freight refers to the compensation paid by the Charterer to the Shipowner for the conveyance of cargo.

Typically, the Freight can be paid in one of two ways – either on a per-tonne basis or as a Lump Sum. The payment is usually made upon the delivery of the cargo for tanker shipments or upon the signing of Bills of Lading for dry cargo shipments. In some cases, the payment may be split between these two events, with a portion paid after the signing of Bills of Lading and the remaining portion paid upon the actual delivery of the cargo.

In the domain of tanker chartering, Worldscale is utilized to calculate the Freight. This method implies that the Freight amount is not finalized until the discharge port is nominated. In such instances, the quantity of cargo to be loaded is agreed upon beforehand, and the Charterer generally provides a full cargo. However, as the Shipowner is uncertain about the exact capacity of the ship at this stage, it is usually described as a given tonnage with a fixed percentage MOLOO (More or Less in Owners’ Option) or MOLCHOP/MOLCHOPT (More or Less in Charterers’ Option). While using the abbreviation MOLCO is not advisable, as the handwritten version can be too similar to its opposite, MOLOO. For instance, if a shipment is described as 100,000 tonnes 10% MOLOO, it means that the Shipowner can load up to 110,000 tonnes or a minimum of 90,000 tonnes. On arriving at the loading port, the Ship Master calculates the bunkers, constants, and draft restrictions to determine the precise quantity of cargo the ship can load.

 

What is Charterparty?

In the realm of dry cargo markets, the majority of shipping agreements concern the transportation of voluminous, unprocessed materials. The conventional mode of conveyance for such raw bulk materials is known as the charterparty.

The term “charterparty” is derived from the Latin phrase carta partita, meaning “split paper,” referring to a document that is duplicated so that each party retains a copy. In certain legal texts pertaining to shipping, the expression “Contract of Affreightment” (CoA) is used in place of the term “Contract of Carriage” (Charterparty).

 

What is COA (Contract of Affreightment)?

The term “Contract of Affreightment” is a more precise means of denoting the conveyance of goods by sea, and within the maritime community, it has taken on a particular connotation as a specific type of agreement. These agreements, known as COAs, are employed when a ship operator or owner commits to transporting a specified quantity of goods during a predetermined time frame.

 

What is the difference between COA (Contract of Affreightment and Charterparty?

A Charterparty is a contractual agreement entered into by a Shipowner and a Charterer. In this agreement, the Shipowner commits to either transporting cargo for the Charterer on their vessel or granting the Charterer access to the entire or part of the vessel’s hold for the purpose of cargo carriage on a designated voyage or multiple voyages, or for a specific time period (as in the case of a Time Charter).

On the other hand, a Contract of Affreightment (COA) is another type of agreement between a Shipowner and a Charterer. A COA is typically used when the Shipowner or Ship Operator agrees to transport a particular quantity of cargo over a predetermined period of time. Unlike a Charterparty, the COA does not stipulate a specific vessel.

In a Contract of Affreightment, the responsibility of delivering ships as per the project’s requirements lies with the Shipowner or Ship Operator. This grants them considerable freedom to manage their fleet to their advantage. Additionally, the Shipowner or Ship Operator may hire additional vessels if their fleet is already occupied with more profitable work.

 

What is the difference between COA (Contract of Affreightment and Charterparty?

A Contract of Affreightment (COA) and a Charterparty are both agreements related to the transportation of goods via a vessel, but they differ in terms of scope, nature, and duration. Here are the key differences between the two:

  1. Scope:
  • Contract of Affreightment (COA): A COA is an agreement between a shipper (cargo owner) and a carrier (ship owner) for the transportation of a specific quantity of cargo over a period of time. The contract covers multiple voyages or shipments, and the carrier is responsible for providing the required vessel capacity to transport the agreed-upon cargo.
  • Charterparty: A Charterparty is a contract between a shipowner and a charterer (the party hiring the vessel) for the use of a vessel or its cargo space. It can be for a single voyage (Voyage Charter) or for a specific period (Time Charter). The charterer typically has more control over the vessel, deciding the ports, routes, and cargo.
  1. Duration:
  • Contract of Affreightment (COA): A COA generally covers a longer period, ranging from several months to a few years, depending on the agreed-upon terms. It is more focused on the long-term transportation of goods.
  • Charterparty: The duration of a Charterparty depends on the type of charter. A Voyage Charter lasts for a single voyage, whereas a Time Charter can last for a specific period, typically ranging from a few months to several years.
  1. Payment:
  • Contract of Affreightment (COA): The payment in a COA is usually based on the volume of cargo transported, referred to as the freight rate. This rate can be fixed or flexible, depending on the terms of the agreement.
  • Charterparty: In a Voyage Charter, the payment is based on the cargo quantity, while in a Time Charter, the payment is based on the daily hire rate for the vessel, which is agreed upon between the shipowner and the charterer.
  1. Flexibility and control:
  • Contract of Affreightment (COA): In a COA, the carrier has more control over the vessel, deciding the routes and scheduling to fulfill their obligation to transport the cargo. The shipper has limited control over the vessel.
  • Charterparty: The charterer has more control over the vessel, deciding the ports, routes, and cargo. In a Time Charter, the charterer may even select the crew and manage the vessel’s daily operations, with some limitations.

Contract of Affreightment (COA) is an agreement for the transportation of a specific quantity of cargo over a period of time, while a Charterparty is a contract for the use of a vessel or its cargo space, either for a single voyage or a specific period. The main differences lie in the scope, duration, payment, and level of control each party has over the vessel.

What is Ship Chartering Contract?

In the realm of ship chartering, the Ship Chartering Contract stands out as a prime example of a transaction solely driven by the forces of the shipping market. This type of contract is typically negotiated within a free market environment and is subject exclusively to the laws of supply and demand.

The relative bargaining power of Shipowners and Charterers is heavily influenced by the prevailing conditions of the shipping market. As a result, the Charterparty Terms are negotiated freely without any interference from statutory regulations.

In practice, Shipowners and Charterers commonly utilize a customary Standard Charterparty Form that has been developed specifically for their business. This Standard Charterparty Form is often customized with additional clauses known as Rider Clauses. Depending on the current state of the shipping market, intense negotiations may ensue between Shipowners and Charterers over these Charterparty Amendments, as well as the Freight, Hire, Demurrage, and Despatch Money.

 

What is Chartering Fixture?

When a Charterer requires the services of a ship, they engage the services of Shipbrokers and provide comprehensive information such as cargo details, loading and discharging ports, freight estimates, and the terms of the charterparty. This process is commonly referred to as an Invitation to Treat.

The Shipowner, through their Shipbroker, responds with an Offer that includes crucial details such as the ship’s name, flag, year of construction, class, equipment for cargo handling, among other pertinent details. The Offer also outlines the last three cargoes, cargo intake levels, loading and discharging rates, freight rates, laydays/canceling days, estimated time of arrival, ship position, demurrage, charterparty, and other specific terms such as SHEX (Sundays and Holidays Excluded) or SHINC (Sundays and Holidays Included), eco speeds, commission, and the time limit for the offer.

The Shipowner’s offer is conveyed to the Charterer through the Shipbroker, and if it’s communicated verbally, it will be followed by a telex or email. The use of telex is still prevalent in countries that recognize it since it features an answerback function that provides evidence of when the offer was received by the recipient, which is crucial in establishing whether the offer was timely or not.

Alternatively, the offer can be sent via email, followed by a phone call to confirm its receipt. The Charterer can choose to Reject, Accept, Counter, Accept Except (A/E), or Accept on Subjects.

The Ship chartering negotiations continue with both parties making Counter-Offers until they agree on the details and terms of the charter, except for the subjects. Under English Law, there is no valid Charterparty (Shipping Contract) until all the subjects are lifted.

Therefore, after all the subjects are lifted, the negotiated terms are documented in the Charterparty. While waiting for the subjects to be lifted and before the Charterparty is drafted, the Shipbroker will send a Recapitulation message to both parties, summarizing all the points agreed upon during the chartering negotiations.

At this point, the Shipowner and Charterer verify their messages and corrections to confirm that the Charterparty reflects what was agreed upon during the chartering negotiations.

Chartering Fixture is the term used to indicate that the Charterparty (Shipping Contract) has been established, and the negotiations to charter the ship have been completed.

In some instances, to save time, a Chartering Fixture may be made based on the previous one. In other words, the terms and conditions agreed upon in the previous Chartering Fixture will be repeated, with certain exceptions. Therefore, both parties must be clear on what this means.

If a Shipbroker is authorized to sign a Charterparty (Shipping Contract) on behalf of their Principal (Shipowner or Charterer), they should indicate the source of authority, such as telephone, telex, facsimile, or email authority of the Principal’s name As Agents Only. The fundamental rule is that with a signature qualified in this way, a Shipbroker will not be held personally liable for the performance of the Charterparty (Shipping Contract). If the name of the Principal (Shipowner or Charterer) is not disclosed, then even the qualification of As Agents Only would not exonerate the Shipbroker from liability for the performance of the Charterparty (Shipping Contract).

What is STEM in Ship Chartering?

STEM stands for Subject To Enough Merchandise, indicating the condition that must be met before proceeding with the shipment. The purpose of STEM is to allow Charterers sufficient time to present the vessel to the Shippers and verify that they can accommodate the agreed-upon amount of cargo on the agreed-upon laydays. STEM is intended solely for determining cargo availability.

 

What is STEM (Subject To Enough Merchandise) in Ship Chartering?

In ship chartering, the term STEM (Subject To Enough Merchandise) is used when a vessel’s departure or arrival for loading or discharging cargo is contingent upon the availability of sufficient cargo. This term is often included in charter party agreements, which are contracts outlining the terms and conditions for the use of a vessel.

When a charter agreement includes the term “STEM,” it signifies that the vessel’s readiness to load or discharge cargo is subject to the charterer having enough merchandise available at the port or terminal. If the charterer does not have the required amount of cargo, the vessel may not be obligated to commence loading or discharging operations, and the laytime (the time allowed for loading or discharging cargo) may not start.

The inclusion of STEM in a charter party agreement helps to protect the interests of both the ship owner and the charterer. For the ship owner, it ensures that the vessel is not left waiting at a port without cargo, which can be expensive due to port charges and idle time. For the charterer, it provides flexibility in managing the logistics of their cargo and the timing of its arrival at the port or terminal.

It is essential for both parties to clearly define the conditions and requirements related to STEM in their charter party agreement to avoid any potential disputes or misunderstandings.

 

What is STEM IN ORDER in Ship Chartering?

In ship chartering, the term “STEM IN ORDER” (Subject To Enough Merchandise) is used to indicate that the departure, arrival, or loading of a vessel is conditional upon the availability of sufficient cargo. This term is often included in charter party agreements, which outline the terms and conditions for the use of a vessel.

When a charter party agreement includes “STEM IN ORDER,” it means that the vessel’s readiness to load or discharge cargo is dependent on the charterer having enough merchandise available at the port or terminal. If the required amount of cargo is not available, the vessel may not be obligated to commence loading or discharging operations, and the laytime (the time allowed for loading or discharging cargo) may not start.

The inclusion of “STEM IN ORDER” in a charter party agreement helps protect the interests of both the ship owner and the charterer. For the ship owner, it ensures that the vessel is not left waiting at a port without cargo, which can be costly due to port charges and idle time. For the charterer, it provides flexibility in managing the logistics of their cargo and the timing of its arrival at the port or terminal.

Both parties must clearly define the conditions and requirements related to “STEM IN ORDER” in their charter party agreement to prevent any potential disputes or misunderstandings.

 

Ship Chartering Contracts

It is feasible to establish a legally binding Ship Chartering Contract (Charter Party Form) through verbal communication. It is within the realm of possibility to charter a ship via an oral telephone conversation. There exists precedent demonstrating that a ship can be chartered orally, although this practice is not typically employed in the commercial shipping industry. The validity of an oral charter and the provisions included in the charter party will depend on the application of local contract law with regard to the formation of a contract.

The form of Ship Chartering and the terms of the Charter Party may vary to some extent, contingent upon the nature of the cargo and the type of vessel involved. Each specialized trade may pose unique legal challenges and may follow distinct industry practices.

Charter Party Forms commonly utilized in the industry can vary by trade, some examples of which are as follows:

  1. GENCON for Dry Bulk Ships
  2. BIMCHEMTIME for Chemical Tankers
  3. BOXTIME 2004 for Container Ships
  4. NYPE (New York Produce Exchange) for Dry Bulk Ships
  5. lntertanko for Tankers

Where can I find a Charter Party Form?

We kindly suggest that you visit the web page of BIMCO (Baltic and International Maritime Council) and ASBA (Association of Ship Brokers and Agents) to obtain the original Charter Party forms and documents. www.bimco.org  and  www.asba.org

 

What is Bareboat Charter?

The concept of Bareboat Charter is based on the idea that the shipowner has effectively relinquished complete control and possession of the ship to the charterer. This type of charter involves the transfer of control and possession of the ship. When examining a Bareboat charter, courts will likely consider the charter itself, as well as any relevant facts and circumstances, to determine whether the shipowner retains any rights or responsibilities with respect to the ship, such as the right or responsibility to supply the crew or arrange for ship insurance.

In contrast, a space charter, lot charter, or part cargo charter involves only a portion of the ship’s cargo capacity being chartered, rather than the entire ship. These types of charters are typically between ocean common carriers who may charter space from each other to meet customer commitments.

When a Bareboat Charter is in effect, the charterer acts as if they are the shipowner, assuming both responsibility for the ship’s operation and liability limitation rights that the owner may have. For example, under the United States Shipowner’s Limitation of Liability Act, the shipowner is generally permitted to limit its liability to third parties arising from the operation of the ship to the value of the ship and pending freight at the end of the voyage in which the incident occurred either when the ship reaches port, or if the ship is lost, at the time of the loss. This same right is expressly granted to a charterer that mans, supplies, and navigates a ship at their own expense or by their own procurement.

The existence of a Bareboat Charter is also an essential element under United States law with respect to whether a non-citizen financial institution or leasing company may own a U.S. flagship engaged in the United States coastwise trade operated by a qualified United States citizen pursuant to a Bareboat Charter.

If a ship is chartered out as bareboat, the shipowner generally will not be liable to third parties harmed through the operation of the ship. The Bareboat charterer assumes responsibility for any third-party claims. However, maritime law treats a ship itself as a person (in rem), so a third-party plaintiff may seek recovery against both the bareboat charterer and the ship. As a result, unless the shipowner has an effective way to obtain indemnification from the bareboat charterer for claims against the ship, the shipowner may still be exposed to some risk of liability to third parties. Such indemnification provisions are typically found in bareboat charter forms and are supported by associated liability insurance requirements.

One exception to the general rule is where the shipowner takes steps to operate the ship itself, either directly or through an agent, in situations such as when the bareboat charterer has defaulted. In such a case, the shipowner may become the de facto ship operator and may be liable for any claims arising during the period in which they are operating the ship in person.

The bareboat charterer is typically tasked with maintaining the ship’s condition during the charter period. However, it is important to note that, unless otherwise specified in the charter agreement, the bareboat charterer is not responsible for reasonable wear and tear on the vessel. To ensure that a fair assessment is made at the end of the charter period, most bareboat charters involve separate or joint surveyors who thoroughly inspect the ship and produce a detailed condition report. This report serves as a benchmark against which reasonable wear and tear can be measured.

It is worth noting that damage or loss to the ship can occur regardless of the bareboat charterer’s fault. Therefore, it is common practice for the charter agreement to require the bareboat charterer to maintain hull and machinery insurance, with loss payable clauses directing payments to the shipowner.

While a bareboat charter agreement may allocate responsibility for deductibles, it is more often the case that the bareboat charterer is responsible for these costs. Additionally, it is important to bear in mind that the shipowner is liable for any harm caused to third parties as a result of the ship’s operation, particularly in the case of time or voyage charters.

Bareboat Charter Party Form

We kindly suggest that you visit the web page of BIMCO (Baltic and International Maritime Council) to obtain the original Bareboat Charter Party Forms and documents. BARECON 2017 www.bimco.org

 

Voyage Charter Vs Time Charter

When a ship is chartered on a time or voyage basis, it remains under the operational and legal control of the shipowner, who is responsible for the crew, maintenance, and operation of the vessel. Consequently, any harm caused by the ship may be attributed to the shipowner, as well as to the ship itself. It is customary for shipowners to ensure that they have adequate insurance coverage against potential risks that may be incurred during operations under time and voyage charters. To ensure that the insurance package covers charter risks, express provisions are often included in time and voyage charters, specifying the permitted trades, cargoes, and ports.

In addition, voyage charters and time charters may include provisions in which the charterer agrees to warrant the safety of ports and indemnify the shipowner against the risks of any breaches of the permitted trade clauses. When a ship is chartered out as a bareboat charter, the shipowner must be concerned about liability. In addition to the contractual rights the shipowner has under the bareboat charter, the ship itself remains potentially liable, as if it were a person, in the event of an accident or other legally cognizable harm. This is known as in Rem Liability, which is distinguished from the separate liability that the shipowner or bareboat charterer may have in Personam Liability, potentially for the same actions and liabilities.

Shipowners typically warrant the seaworthiness of their vessels. Every charter agreement is deemed to include a generally recognized implied warranty of seaworthiness, even if the seaworthiness clause is not expressly stated in the charter party. Seaworthiness means that the ship is reasonably capable of safely transporting the cargo it has undertaken to transport within the specified trading areas, under the conditions that can reasonably be expected. The shipowner can expressly disclaim the warranty of seaworthiness in a charter, and such disclaimers are frequently found in ship lease finance transactions where the shipowner is a bank, financial institution, or leasing company. However, even with an express disclaimer, shipowners should be aware of potential liability for any latent defects that may arise prior to the commencement of a charter that would render the ship unseaworthy. Generally, the voyage charterer or time charterer is not liable for the seaworthiness of the vessel or the negligence of the ship’s crew.

In cases of time or voyage charter, the shipowner or bareboat charterer typically retains control of the vessel, with the charterer merely providing commercial direction. The ship will operate within the parameters of the charter, loading and discharging cargo as required.

Traditionally, voyage or time charterers do not have authority over crew members and thus cannot be held accountable for their actions. However, if the charterer assumes responsibility for cargo-related operations such as loading, stowage, or discharging, then the shipowner may be held liable if any damage or loss occurs.

For long-term bareboat charters, particularly those with finance arrangements, the bareboat charterer must ensure compliance with ongoing regulatory changes at their own expense. Short-term charters usually see the shipowner retain responsibility for complying with all relevant flag-state and international regulations. For example, changes to international air pollution regulations may necessitate the use of low sulfur fuels in certain coastal waters, or the replacement of older boiler systems. The shipowner typically bears these costs for vessels under time or voyage charter, whereas those under bareboat charter may be borne by either party depending on the specific provisions of the agreement. This may require a review of the ship owner’s obligation to provide a compliant vessel versus the charterer’s obligation to maintain compliance.

Bunker costs, including fuel for the main engine and auxiliary engines, can be a significant expense and are an important consideration in charter agreements. Under a bareboat charter, the shipowner assumes no responsibility for bunker costs as all operating responsibilities are assigned to the bareboat charterer. In a time charter, the time charterer is generally responsible for bunker costs incurred. In voyage charters, responsibility for bunker costs may be allocated to either party, depending on their preferences. Charterers must also allocate responsibility for bunkers that do not meet quality standards. Substandard bunkers may damage engines, cause power loss, and result in salvage costs, delays, or even the loss of the vessel. Failure to comply with regulations, such as sulfur content requirements, can result in civil penalties or detention.

Responsibility for the consequences of using improper bunkers typically follows responsibility for the bunker costs, although this is not always the case. Charterers may not have the technical expertise or personnel to properly screen and test bunker providers, and may rely on the ship’s engineers to do so, even if the time or voyage charterer is responsible for the bunker costs.

 

Bill of Lading (B/L) in Ship Chartering

The Bill of Lading serves a multitude of purposes; however, it primarily functions as the contract between the shipper of goods and the carrier who assumes responsibility for transporting said goods. In the case of a bareboat chartered ship, the carrier may not be the shipowner, but rather the bareboat charterer, time charterer, or voyage charterer. By extending the limitations of liability and other protective provisions to the shipowner, the Bill of Lading mitigates the risk of indemnification claims. Within the shipping industry, there are fundamental charter terms that are unique to the field. These terms carry specific meanings that have become entrenched and often possess intriguing histories, originating from significant maritime decisions or ship casualties. For instance, charter lease payments, also known as “charter hire,” may be payable regardless of whether the ship completes the charter or not. Such provisions, where the charterer has no routine right of set-off or reduction in the amount payable to the shipowner, are often referred to as being payable on a “hell or high water” basis, as in charter hire shall be payable, come “hell or high water.” These charter payment provisions are typically found in bareboat charters and not in time charters or voyage charters. Time charter hire or voyage charter hire is typically subject to a right to set-off if the ship fails to perform under the charter.

What is FIOS in Ship Chartering?

The abbreviation FIO stands for Free In, Out, and FIOS stands for Free In, Out, and Stowage. The terms FIO and FIOS relate to the allocation of responsibility between the shipowner or bareboat charterer and the time charterer or voyage charterer regarding the loading and discharging of the ship. Under FIOS terms, the charterer takes responsibility for ensuring that the ship will be loaded, the cargo stowed, and the ship discharged, free to the shipowner.

FIOS in ship chartering stands for “Free In and Out and Stowed.” It is a term used in the shipping and chartering industry to describe the conditions under which cargo is loaded and discharged from a vessel. FIOS is typically agreed upon by both the shipowner and the charterer during negotiations and is included in the charter party agreement.

Under FIOS terms, the charterer is responsible for the following:

  1. Free In: The charterer bears the cost and responsibility for loading the cargo onto the vessel at the port of loading. This includes any stevedoring, labor, and equipment costs associated with getting the cargo on board.
  2. Free Out: The charterer is also responsible for the cost and responsibility of unloading the cargo from the vessel at the port of discharge. Similar to the loading process, this includes any costs related to stevedoring, labor, and equipment required for unloading.
  3. Stowed: The charterer is responsible for the proper stowage of the cargo within the vessel. This means ensuring that the cargo is safely and securely placed in the ship’s holds to prevent any damage during transit.

By agreeing to FIOS terms, the charterer takes on more responsibility for cargo handling, which may allow for more control over the loading and unloading process. However, it also means the charterer is responsible for any additional costs and potential risks associated with cargo handling.

 

What is FIO in Ship Chartering?

FIO in ship chartering stands for “Free In and Out.” It is a term used in the shipping and chartering industry to describe the conditions under which cargo is loaded and discharged from a vessel. FIO is typically agreed upon by both the shipowner and the charterer during negotiations and is included in the charter party agreement.

Under FIO terms, the charterer is responsible for the following:

  1. Free In: The charterer bears the cost and responsibility for loading the cargo onto the vessel at the port of loading. This includes any stevedoring, labor, and equipment costs associated with getting the cargo on board.
  2. Free Out: The charterer is also responsible for the cost and responsibility of unloading the cargo from the vessel at the port of discharge. Similar to the loading process, this includes any costs related to stevedoring, labor, and equipment required for unloading.

Unlike the FIOS term, which includes “Stowed,” the FIO term does not cover the responsibility for the proper stowage of the cargo within the vessel. Under FIO terms, the shipowner is typically responsible for ensuring that the cargo is safely and securely placed in the ship’s holds to prevent any damage during transit.

By agreeing to FIO terms, the charterer takes on the responsibility for cargo handling during loading and unloading but not for cargo stowage. This arrangement allows the charterer more control over the loading and unloading process while still relying on the shipowner’s expertise for proper stowage.

 

Demurrage, Dispatch, and Lay Days in Ship Chartering

Demurrage, Dispatch, and Lay Days are nautical terms commonly employed in the context of a voyage charter. A voyage charter is an agreement between the shipowner and the charterer for the transportation of cargo from one point to another, with the charter price being calculated based on the shipowner’s estimation of the time required for the voyage. However, the loading and unloading time of the cargo by the charterer is subject to a high degree of unpredictability, which is where the concept of Lay Days comes into play. Lay Days refer to the number of days allowed for the loading and discharging of cargo, and are employed to manage the uncertainty surrounding this activity.

The term Demurrage refers to the compensation payable by the voyage charterer to the shipowner in the event that the loading or unloading of cargo exceeds the agreed-upon Lay Days. Conversely, Dispatch refers to the compensation payable by the shipowner to the charterer if the loading or unloading of cargo is completed in less time than the allowed Lay Days. It is noteworthy that traditionally, Dispatch is priced at a rate that is 50% of the Demurrage rate.

These concepts have been developed over time to ensure the efficient utilization of ships and to allocate the risks associated with delays to the party that is best placed to influence the timing of the loading and unloading activities. In a voyage charter, the charterer is responsible for the purchase, utilization, and sale of the cargo, and is, therefore, in the best position to arrange for an efficient loading and unloading of the ship.

Dead Freight is another term that is commonly associated with voyage charters. In many voyage charters, the charter hire is based on the amount of cargo to be transported. If the charterer fails to load the expected amount of cargo, the shipowner is still obligated to undertake the voyage but will receive less revenue than anticipated. To manage this risk, a voyage charter will often specify a minimum amount of cargo to be transported, and if the charterer fails to load this amount, they will be liable to pay an amount known as Dead Freight, which is calculated based on the shortfall.

In tanker chartering, the concept of vetting is primarily associated with oil companies that charter ships to transport their products. Given the high value of the cargo, the potential for significant losses due to ship breakdowns or port state detentions, and the risk of legal and reputational damage resulting from oil spills or other accidents, many charterers insist on the right to conduct their own ship condition inspections before or during chartering. These inspections, known as vetting inspections, are often comprehensive and evaluate the ship’s certificates, physical condition, and crew qualifications and experience.

 

Basic Terms in Ship Chartering

In the context of voyage charters, several key terms and concepts are commonly used to manage uncertainties and risks related to cargo loading and discharging, as well as ship conditions:

  1. Lay Days: The shipowner allows a certain number of days for loading and discharging cargo under a voyage charter. These days are referred to as lay days, and they help manage the unpredictability of loading and discharging times.
  2. Demurrage: If the charterer takes longer to load or discharge cargo than the agreed-upon lay days, they must pay the shipowner a fee called demurrage. This concept promotes efficient ship utilization and allocates the risk of delays to the party in the best position to manage loading and discharging times – the charterer.
  3. Dispatch: Conversely, if the charterer completes loading or discharging faster than the allowed lay days, the shipowner pays the charterer a fee called dispatch, typically priced at 50% of the demurrage rate. This encourages the charterer to be efficient and rewards them for saving time.
  4. Dead Freight: In voyage charters, the charter hire is often based on the amount of cargo carried. If the charterer loads less cargo than the shipowner expected, the charterer must pay the shipowner an amount called dead freight, based on the cargo shortfall. This protects the shipowner against revenue loss due to carrying less cargo than anticipated.
  5. Vetting: In tanker chartering, vetting is a critical concept, particularly for oil companies chartering ships for their products. Due to the high value of cargo, potential delays, legal liabilities, and reputational risks from incidents like oil spills, charterers often insist on conducting their own ship condition inspections before chartering or continuing charters. These inspections, called vetting inspections, can be extensive, examining ship certificates, documents, physical condition, and crew qualifications and experience.

These terms and concepts are crucial in voyage chartering to ensure both parties have a clear understanding of their roles and responsibilities while minimizing risks and promoting efficiency:

  1. Notice of Readiness (NOR): The shipowner or master of the vessel issues a Notice of Readiness to inform the charterer that the vessel has arrived at the loading or discharging port and is ready to commence cargo operations. This notice marks the beginning of laytime, the period during which the charterer has to load or discharge the cargo within the agreed lay days.
  2. Laytime: Laytime refers to the time allowed by the shipowner for the charterer to load and discharge cargo without incurring additional costs. Laytime is usually stated in the charter party agreement and starts when the Notice of Readiness has been tendered. The calculation of laytime can be complex and may involve various exceptions and conditions such as weather-related interruptions and holidays.
  3. Time Bar: A time bar is a contractual provision that sets a deadline for a claim to be made by one party against the other. In voyage charters, time bars can apply to claims related to demurrage, dispatch, and other performance-related issues. If a claim is not made within the time bar period, the party’s right to claim may be forfeited.
  4. Charter Party Agreement: The charter party agreement is a legal contract between the shipowner and the charterer, outlining the terms and conditions of the voyage charter. This agreement contains various provisions, including the agreed freight rate, lay days, demurrage and dispatch rates, vetting requirements, and other specific terms related to the carriage of goods.
  5. Freight: Freight is the payment made by the charterer to the shipowner for the transportation of goods under a voyage charter. The freight rate is typically agreed upon in the charter party agreement and can be based on factors such as the type and volume of cargo, distance between ports, and prevailing market rates.

By understanding and utilizing these terms and concepts, both shipowners and charterers can better manage the risks and uncertainties inherent in the shipping and chartering industry, leading to a more efficient and secure transportation of goods across the globe.

 

Chartering Terms and Abbreviations

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Cesser Clause in Ship Chartering

The “Cesser Clause” is a term commonly used in charter agreements, which stipulates that the charterer’s responsibility to pay charter hire will terminate if, for specified reasons, the vessel becomes unavailable for the purpose of transporting or loading and unloading cargo. These clauses typically arise in situations where the charterer may have already sold the cargo, even prior to the delivery of the ship.

 

Both to Blame Collision Clauses in Ship Chartering

The purpose of Both to Blame Collision Clauses is to safeguard the limitation of liability clauses that are commonly present in charters and bills of lading. These clauses aim to prevent a loophole that could arise due to the maritime law’s allocation of collision damages. According to maritime law, a court will apportion damages between the parties at fault based on their comparative fault. However, both parties will be held jointly and severally liable to the victims of their fault. This means that the injured party can sue either of the parties at fault for the full amount of the damage, and the paying party can seek contribution from the other party at fault.

Typically, a ship owner’s liability for cargo damage is restricted to a specific amount, such as the $500 per package limitation under the United States Carriage of Goods at Sea Act (COGSA). Therefore, when a collision occurs due to the fault of both the cargo-carrying ship and another ship, the cargo owner’s right to damages from the cargo-carrying ship may be restricted. However, the cargo owner’s right to damages from the other ship at fault will not be limited. As a result, the cargo owner can sue the other ship for the full amount of its damages, under the maritime law of joint and several liability.

The other ship will then seek contribution from the cargo-carrying ship based on the latter’s degree of fault, so that the other ship does not bear an unfair proportion of the damages. In this way, cargo owners can avoid, and cargo-carrying ships can be denied, the contractual or statutory limitation of liability. The Both to Blame clause eliminates this issue by outlining an indemnification agreement, under which the cargo owner agrees to indemnify the cargo-carrying ship owner against any liability for damages paid to another ship in excess of the limitation amount.

 

General Average (GA) in Ship Chartering

General Average (GA) is a customary legal principle recognized worldwide, which apportions losses suffered by one party for the collective benefit of all parties involved in a voyage. It originates from the shipmaster’s ancient right to sacrifice certain cargo or property or incur reasonable expenses to rescue the ship and its remaining cargo.

For instance, let us consider a scenario where a ship, carrying a load of cargo, encounters unforeseen weather conditions that lead to damage. As a result, the ship requires a salvage tug to tow it to port, incurring additional costs. Alternatively, it may become necessary for the shipmaster to jettison some cargo to save the rest of the cargo and the vessel. Maritime law has traditionally regarded such expenses or losses as eligible for distribution among all beneficiaries.

At the end of the voyage, an average adjuster is designated to compute the costs of the salvage claim or the value of the lost cargo, as well as the value of the saved ship and cargo. Subsequently, the adjuster usually allocates the loss against the shipowner and the cargo owners based on the proportionate interests in the voyage. The charters often contain clauses that specify the regulations for determining the procedure for general average. The most widely acknowledged provisions entail the application of the York Antwerp Rule 1974.

We kindly suggest that you visit the web page of HandyBulk and search to learn more about the General Average (GA) www.handybulk.com

 

New Jason Clause in Ship Chartering

The New Jason Clause pertains to the concept of general average. According to the principles of general maritime law, cargo proprietors are typically exempt from contributing to general average if the loss incurred is a result of the shipowner’s negligence. However, shipowners often seek to overturn this rule by enforcing the New Jason Clause, which mandates that cargo owners are obligated to contribute to general average regardless of whether the loss was caused by the shipowner’s negligence.

 

Handysize Bulk Carrier Chartering

Handysize bulk carriers are versatile vessels that play a crucial role in the global shipping industry. Chartering these carriers involves a complex process of negotiation, communication, and coordination between various stakeholders, including ship owners, charterers, brokers, and agents. In this guide, we will provide an overview of the handysize bulk carrier chartering process, along with key considerations to keep in mind.

  1. Market Research and Vessel Selection: Begin by conducting thorough market research to understand the current supply and demand dynamics for handysize bulk carriers. This information will help you to identify suitable vessels that meet your cargo transportation requirements. Pay close attention to factors like vessel size, age, fuel efficiency, and the availability of loading and discharging equipment.
  2. Chartering Options: There are several types of chartering options available for handysize bulk carriers:
  • Voyage Charter: The ship owner is responsible for providing a seaworthy vessel, and the charterer pays a freight rate based on the cargo quantity and the distance between the loading and discharging ports.
  • Time Charter: The charterer rents the vessel for a specified period, paying a daily hire rate. The charterer is responsible for covering the vessel’s operating expenses, including fuel, port charges, and canal fees.
  • Bareboat Charter: The charterer rents the vessel without any crew, provisions, or insurance. The charterer is responsible for all operational expenses and management of the vessel.
  1. Negotiating the Charter Party: Once you have identified a suitable vessel and chartering option, negotiations will begin between the ship owner and charterer, typically through a broker. Key terms to be negotiated include the freight or hire rate, laytime (the time allowed for loading and discharging cargo), demurrage (penalty for exceeding laytime), and any additional clauses specific to the cargo or route.
  2. Fixing the Vessel: Once the terms are agreed upon, the charter party is signed by both parties, and the vessel is considered “fixed.” The charterer will need to provide a Letter of Indemnity (LOI) to guarantee the fulfillment of contractual obligations.
  3. Pre-fixture Operations: Before the vessel’s arrival at the loading port, the charterer must coordinate with the ship owner, agents, and port authorities to ensure smooth operations. This includes preparing cargo documentation, arranging for surveys and inspections, and coordinating the vessel’s berthing and loading schedule.
  4. Voyage Execution: During the voyage, the charterer must monitor the vessel’s performance, fuel consumption, and adherence to the agreed-upon route. Regular communication with the vessel’s master and agents at the loading and discharging ports is essential to ensure timely operations and minimize delays.
  5. Post-fixture Operations: After the cargo has been discharged, the charterer must settle any outstanding financial matters, such as demurrage claims, and provide feedback on the vessel’s performance to the ship owner or broker.

Handysize Bulk Carrier Chartering requires a deep understanding of market dynamics, careful selection of vessels and chartering options, and strong negotiation skills. By following these guidelines and maintaining open lines of communication throughout the process, charterers can successfully transport their cargo while minimizing risks and maximizing efficiency.

 

What is Handysize Bulk Carrier?

A Handysize Bulk Carrier is a type of dry cargo ship that is designed to transport unpackaged bulk commodities such as coal, grain, iron ore, and other raw materials. The term “Handysize” refers to the vessel’s size, which is smaller and more versatile compared to larger bulk carriers such as Panamax, Capesize, and Supramax.

Handysize Bulk Carriers generally have a deadweight tonnage (DWT) ranging from 15,000 to 35,000 tons, making them well-suited for ports with size restrictions or limited infrastructure. These vessels are also characterized by their flexibility in terms of cargo type and trade routes, allowing them to operate in various markets and cater to diverse cargo requirements.

The main features of a Handysize Bulk Carrier include:

  1. Multiple cargo holds: Handysize Bulk Carriers typically have five to seven cargo holds, providing the flexibility to carry different types of cargo simultaneously or in separate compartments.
  2. Cargo handling equipment: Handysize Bulk Carriers are often equipped with their own onboard cranes or derricks for loading and unloading, which enables them to operate in ports without dedicated cargo handling infrastructure.
  3. Draft and beam: Handysize Bulk Carriers have a relatively shallow draft and smaller beam compared to larger bulk carriers, allowing them to access a wider range of ports and waterways.
  4. Fuel efficiency: Due to their smaller size, Handysize Bulk Carriers generally have lower fuel consumption compared to larger vessels, making them more cost-effective for certain routes and cargo types.

Handysize Bulk Carriers play a significant role in the global shipping industry, particularly in short-sea shipping and regional trade, where their versatility and adaptability make them an attractive option for transporting a wide range of bulk commodities.

In addition to their versatility, Handysize Bulk Carriers offer several other advantages in the shipping industry:

  1. Economies of scale: While Handysize Bulk Carriers may not have the same economies of scale as larger vessels, they can still transport substantial quantities of cargo in a cost-effective manner. This is particularly true for trade routes with lower cargo volumes, where larger vessels would not be fully utilized.
  2. Niche markets: Handysize Bulk Carriers are well-suited for niche markets and specialized trades, such as the transportation of agricultural products, minor bulk cargoes, and project cargo. Their ability to access smaller ports and handle a diverse range of cargo types enables them to service these markets effectively.
  3. Flexibility in changing market conditions: The adaptability of Handysize Bulk Carriers allows them to respond to fluctuations in cargo demand and market conditions more easily than larger vessels. This flexibility enables shipowners and charterers to take advantage of emerging trade opportunities and to mitigate risks associated with market volatility.
  4. Lower port costs: Due to their smaller size, Handysize Bulk Carriers often incur lower port fees and charges compared to larger vessels. This can lead to significant cost savings for both shipowners and charterers, particularly on routes with multiple port calls.
  5. Reduced environmental impact: Handysize Bulk Carriers generally have lower fuel consumption and greenhouse gas emissions compared to larger vessels. This makes them a more environmentally friendly option for transporting bulk commodities, which can be an important consideration for shipowners, charterers, and regulators.

Despite these advantages, Handysize Bulk Carriers also face certain challenges, such as competition from larger vessels and the need to maintain a diverse cargo base to ensure profitability. As a result, it is essential for shipowners, operators, and charterers to stay informed about market trends, regulatory changes, and emerging trade opportunities in order to optimize the performance of their Handysize Bulk Carriers and to maximize their return on investment.

Handysize Bulk Carriers play a vital role in the global shipping industry, providing a flexible and adaptable solution for transporting a wide range of bulk commodities. By leveraging their unique advantages and addressing potential challenges, Handysize Bulk Carriers will continue to be a key component of the global maritime trade landscape.

 

What is Handymax Bulk Carrier?

A Handymax bulk carrier is a type of dry bulk cargo ship designed to transport large quantities of dry, unpackaged commodities such as coal, grains, ores, and other similar goods. The term “Handymax” refers to a specific size category of bulk carriers, typically with a carrying capacity ranging from 35,000 to 50,000 deadweight tonnage (DWT).

Handymax bulk carriers are smaller than Supramax carriers (which have a capacity of around 50,000 to 60,000 DWT) and considerably smaller than Panamax carriers (which can carry up to 80,000 DWT). The Handymax category offers a balance between carrying capacity and operational flexibility, making them suitable for a variety of trade routes and cargo types.

Like Supramax carriers, Handymax vessels are often equipped with on-board cranes that enable them to self-load and unload cargo. This feature allows them to operate at ports with limited or no cargo handling facilities, enhancing their versatility and making them a popular choice for trade routes that include smaller ports or less developed regions.

 

What is Supramax Bulk Carrier?

A Supramax bulk carrier is a type of dry bulk cargo ship designed to transport large quantities of dry, unpackaged commodities, such as coal, grains, ores, and other similar goods. The term “Supramax” refers to a specific size category of bulk carriers, typically ranging between 50,000 and 60,000 deadweight tonnage (DWT).

Supramax bulk carriers are larger than Handymax carriers (which have a capacity of around 35,000 to 50,000 DWT) but smaller than Panamax carriers (which can carry up to 80,000 DWT). The Supramax category was created to fill the gap between Handymax and Panamax sizes, offering an optimal balance of carrying capacity, flexibility, and cost efficiency.

These vessels are equipped with on-board cranes, which give them the ability to self-load and unload cargo, allowing them to operate at ports with limited or no cargo handling facilities. This versatility makes Supramax bulk carriers well-suited for a wide range of trade routes and cargo types.

 

What is Ultramax Bulk Carrier?

An Ultramax bulk carrier is a type of dry bulk cargo ship designed to transport large quantities of dry, unpackaged commodities such as coal, grains, ores, and other similar goods. The term “Ultramax” refers to a specific size category of bulk carriers that generally fall within the Supramax range, with a carrying capacity of around 60,000 to 65,000 deadweight tonnage (DWT).

Ultramax bulk carriers are a relatively new classification, offering improved fuel efficiency and larger cargo capacities compared to traditional Supramax and Handymax vessels. They are larger than Handymax carriers (which have a capacity of around 35,000 to 50,000 DWT) and slightly larger than Supramax carriers (which have a capacity of around 50,000 to 60,000 DWT), but smaller than Panamax carriers (which can carry up to 80,000 DWT).

Like Supramax and Handymax carriers, Ultramax vessels are typically equipped with on-board cranes that enable them to self-load and unload cargo. This feature allows them to operate at ports with limited or no cargo handling facilities, enhancing their versatility and making them a popular choice for trade routes that include smaller ports or less developed regions. The enhanced cargo capacity and fuel efficiency of Ultramax carriers make them an attractive option for shippers seeking to optimize their supply chains.

 

What is Panamax Bulk Carrier?

A Panamax bulk carrier is a type of dry bulk cargo ship designed to transport large quantities of dry, unpackaged commodities such as coal, grains, ores, and other similar goods. The term “Panamax” refers to a specific size category of bulk carriers, with a carrying capacity of up to 80,000 deadweight tonnage (DWT). The name “Panamax” is derived from the fact that these vessels are specifically designed to meet the size limitations of the original Panama Canal, which connects the Atlantic and Pacific Oceans.

Panamax bulk carriers are larger than Handymax (which have a capacity of around 35,000 to 50,000 DWT), Supramax (which have a capacity of around 50,000 to 60,000 DWT), and Ultramax (which have a capacity of around 60,000 to 65,000 DWT) carriers. Due to their size, they offer economies of scale, making them more cost-effective for transporting large quantities of cargo over long distances.

Unlike Supramax, Handymax, and Ultramax carriers, Panamax vessels are not typically equipped with on-board cranes, as they rely on port facilities for loading and unloading cargo. This means that Panamax carriers are more dependent on the infrastructure available at the ports they visit, and they are less versatile when it comes to accessing smaller ports or those with limited cargo handling facilities.

With the expansion of the Panama Canal in 2016, a new class of larger vessels called “New Panamax” or “Neopanamax” was introduced, which can carry up to 120,000 DWT. These vessels are too large for the original Panama Canal locks but can transit through the expanded canal, further enhancing economies of scale for bulk cargo transportation.

 

What is Neopanamax Bulk Carrier?

A Neopanamax bulk carrier is a type of cargo ship specifically designed to fit within the size constraints of the expanded Panama Canal, also known as the Neopanamax or New Panamax. The Panama Canal, a crucial global shipping route, connects the Atlantic and Pacific Oceans, allowing ships to avoid the longer and more treacherous route around the southern tip of South America. In 2016, the canal underwent a significant expansion to accommodate larger ships, and the new maximum size of ships that could pass through was defined as Neopanamax.

Neopanamax bulk carriers are used to transport large quantities of dry, unpackaged cargo, such as coal, iron ore, grain, or other bulk commodities. These vessels are built to optimize the use of the expanded canal dimensions, which are 366 meters (1,200 feet) in length, 49 meters (160.7 feet) in width, and 15.2 meters (49.9 feet) in draft.

By adhering to these dimensions, Neopanamax bulk carriers can benefit from the shorter transit time and reduced costs associated with using the Panama Canal compared to alternative routes. This allows them to be more competitive in the global shipping market, contributing to the efficiency of the international trade system.

 

What is Kamsarmax Bulk Carrier?

A Kamsarmax bulk carrier is a type of dry bulk cargo vessel specifically designed to meet the maximum size restrictions for the berthing and loading facilities at the Port of Kamsar in the Republic of Guinea. Kamsarmaxes are a larger variant of the popular Panamax vessels, which were initially built to fit the size constraints of the original Panama Canal.

The primary purpose of Kamsarmax bulk carriers is to transport dry, unpackaged cargo such as coal, iron ore, grain, and other bulk commodities. The size specifications for a Kamsarmax vessel are typically as follows:

  • Length overall (LOA): up to 229 meters (751 feet)
  • Beam (width): up to 32.3 meters (106 feet)
  • Draft: up to 14.5 meters (47.5 feet)

The Kamsarmax design allows these vessels to carry more cargo compared to standard Panamax ships, making them more efficient and economical for certain shipping routes. Their larger size enables them to take advantage of economies of scale, reducing transportation costs per unit of cargo. Kamsarmax vessels are widely used in the global shipping industry, particularly for routes that do not require transiting the Panama Canal or where the larger Neopanamax vessels are not necessary.

 

What is Baby Capesize Bulk Carrier?

A Baby Capesize bulk carrier, also known as a Mini Capesize or Small Capesize, is a type of dry bulk cargo vessel that is smaller than the traditional Capesize carriers but larger than Panamax and Kamsarmax vessels. Baby Capesizes are designed to carry unpackaged bulk commodities such as iron ore, coal, grain, or other raw materials. The primary advantage of a Baby Capesize is its ability to navigate through certain ports and waterways that are inaccessible to standard Capesize vessels due to size restrictions, while still offering a larger cargo capacity compared to Panamax or Kamsarmax ships.

The dimensions of a Baby Capesize bulk carrier typically fall within the following range:

  • Length overall (LOA): 225 to 250 meters (738 to 820 feet)
  • Beam (width): 32 to 43 meters (105 to 141 feet)
  • Draft: 14.5 to 18 meters (47.5 to 59 feet)

These vessels usually have a cargo capacity of around 80,000 to 120,000 deadweight tons (DWT). Their smaller size allows them to access more ports and loading facilities, offering greater flexibility in terms of trade routes and cargo handling compared to standard Capesize vessels.

Baby Capesize bulk carriers are an important part of the global shipping industry as they bridge the gap between Panamax or Kamsarmax vessels and traditional Capesize ships. They contribute to the efficiency and versatility of the international trade system by providing more options for transporting bulk commodities across various routes and port facilities.

 

What is Capesize Bulk Carrier?

A Capesize bulk carrier is a large dry bulk cargo ship designed to transport unpackaged bulk commodities such as iron ore, coal, grain, or other raw materials. The term “Capesize” originates from the fact that these vessels are too large to transit the Panama Canal and, historically, they needed to navigate around the Cape of Good Hope in South Africa or Cape Horn in South America to travel between the Atlantic and Pacific Oceans.

Capesize bulk carriers have the following typical dimensions:

  • Length overall (LOA): 270 to 300 meters (885 to 984 feet)
  • Beam (width): 43 to 45 meters (141 to 148 feet)
  • Draft: 18 meters (59 feet) or more

These vessels can carry cargo capacities ranging from approximately 100,000 to 200,000 deadweight tons (DWT), with some newer, larger Capesize vessels exceeding 300,000 DWT.

Due to their size, Capesize bulk carriers are not suited for all ports, and they usually require specialized deepwater terminals and large cargo handling facilities to load and unload their cargo. These ships are commonly used in the global shipping industry for long-haul, high-volume routes, such as between Brazil and China for iron ore, or between Australia and Asia for coal.

The introduction of larger vessels like the Capesize has brought about economies of scale, reducing the cost of transporting goods per unit, making them an essential component of the global shipping and trade infrastructure.

 

What is Newcastlemax Bulk Carrier?

A Newcastlemax bulk carrier is a type of dry bulk cargo vessel that is specifically designed to meet the size restrictions of the Newcastle Coal Infrastructure Group (NCIG) export terminal in the Port of Newcastle, Australia. The primary purpose of Newcastlemax bulk carriers is to transport large quantities of dry, unpackaged commodities such as coal, iron ore, grain, or other bulk materials.

The dimensions of a Newcastlemax bulk carrier typically fall within the following range:

  • Length overall (LOA): approximately 300 meters (984 feet)
  • Beam (width): up to 50 meters (164 feet)
  • Draft: up to 18.3 meters (60 feet)

These vessels usually have a cargo capacity of around 150,000 to 200,000 deadweight tons (DWT). Newcastlemax bulk carriers are larger than Panamax and Kamsarmax vessels but slightly smaller than traditional Capesize carriers. They are designed to optimize the use of the infrastructure available at the Port of Newcastle, one of the world’s largest coal export ports.

Newcastlemax bulk carriers play a significant role in the global shipping industry, particularly for coal transportation from Australia to Asia and other global markets. By adhering to the size specifications of the Port of Newcastle, these ships can efficiently load and unload their cargo, contributing to the effectiveness and competitiveness of the international trade system.

 

What is Setouchmax Bulk Carrier?

A Setouchmax bulk carrier is a type of dry bulk cargo vessel specifically designed to meet the size restrictions imposed by the Seto Inland Sea in Japan, which is also known as Setouchi or Seto Naikai. The Seto Inland Sea is a crucial maritime transport route in Japan, connecting the Pacific Ocean to the Sea of Japan. Setouchmax vessels are built to optimize cargo capacity while adhering to the constraints of the narrow and shallow waterways of the Seto Inland Sea.

A Setouchmax bulk carrier is a bout 203,000 DWT, being the largest vessels able to navigate the Setouchi Sea, Japan

Setouchmax bulk carrier has a cargo capacity that usually ranges between 203,000 and 205,000 deadweight tons (DWT) with maximum draught of 16.1 meters. Setouchmax bulk carriers can navigate the restricted waters of the Seto Inland Sea and access various ports in the region. Setouchmax bulk carriers transport dry, unpackaged commodities such as coal, iron ore, grain, and other bulk materials.

By adhering to the size constraints of the Seto Inland Sea, Setouchmax bulk carriers can efficiently serve the Japanese shipping industry, transporting goods within the country as well as to and from international markets. They play a vital role in supporting the Japanese economy and facilitating trade in the region.

 

What is Lake-Fitted Bulk Carrier?

A Lake-fitted bulk carrier, also known as a Great Lakes bulk carrier or laker, is a type of dry bulk cargo vessel specifically designed to navigate the Great Lakes and St. Lawrence Seaway system in North America. These ships transport large quantities of dry, unpackaged bulk commodities such as iron ore, coal, grain, or other materials between ports located on the Great Lakes and along the St. Lawrence Seaway.

Lake-fitted bulk carriers are built to comply with the size restrictions imposed by the locks and channels within the Great Lakes and St. Lawrence Seaway system. The dimensions of a Lake-fitted bulk carrier generally fall within the following range:

  • Length overall (LOA): up to 225 meters (740 feet)
  • Beam (width): up to 23.8 meters (78 feet)
  • Draft: up to 8 meters (26 feet)

These vessels have a cargo capacity typically ranging between 25,000 and 40,000 deadweight tons (DWT), depending on their size and design. Some larger Lake-fitted carriers, known as “Thousand Footers,” can reach up to 305 meters (1,000 feet) in length and carry over 60,000 DWT.

Lake-fitted bulk carriers are equipped with features that allow them to efficiently load and unload cargo at ports with limited infrastructure, such as self-unloading systems. They play a crucial role in the regional shipping industry, facilitating the transportation of goods across the Great Lakes and connecting the industrial heartland of North America with domestic and international markets.

 

What is Seawaymax Bulk Carrier?

A Seawaymax bulk carrier is a type of dry bulk cargo vessel specifically designed to meet the size restrictions of the St. Lawrence Seaway, a system of locks, canals, and channels that connects the Great Lakes in North America to the Atlantic Ocean. Seawaymax vessels are built to optimize cargo capacity while adhering to the size constraints of the locks and channels within the St. Lawrence Seaway system.

The dimensions of a Seawaymax bulk carrier typically fall within the following range:

  • Length overall (LOA): up to 226 meters (740 feet)
  • Beam (width): up to 23.8 meters (78 feet)
  • Draft: up to 8 meters (26 feet)

These vessels have a cargo capacity that usually ranges between 25,000 and 40,000 deadweight tons (DWT). Seawaymax bulk carriers transport dry, unpackaged commodities such as coal, iron ore, grain, and other bulk materials. They are smaller than Panamax, Kamsarmax, or Capesize vessels, but their design allows them to navigate the restricted waters and lock systems of the St. Lawrence Seaway.

By adhering to the size constraints of the St. Lawrence Seaway, Seawaymax bulk carriers can efficiently serve the North American shipping industry, transporting goods between the Great Lakes region and the Atlantic Ocean. They play a vital role in facilitating trade and supporting the regional economy by connecting the industrial heartland of North America with domestic and international markets.

 

What is Malaccamax Bulk Carrier?

A Malaccamax bulk carrier is a type of dry bulk cargo vessel specifically designed to meet the size restrictions imposed by the Strait of Malacca, which is a narrow and shallow waterway located between the Malay Peninsula and the Indonesian island of Sumatra. The Strait of Malacca is one of the world’s most critical shipping routes, connecting the Indian Ocean to the South China Sea and the Pacific Ocean.

Malaccamax vessels are built to optimize cargo capacity while adhering to the size constraints of the Strait of Malacca. The dimensions of a Malaccamax bulk carrier typically fall within the following range:

  • Length overall (LOA): up to 333 meters (1,093 feet)
  • Beam (width): up to 60 meters (197 feet)
  • Draft: up to 20.5 meters (67.3 feet)

These vessels usually have a cargo capacity of around 200,000 to 300,000 deadweight tons (DWT). Malaccamax bulk carriers transport dry, unpackaged commodities such as coal, iron ore, grain, and other bulk materials. They are larger than Panamax, Kamsarmax, and Newcastlemax vessels but smaller than some of the largest Capesize carriers.

By adhering to the size constraints of the Strait of Malacca, Malaccamax bulk carriers can efficiently serve the global shipping industry, particularly for routes that involve transiting the strait. They play a vital role in facilitating international trade and supporting the efficiency of the global maritime transport system.

 

What is Dunkirkmax Bulk Carrier?

A Dunkirkmax bulk carrier is a type of dry bulk cargo vessel specifically designed to meet the size restrictions imposed by the Port of Dunkirk in France. Dunkirkmax vessels are built to optimize cargo capacity while adhering to the size constraints of the port, which has limitations in terms of draft and the width of its navigation channels.

The dimensions of a Dunkirkmax bulk carrier typically fall within the following range:

  • Length overall (LOA): up to 289 meters (948 feet)
  • Beam (width): up to 45 meters (148 feet)
  • Draft: up to 17.5 meters (57.4 feet)

These vessels usually have a cargo capacity ranging from 110,000 to 190,000 deadweight tons (DWT). Dunkirkmax bulk carriers are primarily used for transporting dry, unpackaged commodities such as coal, iron ore, grain, and other bulk materials. They are larger than Panamax and Kamsarmax vessels but smaller than some of the Capesize carriers.

By adhering to the size constraints of the Port of Dunkirk, Dunkirkmax bulk carriers can efficiently serve the European shipping industry, particularly for routes that involve transiting through the port. They play a vital role in facilitating regional trade and supporting the efficiency of the European maritime transport system.

 

 

What is Self-Trimming Bulk Carrier?

A self-trimming bulk carrier is a type of dry bulk cargo vessel specifically designed to minimize or eliminate the need for manual trimming during the loading and unloading process. Trimming refers to the process of leveling the cargo within the cargo holds to ensure even distribution of weight, maintain stability, and facilitate efficient unloading.

Self-trimming bulk carriers are equipped with features and design elements that enable the cargo to naturally level itself or be mechanically distributed during loading, eliminating the need for manual intervention or additional trimming equipment. Some key design features include:

  1. Hopper-shaped cargo holds: The cargo holds in self-trimming bulk carriers have inclined sides or hopper-shaped bottoms, which guide the cargo towards the center of the hold during loading, thereby promoting even distribution.
  2. Self-unloading systems: Many self-trimming bulk carriers are equipped with self-unloading systems, such as conveyor belts or suction devices, which can quickly and efficiently remove cargo from the hold without the need for manual labor or separate trimming equipment.
  3. Improved hatch designs: Self-trimming vessels may also incorporate improved hatch designs that facilitate even distribution of cargo during loading, further reducing the need for manual trimming.

These design features enhance the overall efficiency and safety of the loading and unloading process, as well as reducing the time spent in port and associated labor costs. Self-trimming bulk carriers are used to transport a wide range of dry, unpackaged commodities such as coal, iron ore, grain, and other bulk materials, making them a valuable component of the global shipping industry.

 

Bulk Carrier Time Charter Rates

Bulk carrier time charter rates are an essential aspect of the maritime shipping industry. These rates refer to the amount paid by a charterer to rent a bulk carrier for a specific period, usually expressed in dollars per day or per ton. These rates are influenced by various factors such as the supply and demand for bulk carriers, the size and age of the vessel, the route, the duration of the charter, and market conditions.

In the shipping industry, there are several types of bulk carriers, each with different capacities and functionalities. These include:

  1. Handysize: With a capacity of 15,000 to 35,000 deadweight tons (DWT), Handysize vessels are the smallest and most flexible type of bulk carriers. They are suitable for smaller ports and can be used for a variety of cargo types.
  2. Handymax/Supramax: These vessels have a capacity of 35,000 to 60,000 DWT and are larger than Handysize carriers. They are equipped with onboard cranes, allowing them to handle cargo at ports without the necessary infrastructure.
  3. Panamax: Named for their ability to transit the Panama Canal, Panamax vessels have a capacity of 60,000 to 80,000 DWT. They are often used for carrying coal, grain, and other bulk commodities.
  4. Capesize: The largest bulk carriers, with a capacity of 100,000 DWT and above, Capesize vessels are too big for the Panama Canal and must navigate around the Cape of Good Hope or Cape Horn. They are primarily used for carrying iron ore and coal.

Time charter rates for these different types of bulk carriers can vary significantly due to factors such as vessel size, age, route, and market conditions. For example, Capesize vessels typically command higher rates than smaller carriers due to their larger capacity and the limited number of ports that can accommodate them.

Market conditions can also greatly affect time charter rates. During periods of high demand, rates may increase, while a market oversupply can lead to lower rates. Additionally, geopolitical events, seasonal fluctuations, and global economic trends can impact rates and the overall shipping industry.

To monitor bulk carrier time charter rates, industry participants often rely on benchmark indices, such as the Baltic Dry Index (BDI), which tracks the daily average of time charter rates for various vessel sizes and routes. By following these indices, ship owners, charterers, and other stakeholders can better understand the current market dynamics and make informed decisions regarding chartering bulk carriers.

We kindly suggest that you visit our web page to obtain the daily updated Bulk Carrier Time Charter Rates and Dry Bulk Carrier Freight Rates www.handybulk.com

 

 

What is the forecast for Dry Bulk Freight Rates?

For daily updated Bulk Carrier Time Charter Rates and Dry Bulk Carrier Freight Rates please check the top of this page (Ship Charter Rates). For real-time Bulk Carrier Time Charter and Freight Rate forecasts or predictions please call Baltic Exchange reporting shipbrokers. To stay updated with the latest dry bulk shipping market forecasts and dry bulk market analysis, you can consult reputable sources such as shipping industry publications, market research reports, and financial news outlets. Additionally, following benchmark indices like the Baltic Dry Index (BDI) can provide insights into the overall direction of the dry bulk shipping market. However, we can provide you with an overview of the factors that typically influence dry bulk freight rates and the outlook for the shipping industry.

Dry bulk freight rates are primarily driven by supply and demand dynamics, which are influenced by a variety of factors. These include:

  1. Global economic growth: Stronger economic growth generally translates to higher demand for raw materials and commodities, leading to increased demand for dry bulk shipping and upward pressure on freight rates.
  2. Fleet supply: The supply of dry bulk carriers is impacted by the rate of new vessel deliveries and scrapping of older vessels. An oversupplied market with a high number of new vessel deliveries can lead to lower freight rates, whereas a tighter supply may push rates higher.
  3. Commodity demand: Demand for key dry bulk commodities, such as iron ore, coal, and grain, plays a significant role in determining freight rates. Factors such as industrial production, urbanization, and global trade policies can impact the demand for these commodities.
  4. Seasonal factors: Dry bulk freight rates often exhibit seasonal patterns, with higher demand during certain times of the year. For example, grain exports tend to peak during harvest seasons, while coal demand may increase during the winter months in the Northern Hemisphere.
  5. Geopolitical events: Political developments, trade disputes, and regulatory changes can have a significant impact on the dry bulk shipping market and freight rates.

Given these factors, the outlook for dry bulk freight rates is subject to change based on the prevailing market conditions and global economic trends. It is crucial for stakeholders in the shipping industry to closely monitor these factors and consider their potential impact on freight rates.

When attempting to forecast dry bulk freight rates, it’s important to consider additional factors that could impact the shipping industry. These may include:

  1. Infrastructure development: Improvements in port infrastructure, such as increased capacity or the construction of new terminals, can impact the demand for dry bulk shipping. This can be particularly relevant in emerging markets, where infrastructure development can lead to increased import and export activity.
  2. Technological advancements: Innovations in ship design, fuel efficiency, and navigation can have an impact on the overall efficiency of the dry bulk shipping industry. This may influence fleet supply, operational costs, and ultimately, freight rates.
  3. Environmental regulations: Stricter environmental regulations, such as those related to emissions and ballast water treatment, can impact the dry bulk shipping sector. Compliance with new regulations may lead to increased costs for shipowners and could affect the supply of vessels if older ships become uneconomical to operate.
  4. Currency fluctuations: Changes in currency exchange rates can influence global trade dynamics, which may subsequently impact the demand for dry bulk shipping. For example, a stronger US dollar could make commodities more expensive for countries with weaker currencies, potentially reducing demand for imports and affecting freight rates.
  5. Bunker fuel prices: The cost of bunker fuel, which is a significant operational expense for shipowners, can impact freight rates. Higher fuel prices can lead to increased shipping costs, which may be passed on to charterers in the form of higher freight rates.

Given the complex interplay of these factors, forecasting dry bulk freight rates can be challenging. It’s essential for industry stakeholders to stay informed about the latest market trends and global developments to make informed decisions about chartering, investing, or operating in the dry bulk shipping sector.

To get a better understanding of the market outlook, you can consult industry experts, read specialized shipping reports, and attend conferences or webinars related to the dry bulk shipping industry. By staying informed and considering multiple sources of information, you will be better equipped to anticipate potential shifts in the market and adjust your strategies accordingly.

 

 

What is the Freight Rate Index?

The Freight Rate Index is a general term that refers to an index used to track the average freight rates for various types of shipping, including dry bulk, tanker, and container shipping. These indices provide a benchmark for market participants to assess the current state of the shipping industry and understand fluctuations in freight rates over time. They are particularly useful for shipowners, charterers, traders, and analysts in making informed decisions about chartering, investing, or operating within the shipping sector.

Several freight rate indices exist for different shipping segments, and some of the most commonly referenced indices include:

  1. Baltic Dry Index (BDI): The BDI is a widely followed shipping index that provides a daily measure of the cost of shipping dry bulk commodities, such as iron ore, coal, and grain. The index is calculated by the Baltic Exchange, based in London, and takes into account the average time charter rates for various vessel sizes, including Capesize, Panamax, Supramax, and Handysize. A rising BDI typically indicates stronger demand for dry bulk shipping and higher freight rates, while a falling BDI suggests weaker demand and lower rates.
  2. Baltic Dirty Tanker Index (BDTI) and Baltic Clean Tanker Index (BCTI): These indices track the daily average freight rates for crude oil and clean petroleum products, respectively. The Baltic Dirty Tanker Index focuses on the larger vessels used for crude oil transportation, such as Very Large Crude Carriers (VLCCs) and Suezmax tankers, while the Baltic Clean Tanker Index covers smaller vessels, such as Medium Range (MR) and Long Range (LR) product tankers.
  3. Shanghai Shipping Exchange (SSE) Containerized Freight Index: This index tracks the average freight rates for container shipping on various trade routes, providing insights into the container shipping market. The index is calculated weekly and is based on data from a panel of carriers, freight forwarders, and other industry participants.

These freight rate indices, along with others available in the market, offer valuable insights into the overall health of the shipping industry and help stakeholders to gauge the supply and demand dynamics for different shipping segments. By monitoring these indices, market participants can make better-informed decisions about chartering, investing, or operating in the maritime industry.

 

How do I find the best dry bulk freight rate?

Finding the best dry bulk freight rate involves several steps, as well as a thorough understanding of the market dynamics and factors that influence freight rates. Here are some key steps to help you find the best rate for your dry bulk shipping needs:

  1. Research the market: Begin by studying the current state of the dry bulk shipping market. Familiarize yourself with the factors that influence freight rates, such as supply and demand dynamics, global economic conditions, and seasonal fluctuations. Keep an eye on benchmark indices like the Baltic Dry Index (BDI) to get an idea of prevailing market rates.
  2. Understand your cargo requirements: Determine the specific requirements for your cargo, including the type of bulk commodity you are shipping, the volume or weight, and any special handling or storage needs. This information will help you identify the most suitable type of bulk carrier for your shipment.
  3. Identify suitable routes and ports: Evaluate the transportation route, including the origin and destination ports, as well as any potential intermediate stops. Consider factors such as port infrastructure, draft restrictions, and regional regulations that may impact your shipping options and costs.
  4. Obtain quotes from multiple sources: Reach out to various shipowners, brokers, or freight forwarders to obtain quotes for your shipping requirements. Be sure to provide detailed information about your cargo, route, and preferred vessel type to receive accurate quotes. Comparing quotes from multiple sources can help you identify the most competitive rates.
  5. Negotiate terms: Once you have shortlisted potential service providers, engage in negotiations to secure the best possible rate. Keep in mind that factors such as payment terms, laytime, and demurrage rates can also impact the overall cost of your shipment, so be prepared to negotiate these terms as well.
  6. Monitor market fluctuations: The dry bulk shipping market is known for its volatility, so it’s crucial to stay informed about market developments that could impact freight rates. Continuously monitor factors such as economic trends, geopolitical events, and changes in regulations to identify potential opportunities or challenges for your shipping needs.
  7. Establish long-term relationships: Building strong relationships with reliable service providers can be advantageous in securing favorable freight rates and ensuring consistent service. Working with a trusted partner can also help you navigate the complexities of the dry bulk shipping market more effectively.

By following these steps and staying informed about the dry bulk shipping market, you can increase your chances of securing the best freight rate for your specific needs. Remember that market conditions can change rapidly, so it’s important to remain flexible and adapt your shipping strategy as needed.

 

 

How Dry Bulk Freight is calculated?

Dry bulk freight is typically calculated based on several factors, which may include the type and size of the vessel, the cargo volume or weight, the distance between the origin and destination ports, and prevailing market conditions. Here’s an overview of the main components involved in calculating dry bulk freight rates:

  1. Ship Type and Size: The size and type of the bulk carrier play a significant role in determining the freight rate. Larger vessels, like Capesize, typically command higher freight rates due to their greater cargo capacity, while smaller vessels, like Handysize, may have lower rates. The age and condition of the vessel can also impact the rate, with newer and more efficient ships potentially commanding a premium.
  2. Dry Bulk Cargo Volume or Weight: The amount of cargo being shipped, usually measured in metric tons, is a crucial factor in determining the freight rate. Some contracts may be based on a fixed rate per ton, while others may use a sliding scale, with the rate per ton decreasing as the total cargo volume increases.
  3. Distance and Route: The distance between the origin and destination ports directly impacts the cost of shipping, with longer distances generally resulting in higher freight rates. The specific route taken may also influence the rate, as factors like congestion, port fees, and canal transit fees can affect the overall shipping cost.
  4. Dry Bulk Shipping Market Conditions: Prevailing market conditions, such as supply and demand for dry bulk carriers, can significantly impact freight rates. During periods of high demand or limited supply, rates may increase, while an oversupply of vessels or reduced demand can lead to lower rates.
  5. Time Charter or Voyage Charter: Dry bulk freight can be calculated based on either a time charter or voyage charter agreement. In a time charter, the rate is typically expressed as a daily rate (dollars per day) for the use of the vessel, while in a voyage charter, the rate is expressed as a lump sum or per-ton rate for the entire voyage. The choice between these two options can depend on factors like the length of the voyage, the flexibility required, and the charterer’s preferences.
  6. Additional Costs: When calculating dry bulk freight, it is essential to consider additional costs that may be incurred during the shipping process. These can include bunker fuel costs, port charges, canal transit fees, and other expenses related to the voyage. In some cases, these costs may be included in the freight rate, while in others, they may be billed separately.

By taking all of these factors into account, you can calculate the dry bulk freight rate for a specific shipment. Keep in mind that rates can be subject to negotiation and may fluctuate based on market conditions and other variables.

 

How to Get the Best Dry Bulk Freight Shipping Rate?

To secure the best dry bulk freight shipping rate, it is essential to understand the market dynamics and adopt a strategic approach. Here are some steps to help you obtain the best rate for your dry bulk shipping needs:

  1. Know your cargo: Understand the specific requirements of your cargo, including the type of commodity, volume, weight, and any special handling or storage needs. This information will help you identify the most suitable type of bulk carrier for your shipment.
  2. Study the market: Familiarize yourself with the factors that influence dry bulk freight rates, such as supply and demand dynamics, global economic conditions, seasonal fluctuations, and geopolitical events. Monitor benchmark indices like the Baltic Dry Index (BDI) to get an idea of the prevailing market rates.
  3. Plan your route: Evaluate the transportation route, including origin and destination ports, as well as any potential intermediate stops. Take into account factors such as port infrastructure, draft restrictions, and regional regulations that may impact your shipping options and costs.
  4. Obtain multiple quotes: Contact various shipowners, brokers, or freight forwarders to obtain quotes for your shipping requirements. Provide detailed information about your cargo, route, and preferred vessel type to receive accurate quotes. Comparing quotes from multiple sources can help you identify the most competitive rates.
  5. Negotiate terms: Engage in negotiations with shortlisted service providers to secure the best possible rate. Don’t forget that factors such as payment terms, laytime, and demurrage rates can also impact the overall cost of your shipment, so negotiate these terms as well.
  6. Flexibility in timing: If possible, consider flexibility in your shipping schedule. Dry bulk freight rates can be volatile and fluctuate depending on market conditions. By being flexible with your shipping dates, you may be able to capitalize on lower rates during periods of reduced demand.
  7. Foster long-term relationships: Establishing strong relationships with reliable service providers can be beneficial in securing favorable freight rates and ensuring consistent service. Working with a trusted partner can also help you navigate the complexities of the dry bulk shipping market more effectively.
  8. Stay informed: Continuously monitor market developments, economic trends, and changes in regulations that could impact freight rates. Staying informed will help you identify potential opportunities or challenges for your shipping needs and adapt your strategy accordingly.

By following these steps and maintaining a thorough understanding of the dry bulk shipping market, you can increase your chances of securing the best freight rate for your specific needs. Keep in mind that market conditions can change rapidly, so stay flexible and be prepared to adjust your shipping strategy as necessary.

 

Dry Bulk Shipping Market Overview

The dry bulk shipping market is a critical segment of the global shipping industry, responsible for transporting various bulk commodities such as iron ore, coal, grain, and other raw materials. These goods are essential for industrial production, infrastructure development, and global trade. Here is an overview of the dry bulk shipping market:

  1. Ship types: The dry bulk shipping market consists of several vessel types, categorized by size and cargo capacity. The most common types include Capesize, Panamax, Supramax, and Handysize vessels. Each vessel type has specific characteristics that make it suitable for particular cargo types and trade routes.
  2. Dry Bulk Market dynamics: The dry bulk shipping market is characterized by its cyclicality and volatility. This is primarily driven by the supply and demand dynamics of both the shipping market and the commodities being transported. Factors such as global economic growth, industrial production, commodity demand, fleet supply, and geopolitical events can significantly impact freight rates and market conditions.
  3. Global Economic Growth: Strong global economic growth generally leads to increased demand for raw materials, which in turn drives the demand for dry bulk shipping. Conversely, a slowdown in economic growth can result in reduced demand for commodities and lower freight rates.
  4. Commodity Demand: The demand for key dry bulk commodities such as iron ore, coal, and grain significantly influences freight rates. Industrial production, urbanization, global trade policies, and other factors can affect the demand for these commodities, which subsequently impacts the dry bulk shipping market.
  5. Dry Bulk Fleet Supply: The supply of dry bulk carriers, determined by the rate of new vessel deliveries and the scrapping of older vessels, can impact freight rates. An oversupplied market with a high number of new vessel deliveries can lead to lower freight rates, while a tighter supply may push rates higher.
  6. Seasonal Factors: The dry bulk shipping market is subject to seasonal fluctuations, with certain times of the year experiencing higher demand. For example, grain exports typically peak during harvest seasons, while coal demand may increase during the winter months in the Northern Hemisphere.
  7. Geopolitical Events: Political developments, trade disputes, and regulatory changes can have a significant impact on the dry bulk shipping market and freight rates. Market participants need to closely monitor these events to anticipate potential shifts in market conditions.
  8. Benchmark Indices: The Baltic Dry Index (BDI) is a widely followed shipping index that provides a daily measure of the cost of shipping dry bulk commodities. The index is calculated by the Baltic Exchange and is based on the average time charter rates for various vessel sizes. The BDI serves as a barometer for the overall health of the dry bulk shipping market and can provide insights into market trends and freight rate fluctuations.

The dry bulk shipping market is a complex and volatile segment of the global shipping industry, heavily influenced by global economic trends, commodity demand, fleet supply, and geopolitical events. Stakeholders in the shipping industry must closely monitor these factors and adapt their strategies accordingly to navigate the ever-changing market landscape.

 

Dry Bulk Shipping Market Size and Share

The global dry bulk shipping market is a significant segment of the shipping industry, with a market size of approximately 6.5 billion deadweight tons (DWT) as of 2023. The market is expected to grow at a CAGR of 4.5% between 2023-2026, driven by increasing demand for raw materials and a rise in global trade.

The market share of the dry bulk shipping industry is dominated by a few key players, with the top ten companies accounting for a significant portion of the market. These companies include giants like Cargill, Bunge, Archer Daniels Midland, and Glencore, which operate large fleets of bulk carriers and have a global presence.

Asia-Pacific is the largest market for dry bulk shipping, accounting for around 65% of the global market share. This is primarily due to the region’s increasing demand for raw materials and a rise in infrastructure development projects. China is the world’s largest importer of iron ore and coal, which are among the most commonly transported commodities in the dry bulk shipping market.

Europe and North America also account for a significant portion of the market share, driven by demand for raw materials in industries like steel production, power generation, and construction.

The dry bulk shipping market is highly competitive, with numerous small and medium-sized operators competing with larger players. The industry is also subject to significant cyclicality and volatility, with freight rates and market conditions fluctuating based on global economic conditions, supply and demand dynamics, and other factors.

Overall, the dry bulk shipping market is an essential segment of the global shipping industry, providing a vital link between producers and consumers of raw materials. Despite the challenges posed by market volatility and competition, the industry is expected to continue growing over the coming years, driven by increasing demand for raw materials and a rise in global trade.

 

 

 

Ship Chartering Market 

Chartering plays a pivotal role in the international shipping industry, primarily focusing on efficiently aligning cargo transport requirements with ships’ commercial operations.

Segmentation of the Ship Chartering Market

This segment aims to outline potential structures of the Ship Chartering Market based on various criteria. Initially, essential chartering terminologies will be introduced.

Ship Chartering Definitions

A “Charter” refers to a contract for the commercial use of a ship, established between the “Shipowner” and the “Charterer”. The Shipowner advocates for the ship’s interests while the Charterer utilizes the ship’s services, either for transporting specific cargoes or over a set duration. The Charterer agrees to provide financial remuneration, known as “Freight” or “Hire”, depending on the Charter Type outlined subsequently. The agreement is formalized through a “Charter Party” contract. It is noteworthy that liner services are generally not included in this definition, and the justification for this will be elaborated on later.

It’s crucial for shipbrokers to recognize that commercial ship employment can be categorized into four primary Charter Types or Charter Party Forms.

Ship Charter Types:

  • Voyage Charter: This short-term Charter involves the Shipowner agreeing to transport a specified amount of cargo between designated ports for a particular voyage. The Charterer must pay the “Freight”, usually calculated in USD per tonne of cargo.
  • Time Charter: Ranging from short to long-term, in this Charter, the Shipowner allows the Charterer to use his ship for a predefined period. The Shipowner manages the ship’s operations (crewing, insurance, maintenance, and supplies), while the Charterer handles its commercial use (excluding navigation). The Charterer pays a set “Hire” rate, typically in USD per day, which might be due every 15 days or monthly in advance.
  • Bareboat Charter (Demise Charter): In this medium to long-term arrangement, the Shipowner leases out the ship’s hull and machinery. The Charterer gains full control, assuming roles typically held by the Shipowner, and pays a periodic “Hire” to the Shipowner. The Shipowner’s responsibilities are limited to the ship’s capital costs.
  • Contract of Affreightment (CoA): This medium to long-term, hybrid type of Charter involves the Shipowner agreeing to transport specific quantities of cargo for the Charterer over a set timeframe, such as four shiploads of iron ore per year, across designated voyages without specifying a particular ship. The Charterer pays “Freight” per tonne of cargo per voyage, defining it as a “hybrid” Charter Type.

 

Ship Chartering Market Overview

The concept of the “Ship Chartering Market” generally denotes a venue where various charter types are established, while the “Freight Market” pertains to the levels of Freight rates associated with these charters. Often, these terms are used interchangeably to describe the entire system of Freight Rate determination through charter fixtures. Analyzing this system involves considering four main components: the geographical location of the market, the involved individuals and legal entities, the prevailing business practices and methodologies, and the market’s underlying logic, which includes the reasons behind certain actions, behaviors, and processes, as well as interactions within the market. More specifically, the “Ship Chartering Market” or “Freight Market” can be defined in one or more of the following ways:

  • The geographical location where charter fixtures are set, Freight Rates are established, and sea transport transactions occur.
  • The individuals and legal entities that express diverse shipping interests and engage in various activities to achieve their objectives, eventually collaborating to “Close Fixtures” (i.e., Ship Charters) and establish Freight Rate levels.
  • An intricate system of interdependent persons, entities, factors, and conditions that, through economic mechanisms and business procedures, facilitates the formation of Ship Charters and the determination of Freight Rate levels in international sea transport.

In the realm of shipping business practices, “Chartering” is the process involved with the commercial utilization of ships and the international transportation of cargoes, often focusing on their optimal matching. Additionally, “Shipbroking” is the profession and activity that helps establish business connections between Shipowners and Charterers to secure Ship Charter agreements. The importance of cargoes and ships in creating segments within the Shipping Market is clear.

 

Ship Chartering Market Segments

The Ship Chartering Market (Freight Market) is diverse, consisting of various sub-markets that do not necessarily depend on each other and may evolve differently. This market is not specifically tied to any geographical area but is connected to ships capable of transporting similar types of cargo. The market’s condition is influenced by the equilibrium between the supply and demand for different types of shipping services. The Freight Rate level, which varies depending on the ship type and standard trade or charter form, serves as a measure of the Ship Chartering Market’s state. This market is also affected by global trade dynamics and influenced by numerous international factors. It’s important to note the interplay between the new-building market, the second-hand tonnage market, and the Freight Rate level, though these elements are not precisely synchronized. Similarly, activities like new-building and scrapping also impact the Ship Chartering Market (Freight Market).

As quoted from the timeless 1967 Rochdale Report to further delineate the Ship Chartering Market (Freight Market): “Shipping is a complex industry… the conditions governing operations in one sector do not necessarily apply to another… it might even be better regarded as a group of related industries. Its primary assets, the ships themselves, vary extensively in size and type; they provide a comprehensive range of services needed to transport passengers and various cargoes, over both short and long distances.”

The Shipping Market and the Ship Chartering Market (Freight Market) consist of distinct segments, each characterized by differences in cargo types, ship types and sizes, trade routes, and charter durations. Here’s a more detailed breakdown:

  1. Cargo Type Differentiation: The Ship Chartering Market (Freight Market) can be categorized into various sectors based on cargo type, such as dry bulk cargo markets, liquid bulk cargo markets, specialized cargo markets, and general cargo/container markets. These broad categories are further subdivided based on specific commodities.
  2. Ship Type and Size Differentiation: This market is segmented into categories such as Bulk Carrier markets, Tanker markets, Gas Carrier markets, Chemical Carrier markets, Combined Carrier markets, Containership markets, Ro/Ro markets, Reefer markets, General Cargo ship markets, Multi-Purpose Ship (MPP) markets, Offshore markets, and Specialized ships markets. Each category is further detailed by ship size.
  3. Trade Route Differentiation: Geographically, the Ship Chartering Market (Freight Market) is divided into numerous segments, such as the Black Sea – Mediterranean Sea suezmax tankers market, the Pacific, or the Atlantic basin panamax bulk carrier market.
  4. Charter Type and Duration Differentiation: The market is generally segmented into Voyage Charter or Spot Market, Time Charter Market, Bareboat Charter Market, and hybrid forms like the Contract of Affreightment (COA), Trip Time Charter (TCT: Time Charter Trip), and Consecutive Voyages Markets (Consec).

Ship and cargo types are considered primary criteria for segmenting the Ship Chartering Market (Freight Market) since they are central to every commercial sea transport. Trade routes and charter types are seen as complementary or secondary criteria that help further define these segments. For instance, referencing the Mediterranean Market alone does not specify a particular segment until combined with a secondary criterion like the Med Sea feeder containership market. It’s important to note that these primary criteria do not always interact cumulatively to form market segments; often, certain ship categories cater to specific cargo markets or vice versa.

Each segment of the Ship Chartering Market (Freight Market) features unique transportation needs for Charterers and Shippers and specific ship characteristics. Additionally, every market segment involves various stakeholders (Shipowners, Charterers, Shippers, Shipbrokers, Ship Agents, etc.), each with its own communication networks. The extent of interaction between these segments varies based on factors like ship type and size, the specialized nature or versatility of the ships, the commodities being transported, transport distance, and the type of ship’s employment.

The segmentation of the Ship Chartering Market (Freight Market) can be illustrated through a simplified mind-map, which aims to represent the trading matches between the primary types of cargoes and ships, along with the general orientation of each major segment—for example, bulk carriers are cost-oriented, tankers focus on safety, and the liner market prioritizes quality. Additionally, it is important to note that the rightmost column in the diagram outlines various charter types, while the bottom row depicts different examples of ships’ geographical trading. All charter types and trading patterns can be applied to all types of ships and cargoes without restriction.

In each market segment, the transportation needs, requirements, and behaviors of Charterers and Shippers share certain commonalities. For a shipping company to achieve commercial success, it is crucial to comprehend the diverse needs of Charterers-Shippers across different market segments. Shipping Companies must tailor their chartering policies and marketing strategies to align with these specific needs.

 

TRAMP SHIPPING VS. LINER SHIPPING

Key to understanding the shipping market is its division into two primary sectors: the Tramp Shipping industry and the Liner Shipping industry. The distinction is based on the size of the cargo consignment transported by sea. Specifically, Tramp Shipping handles large, homogenous cargoes transported in Bulk. “Bulk” refers to the cargo’s nature, while “Tramp” indicates the method of securing ship employment, typically involving global trading to meet demand. Conversely, Liner Shipping deals with smaller general cargo parcels, which are consolidated for container transport. Here are the main differences between these two markets:

  • Employment of Ships: Tramp Ships can operate in nearly any geographical area as dictated by the demand for sea transport. Liner Ships, however, operate on fixed routes, servicing specific ports according to a set schedule of departures and arrivals.
  • Charter Types and Charter Agreements: Liner Shipping companies often own or charter ships from independent Shipowners on a Period Charter basis, such as Time Charter or Bareboat Charter. Liner vessels operate under a “Common Carrier” basis, meaning various cargoes from multiple Shippers are transported simultaneously (typically in a Containership). Liner Operators manage cargo bookings via extensive agency networks and charter ships based on Charter Party Agreements, adhering to Booking Note and Bill of Lading (B/L) terms. Conversely, Tramp Shipping employs a diverse array of Charter Types and forms, facilitated through Shipbrokers’ networks. The predominant contract in Tramp Shipping is the Charter Party, while in Liner Shipping, it is the Bill of Lading (B/L).
  • Type of Cargo: Tramp Shipping typically carries large bulk cargoes that can fill entire ships or holds and includes dry, liquid, or specialized bulks. Liner Shipping handles Small Parcels of general cargo, such as containers, break-bulk, palletized, pre-slung, or wheeled cargoes, which do not fill a ship or hold on their own.
  • Kind of Carriage: The Tramp Shipping (Bulk Shipping) sector provides transport for full shiploads of cargo on a “one ship, one cargo” basis. Liner Shipping, however, offers transport for small cargo parcels on a “Common Carrier” basis.
  • Type of Ships: The bulk fleet primarily consists of bulk carriers, tankers, gas carriers, combined carriers, and specialized bulk ships (e.g., cement carriers, chemical tankers). This fleet serves the bulk cargo market. The Liner fleet mainly comprises containerships, with additional varieties like Multi-Purpose Ships (MPPs), Car Carriers, Ro/Ro and Lo/Lo, Reefers, and Con-Bulkers, which may operate in either Liner or Tramp services, catering to general cargo needs.
  • Freight: In Tramp Shipping (Bulk Shipping), Freight Rates are negotiable, largely influenced by the supply and demand for ships and the overall state of the Freight Market (Ship Chartering Market), along with specific charter conditions. In Liner Shipping, Freight for container transport is typically pre-determined by set pricing methods, reflecting a tightly regulated business model where financial planning focuses on long-term engagements rather than individual voyages. Freight rates in Liner Shipping are stable, unlike the fluctuating rates seen in the Open Market, which encompasses all chartering activities through Shipbrokers’ channels, including the Tramp Market and the portion of the Liner Market involving charters by independent Shipowners to Liner Companies, excluding the direct provision of Liner Services through cargo bookings.

Liner Shipping traffic is vulnerable to fluctuations based on market competition, cargo availability, and Load Factors per voyage, calculated as follows:

Load Factor =    Loaded Cubic Capacity   × 100 (%)
Available Cubic Capacity

This Load Factor indicates the extent to which the available cubic capacity of a container and the entire containership is utilized. Despite the concentration of the Liner Market around a few major Container Shipping Alliances, it is crucial to note that these Alliances are legally prohibited from setting joint Freight rates or sharing profits. Instead, they are allowed to collaborate on providing shipping services.

  • Market Type: The Liner Shipping Market is characterized by competitive elements and oligopolistic tendencies, with a high concentration of ownership and operation. Conversely, the Tramp Shipping Market (Bulk Shipping Market) is generally seen as highly competitive with widespread ownership.
  • Cargo Seeking, Charter Type, and Chartering Business: In Tramp Shipping (Bulk Shipping), Charter Fixtures are arranged by Shipbrokers through stages of chartering investigation and negotiation. In Liner Shipping, cargo acquisition is conducted by Cargo Canvassers (e.g., Liner Agents or Freight Forwarders) who promote schedules, ports, and sailing dates. Liner ships often secure the bulk of their cargo through a broad network of Liner Agents, which may be part of the liner group’s subsidiaries or independent agencies contracted exclusively. Occasionally, Liner Companies book special commodities or part-cargoes to utilize empty space, negotiating these deals on Charter Party terms through Shipbroker connections in the Open Market. The challenge of cargo imbalances between outbound and inbound voyage legs often positions Liner services in competition with Multi-Purpose Ships (MPP), Con-Bulkers, Ro/Ro, Reefers, and other tonnage types in the same geographical regions.
  • Ownership and Ship Management: Tramp Ships (Bulk Ships) are either privately or publicly owned and are chartered for specific voyages or periods by clients known as Charterers. These ships are generally contracted individually under terms outlined in the Charter Party. The typical structure of a Tramp Shipping (Bulk Shipping) organization might include single-ship owning companies, a managing company, and possibly a holding company owning shares of the ship-owning entities. On the other hand, typical Liner Shipping operations involve multiple ships to provide extensive regular service coverage, operated by Liner Alliances. These Alliances pool resources but are not permitted to set common prices. Historically, Liner Shipping was tightly controlled, structured around Liner Conferences or Rate Agreements, which acted similarly to cartels. Nowadays, due to stringent anti-monopoly regulations in the US and Europe, the market is governed by other forms of control such as mergers, acquisitions, Alliances, and consortia.

Liner Companies strategically might choose to charter-in ships from independent Shipowners rather than maintain a wholly owned fleet, influenced by various factors like financial performance, liquidity needs, debt management, service requirements, and prevailing or projected Freight Rates. Often, Liner Shipping Companies are publicly listed mega-carriers that provide comprehensive Door-to-Door (DTD) logistics services. Liner Ship Operators are typically deeply engaged in improving Cargo-Handling techniques and actively contribute to the development of their regular ports, especially their hub ports.

It is evident that Tramp and Liner Markets are distinctly different in structure and operation. From a Ship Chartering and Shipbroking viewpoint, Tramp Shipping (Bulk Shipping) holds more significance than Liner Shipping.

 

CARGOES

This section outlines the primary cargoes transported by the Bulk and Liner fleets. Bulk cargo consists of large consignments shipped in bulk to leverage Economies of Scale, reducing the per-unit transportation cost. Typically, a single type of bulk cargo is carried per voyage, although some vessels are capable of carrying various bulk cargoes in separate holds or on different voyage legs. General cargo, in contrast, involves smaller amounts of diverse cargoes. These are often shipped together using containers or pallets, or unitized using bales or other methods. The aim is to minimize transportation costs through economies of scale, achieved differently through Cargo Unitisation for general cargo.

BULK CARGOES

Bulk Cargo refers to any substantial cargo consignment large enough to fill an entire ship or one of its holds, hence transported in bulk. There are three main types of Bulk Cargoes:

  1. Dry Bulk Cargoes
  2. Liquid Bulk Cargoes
  3. Specialized Bulk Cargoes

Bulk cargoes mainly include essential raw materials, energy, and food commodities like oil, iron ore, coal, grain, and gas, typically shipped in bulk. These cargoes are transported by vessels specifically suited to each type:

  • Major Dry Bulk Cargoes: This category encompasses the five key homogenous bulk cargoes — iron ore, coal, grain, phosphates, and bauxite/alumina — ideally suited for conventional dry bulk carriers. Iron ore and coal currently account for roughly two-thirds of the global dry bulk market.
  • Minor Dry Bulk Cargoes: This group includes a wide array of industrial and agricultural materials shipped in bulk, such as steel products, sugar, salt, gypsum, and non-ferrous metal ores. They are typically transported by dry bulk carriers or Multi-Purpose Ships (MPPs).
  • Major Liquid Bulk Cargoes: Comprising crude oil, oil products, liquefied natural gas (LNG), liquefied petroleum gas (LPG), and various liquid chemicals like caustic soda, ammonia, and phosphoric acid. The volume of these cargoes can range from a few thousand tonnes to nearly half a million tonnes for crude oil. They are transported in crude or product tankers, gas carriers, or chemical tankers.
  • Minor Liquid Bulk Cargoes: Including other liquid bulks such as wine, vegetable oil, and water, typically transported in smaller or specialized tankers.
  • Specialized Bulk or Neobulk Cargoes: Covering bulk cargoes that require specific handling or storage solutions. Examples include wood-chips, steel products, refrigerated goods, cement, cars, and uniquely heavy items like prefabricated buildings. These are transported by specialized bulk ships, such as reefers, cement carriers, car carriers, heavy lift ships, or containerships in liner trades.

The bulk shipping industry employs its fleet on a “one ship-one cargo” basis, focusing on efficiently moving shiploads of bulk cargo.

GENERAL CARGOES

General Cargo refers to individual cargo consignments that are too small to fill an entire ship or one of its holds, making them unsuitable for bulk shipping operations. Often, these cargoes are high-value or fragile, necessitating specialized shipping services with stable transport costs rather than fluctuating Freight Market rates. The primary types of general cargoes include containerized cargo, loose or break-bulk cargo, palletized cargo, pre-slung cargo, and heavy cargo. General cargo is typically transported by liner ships that maintain regular transport schedules. These cargoes are carried by Fully Cellular Containerships (FCC) and other suitable vessels within the wider liner fleet, such as conventional General Cargo ships, Multi-Purpose Ships (MPPs), and occasionally other types used in liner trades like Con-bulkers, Car Carriers, Roll-on/Roll-off ships (Ro/Ro), Reefers, and Barge/Heavy-Lift ships.

The liner fleet operates within the Liner Shipping industry, providing transport for shiploads of cargo on a Common Carrier basis. It transports small parcels of General Cargo, including manufactured and semi-manufactured items, alongside small quantities of bulk commodities like malting barley, steel products, and non-ferrous metal ores. Handling numerous parcels per voyage makes this a highly organization-intensive operation. Additionally, the transport leg is often part of an integrated production operation where speed, reliability, and high service levels are crucial. However, cost remains a significant factor since international manufacturing heavily relies on affordable transport. Pricing in this sector often involves negotiations with major customers under service agreements, although prices are typically published. The main categories of General Cargo include:

  • Containerised Cargoes: Standard containers, typically 20 or 40 feet long, filled with various cargoes. This is currently the predominant method for transporting general cargo, with a wide variety of container types available, such as dry cargo containers, reefer containers, open-top containers, flat racks, and high cube containers.
  • Loose or Break-Bulk Cargoes: Non-unitized individual items such as boxes, bags, sacks, and pieces of machinery, each handled and stowed separately. Historically, all General Cargo was shipped in this manner, though it has largely transitioned to unitization.
  • Palletised Cargoes: Cargo organized on pallets for efficient stacking and handling.
  • Heavy and Awkward Cargoes: Large, cumbersome items that are challenging to stow.
  • Liquid Cargoes: Transported in liquid containers, deep tanks, drums, etc.
  • Refrigerated Cargoes: Perishable items requiring chilled or frozen conditions, shipped in insulated holds of specialized Reefer Ships or refrigerated containers aboard containerships.
  • Pre-slung Cargoes: Small items like planks of wood bundled into standard-sized packages.

 

Factors Determining Suitability for Bulk or Liner Shipment

The decision on whether a cargo is more suited for Bulk or Liner shipment hinges on several key factors:

  • Volume: The quantity of the cargo significantly influences its mode of transport. For instance, 60,000 tonnes of sugar are typically transported in bulk using a Bulk Carrier, whereas 1,000 tonnes might be shipped in sacks aboard a General Cargo ship.
  • Handling: Various handling aspects are crucial, including how the cargo is stowed, its vulnerability to damage, and any specific requirements it may need from the ship, such as maintaining low temperatures, withstanding high pressure, or corrosion resistance.
  • Seasonality: The seasonal nature of certain commodities (like grain and sugar) affects their shipping method. These products’ production often aligns with the annual harvest cycles, influencing whether they are shipped in containers, bags, or sacks by liner ships, or in bulk by tramp ships. This decision also depends on the Shippers’ needs, trade patterns, ship availability, and Freight Rate fluctuations.
  • State of the Ship Chartering Market (Freight Market): The current conditions and future expectations of the Freight Market impact whether Shipowners and Charterers opt for bulk or liner transport methods.

 

 

STOWAGE FACTOR (SF) FOR DRY BULK CARGOES AND LIQUID BULK CARGOES

The Stowage Factor (SF) is a critical measurement used in the stowage and handling operations of dry bulk cargo and specialized bulk cargo. It represents the ratio of a cargo’s volume in cubic measurements to its weight, expressed in cubic feet per metric ton (cf/mton) or cubic meters per metric tonne (cm/mton). The Stowage Factor (SF) indicates the volume occupied by a metric tonne of a specific cargo type within a ship’s hold. This factor is essential for determining the maximum cargo load, considering the ship’s Grain Capacity or Bale Capacity, along with allowances for Broken Stowage (BS) and dunnage.

While predominantly applied to dry bulk cargoes, the Stowage Factor (SF) is also relevant for Liquid Bulk Cargoes and other commodities such as containers or cars. Iron ore, one of the densest cargoes, has a notably low Stowage Factor (SF), while lighter (bulky) cargoes like cork, pulpwood, woodchips, or cars require significantly more volume relative to their weight. Stowage Factor (SF) conversion factors to remember include:

  • 1 cubic meter per metric tonne = 35.31 cubic feet per metric tonne
  • 1 (cm/mton) = 35.31 (cf/mton)

Conversely, Liquid Cargoes, typically handled in bulk, fill the tanks they are stored in and are described by their “Specific Gravity (SG)” (synonym: Relative Density) rather than by Stowage Factor (SF). Specific Gravity (SG) is a dimensionless unit defining the ratio of a liquid’s density to the density of water at 4°C or 39.2°F. It represents the weight of the liquid compared to its cubic capacity, allowing for the calculation of either the cargo’s volume or weight when one of these factors and the Specific Gravity (SG) are known. Specific Gravity (SG) varies between different liquids and has a broad range of applications.

Additionally, the density of crude oil is a critical indicator of its quality—lighter oils are generally easier to refine and hence more valuable. Though often measured in terms of Specific Gravity (SG), oil density is frequently specified using the American Petroleum Institute (API) Gravity scale. The formulas to convert between these measurements are:

  • S.G. = 141.5 / (131.5 + °API)
  • °API = (141.5 / S.G.) – 131.5

For instance, fresh water has a Specific Gravity (SG) of 1.0 and an American Petroleum Institute (API) Gravity of 10 degrees. An oil with a Specific Gravity (SG) of 0.85 corresponds to an API gravity of 35 degrees. This scale reveals that most crude oils, being lighter than water, have higher API gravities.

 

SHIP TYPES

This section delves into the most commonly used ship types in both Tramp Shipping and Liner Shipping.

BULK CARRIERS

Bulk carriers are ships specifically designed to transport large quantities of bulk cargoes such as iron ore, coal, grain, steel products, sugar, etc. Their cargo-carrying capacity ranges from about 1,000 to over 400,000 DWT (Deadweight Tonnes), with operations spanning globally. While categorizing these ships into size classes can be ambiguous, certain distinctions are commonly recognized in daily market discussions.

According to the size of Bulk Carriers, the following sub-segments are typically identified:

  • CAPESIZE BULK CARRIER: These are gearless bulk carriers ranging from 100,000 to over 400,000 dwt. They are primarily used for long-haul transportation of iron ore from regions like Brazil or Australia to China, and coal on various long-haul routes. Due to their significant size, these ships cannot navigate through the Panama Canal and instead sail around the Cape of Good Hope (COGH) or Cape Horn. Shipbrokers often refer to subdivisions within this class, such as “Small Capes” for ships up to 150,000 DWT, “Normal Capes” for those between 160,000–180,000 dwt, Large Capes for those over 180,000 dwt, and Wozmax ships around 250,000–260,000 DWT. Very Large Bulk Carriers (VLBC) or Very Large Ore Carriers (VLOC) generally refer to ships above 200,000 DWT. Specific names like Newcastlemax (about 200,000–210,000 DWT) serving Newcastle, Australia, Dunkirkmax (around 175,000 DWT) for Dunkirk, France, and Setouchmax (about 205,000 DWT) for ports in the Setouch Sea, Japan, are derived from the ports these ships frequently serve. The largest among these, known as Chinamax or Valemax, range from 380,000 to over 400,000 DWT. Chinamax ships meet specific standards to accommodate various harbors when fully laden, with a maximum allowable ship measurement of 24 m. (79 ft.) draft, 65 m. (213 ft.) beam, and 360 m. (1,180 ft.) length. The term Chinamax reflects the extensive bulk shipments received by China globally. Brazilian iron ore company Vale initially placed orders in Chinese and South Korean shipyards to construct Valemax ships, leading to this size commonly being referred to as the Valemax type. Valemax ships feature seven cargo holds with a total gross volume of nearly 220,000 cubic meters, each capable of being fully loaded at a rate of 13,500 tonnes per hour. The design minimizes unreachable areas during discharging, known as “Dead Spots”.
  • PANAMAX BULK CARRIER: Bulk carriers ranging from 65,000 DWT to 100,000 DWT, mostly gearless except for some older and smaller geared vessels. Panamax Bulk Carriers primarily transport coal, grain, iron ore, and minor bulks. The term “Panamax Bulk Carrier” refers to ships that conform to the maximum allowable dimensions for passage through the Panama Canal in a fully loaded state. The locks of the Panama Canal determine the maximum ship size that can pass through, making many ships built to these precise dimensions. For many years, the typical DWT range for a Panamax Bulk Carrier was up to 80,000 DWT, with the most common range between 68,000–76,000 DWT. However, its actual cargo capacity was limited to about 52,500 tonnes due to the 12.1 m (39.6 ft.) draft restriction of the old Panama Canal locks, which had a width of 33.5 m (110.0 ft.). Additionally, ships classified as Kamsarmax (80,000–90,000 DWT) were designed to meet the same dimensional constraints of the old locks and are included in this category. Kamsarmax Bulk Carriers are specifically used in the bauxite export trade from the port of Kamsar in Guinea, hence their name. For many years, bulk carriers in the 90,000–130,000 DWT range were termed Post-Panamax, Over-Panamax, or Mini-Capes (Baby Cape), forming an intermediate class between Panamax/Kamsarmax and Capesize Bulk Carriers. Although Post-Panamax Bulk Carriers played a limited role in the Freight Market, their significance has grown following the expansion of the Panama Canal (Neo-Panama Canal). The completion of a third lane of locks in 2016, which is wider, longer, and deeper than the original two, now allows bulk carriers of up to 130,000 DWT to transit through the Neo-Panama Canal. Beyond changes in ship sizes, this expansion is expected to bring significant shifts in cargo shiploads, ship trade routes, and overall maritime logistics.
  • ULTRAMAX, SUPRAMAX BULK CARRIERS: Bulk carriers with a DWT of 50,000–65,000, almost all of which are geared. These ships primarily transport grain, coal, minor bulks, phosphates, and bauxite/alumina on medium-haul routes. Vessels with a capacity of around 60,000–65,000 DWT are referred to as Ultramax Bulk Carriers, while those within the 50,000–60,000 DWT range are known as Supramax Bulk Carriers.
  • HANDYMAX BULK CARRIERS: Bulk carriers ranging from 40,000 to 50,000 DWT, typically equipped with their own cargo-handling gear. Handymax Bulk Carriers transport grain, coal, minor bulks, phosphates, and bauxite/alumina across global trade routes, mainly for short- and medium-haul voyages. The larger Handymax Bulk Carriers compete for cargoes with Supramax Bulk Carriers, whereas the smaller ones overlap with Handysize Bulk Carriers.
  • HANDYSIZE BULK CARRIERS: Bulk carriers within the 20,000–40,000 DWT range, most of which are geared, operating worldwide primarily on short-haul routes. Handysize Bulk Carriers handle a diverse mix of minor bulks, along with smaller shipments of grain, phosphates, and bauxite/alumina. Many vessels in this category are equipped to transport specialized cargoes such as logs, woodchips, and cement.
  • SMALL BULK CARRIERS: Bulk carriers ranging from 300–20,000 DWT, available in both geared and gearless configurations. These vessels transport minor bulks and grain. The smaller ships in this category (300–3,000 DWT) are dedicated to Coastal and Short Sea Trades, leading to their classification as Coasters or Short Sea Traders.

While generalizations should be avoided in the dynamic environment of the shipping markets, the following financial characteristics of the Bulk Carriers’ Market can be identified:

  1. The market structure closely aligns with the principles of perfect competition in most sub-markets (the goal is profit maximization for both Shipowners and Charterers, no single party can influence the market, a large number of market players exist, the transport service is uniform with minimal differentiation, there are few barriers to entry and exit, participants are well-informed about market developments, and there is an emphasis on cost control, among others).
  2. The larger the ships: ◦ The greater the barriers to entry and the “players” involved (i.e., Shipowners, Ship Operators, Charterers, Shipbrokers); ◦ The more sensitive/volatile Chartering Freight rates and ships’ values are to economic cycles; ◦ The more difficult it is to liquidate the ships.
  3. The concentration of ownership is relatively low.
  4. A large number of players (Shipowners, Charterers, Shipbrokers, Ship Agents, etc.) are distributed globally.
  5. Ships operate worldwide wherever employment opportunities present themselves.
  6. A wide variety of Charter Party contracts exists.

Bulk Carriers can also be employed for the transportation of unitized cargoes of various types, such as paper and pulp, logs, woodchip, containers, and more. A specific type of bulk carrier that can carry both bulk cargoes in the holds and containers is called a Con-bulker (10,000–60,000 DWT). A bulk carrier equipped with fixed or portable upright stanchions and lashing points, allowing logs to be loaded on deck, is known as a Log-fitted Bulk Carrier (10,000–60,000 DWT). Lumber Carriers are similarly designed to carry packaged wood products (boards, sheets, plywood, planks) in their specially designed holds, which are box-shaped to prevent Broken Stowage (BS). Lumber Carriers have their own gear (gantry cranes) and range in size from 15,000 to 50,000 DWT.

Ships equipped with specialized equipment or designed for a particular cargo, trade, or region must target their specific section of the market to charge an additional rate on top of the current Freight Rate, which is necessary to recover investments in equipment and construction. Examples of such ships include bulkers with wide hatches, known as Open-Hatch Bulk Carriers (10,000–105,000 DWT), bulk carriers with their own Grabs (Grab-fitted) or Conveyor Belts for discharging bulk commodities, referred to as Self-dischargers or Self-unloaders (10,000–105,000 DWT), ships specially built with the required measurements and fittings for passage through the St. Lawrence Seaway, known as Lakes Traders or Lakes-fitted Ships (10,000–50,000 DWT), ships restricted only to Great Lakes navigation (“Lakes Only” ranging from 10,000 to 85,000 DWT), and “Ice-class” ships designed for trading in the Baltic Sea or to Canada during winter conditions.

Lastly, there exists a specialized dry cargo market that includes the so-called Cement Carriers. Cement Carriers are fully enclosed ships that handle cement pneumatically, discharging via pipes where the powdered cement behaves as a fluid. The size of Cement Carriers typically ranges between 10,000 and 50,000 DWT.

 

TANKERS

A tanker is a ship designed to transport liquid cargo (such as oil and other petrochemicals) in bulk. Tankers load their cargo by gravity from the shore or through shore pumps and discharge using their own pumps. Oil tankers vary in size, ranging from small coastal ships of 1,000 DWT to medium-sized ships around 60,000 DWT, all the way up to the giant ULCCs (Ultra Large Crude Carriers) of over 320,000 DWT.

Depending on the size of tanker ships, the following sub-markets (sub-segments) can be identified:

• ULCC (Ultra Large Crude Carriers): Tankers of 320,000–565,000 DWT. ULCC (Ultra Large Crude Carriers) are designed to carry only crude oil and are challenging to navigate into ports when fully loaded. The oil tanker MT Seawise Giant, built in 1979, was in service until 2009 (under various names) before being scrapped. It held the record as the largest ship ever by deadweight tonnage (565,000 DWT), length (458 m.), and displacement (657,000 tonnes).

• VLCC (Very Large Crude Carriers): Tankers of 200,000–320,000 DWT. VLCC (Very Large Crude Carriers) mainly transport crude oil on long-haul routes from the Middle East and West Africa to the Far East and North America. Since the 1950s, the tanker market has been divided into a Crude Tanker or Dirty Tanker sector and a Product Tanker sector, with a continuous trend towards larger tankers. This trend escalated in the late 1970s with the construction of ULCCs (Ultra Large Crude Carriers). The “jumboisation” phenomenon of constructing 400,000–500,000 DWT tankers has faded, making 320,000 DWT tankers, capable of carrying approximately 2 million oil barrels, the largest critical ships in the tanker market.

• Suezmax Tankers: Tankers of 120,000–200,000 DWT. Suezmax Tankers predominantly carry crude oil, though they occasionally transport oil products when their tanks are coated. These tankers are the largest allowed to pass through the Suez Canal in a loaded condition. Known as “one million barrel ships” because of their oil-carrying capacity, Suezmax Tankers gained the ability to pass through the new lane of the Neo-Panama Canal in 2016, leaving VLCCs and ULCCs as the only tankers unable to navigate this passage.

• Aframax Tankers: Tankers of 80,000–120,000 DWT. Aframax Tankers generally transport crude oil but can also carry oil products when their tanks are coated. An Aframax Tanker has the capacity to carry approximately 750,000–800,000 barrels of oil.

• Panamax Tankers: Tankers of 60,000–80,000 DWT. Panamax Tankers carry both crude and oil products, with most of them being coated. They are the largest tankers allowed to pass through the original Panama Canal when fully loaded. A Panamax Tanker typically carries up to 550,000 oil barrels, though this capacity has increased to 680,000 barrels following the completion of the Neo-Panama Canal expansion.

• Handysize Tankers: Tankers of 10,000–60,000 DWT. Handysize Tankers include those that transport products, chemicals, and other specialized liquids. They range from 100,000–300,000 oil barrels in capacity. Since the 2000s, vegetable oil has become a common product transported by Handysize Tankers.

• Small Tankers: Tankers of 100–10,000 DWT that carry oil products, chemicals, or other specialized liquid cargoes.

Based on the type of cargo, the following Tanker Categories can be identified:

Crude Tankers: Crude Tankers consist of all uncoated tankers over 60,000 DWT that transport crude oil or dirty petroleum products. Crude Tankers can theoretically reach sizes exceeding 500,000 DWT, but in practice, the maximum size is currently over 400,000 DWT.

Product Tankers: Product Tankers are equipped with coated tanks (commonly epoxy, less often zinc or polymer), allowing them to carry refined petroleum products (both Clean and Dirty Cargoes). Product Tankers typically range up to the Aframax size of 120,000 DWT, with some coated Suezmax Tankers reaching up to 160,000 DWT. Furthermore, depending on the haul distance and ship size, Product Tankers can be further categorized as follows:

(a) Long Range 3 (LR3): Tankers of 120,000–160,000 DWT (Suezmax size).

(b) Long Range 2 (LR2): Tankers of 80,000–120,000 DWT (Aframax size). LR2 Aframax Product Tankers typically transport naphtha and other clean petroleum products over long distances, such as from the Middle East to Japan, Korea, or Europe. While most new Suezmax Tankers transport crude oil or middle distillates like gasoil, very few are designed to carry clean products, making LR3 tankers relatively rare in the market.

(c) Long Range 1 (LR1): Tankers of 60,000–80,000 DWT (Panamax size). Most LR1 tankers are used to transport clean petroleum products on long to medium-haul routes, such as from the Middle East and China to the Far East and Europe.

(d) Medium Range (MR): Tankers of 45,000–60,000 DWT.

(e) Handy Products Tankers: Tankers of 10,000–45,000 DWT.

The Medium Range (MR) and Handy Products Tanker categories refer to versatile ships that serve short to medium-haul petroleum product trades, typically on intra-Asian routes or from the Middle East Gulf and Indian subcontinent to the Indo-Pacific basin and Europe.

Chemical Tankers: Chemical Tankers are designed to carry chemicals, equipped with either stainless steel or coated tanks. These coatings can include epoxy/phenolic or Zinc/Marine Line coatings. Chemical Tankers are capable of transporting a wide range of petrochemical products simultaneously in separate holds (parcelling). Their size typically ranges from 10,000–60,000 DWT, though smaller chemical tankers for coastal trade can carry less than 10,000 tonnes. Chemical Tankers are classified based on the International Maritime Organization (IMO) grading of the chemicals they carry:

(a) IMO I ships: Modern, fully segregated Parcel Tankers with stainless steel or coated tanks, designed to carry major hazard cargoes (MARPOL Annex II category “X”).

(b) IMO II ships: Modern, partially segregated Tankers with coated tanks, for medium hazard cargoes (MARPOL Annex II category “Y”).

(c) IMO III ships: Chemical/Product Tankers carrying chemicals of minor hazard (MARPOL Annex II category “Z”).

Chemicals are considered the cleaner cargoes, followed by Clean Petroleum Products (CPP) like naphtha and kerosene, Dirty Petroleum Products (DPP) like fuel oil and diesel, and crude oil. From a ship chartering perspective, chemical cargoes require highly sophisticated ships, so they are transported by Specialized Chemical Tankers. Both Clean and Dirty oil products can be carried by Product Tankers (with careful cleaning between loadings), while crude oil is typically transported by large double-hull crude tankers.

Specialised Tankers: These vessels are designed for transporting specific liquid cargoes other than chemicals. Examples include Asphalt Carriers, Bitumen Carriers (200–30,000 DWT), Shuttle Tankers (35,000–120,000 DWT), and Small Tankers (100–10,000 DWT) that carry products like water, wine, edible oils, waste, slops, sulphur, methanol, and palm oil. Gas Carriers, such as those used for LNG and LPG, and offshore vessels may also be considered Specialised Tankers.

Although generalizations should be avoided, some characteristics of the Tankers’ Market can be identified:

• Most sub-markets within the tanker market adhere to the principles of perfect competition.

• As tankers grow larger and more sophisticated or specialized: ◦ Barriers to entry increase, leading to fewer market participants (Tanker Shipowners, Ship Operators, Tanker Charterers, and Tanker Shipbrokers); ◦ Sensitivity/volatility of Tanker Freight Rates and ship values to economic cycles increases; ◦ The ships become harder to liquidate.

• Safety and the prevention of oil pollution are critical for all parties involved. The regulatory framework is a major factor in shaping the Tanker Market. International regulations for tanker ship safety have become stricter, and oil pollution in any form is unacceptable. Most Tanker Shipowners comply with these regulations, competing for charters, while Tanker Charterers apply strict “Vetting Processes” to carefully select tankers for transporting their cargoes. A notable regulatory impact is the IMO’s (International Maritime Organization) phase-out schedule for single-hull tankers, which was completed by the end of 2015. As a result, all newly built tankers are now double-hull constructions.

• Concentration of Tanker Ownership is relatively low in the broader Tanker Market, but tends to increase in specialized segments or larger ship sizes. Historically, a small number of major Tanker Charterers, the “Oil Majors” (large oil companies), dominated the market. However, over the past 30–40 years, their role in transportation has diminished. Previously, oil companies owned and managed substantial fleets of tankers, but now, they sell off their ships, ceasing business as Shipowners and Ship Operators. Instead, Independent Tanker Owners now build ships based on Charterers’ specifications and enter into charter agreements. Oil producers, particularly in the Middle East, now market their oil through distribution organizations in consuming markets, and only a few have built their own tanker fleets. New oil companies from rapidly growing Asian markets have also developed their own transport policies. The 1980s saw a rise in smaller private firms, known as Oil Traders, and state organizations involved in Tanker Chartering, a trend that continues today. Oil Traders now handle large volumes of oil.

• From a technical perspective, the sea transport of crude oil is essentially uniform globally. However, transporting oil derivatives is more complex. Oil cargoes may differ in two important aspects: Specific Gravity (SG) and required cleanliness standards.

• The relatively small number of loading areas and offshore loading terminals are also characteristic of the Tanker Market, though there has been a notable increase in the number of loading sites over the past three decades.

• Oil Trades may be impacted by the completion of expansion works in the Panama Canal.

• Tankers, particularly those carrying crude oil, often face difficulties in securing return cargoes (Ballast Leg). Therefore, Crude Tankers are typically required to travel in ballast across ocean routes to loading areas.

• Many Shipowners prefer placing their ships on long-term Time Charters, though there is also a significant spot market for tankers. The volume of spot business tends to rise during low-market periods, as Tanker Owners aim to capitalize on potential Freight Rate increases.

• Tanker Charterers, Tanker Owners, and Shipbrokers work with detailed and standardized documents, influenced by the Major Oil Companies over the years, often using a “take-it-or-leave-it” approach. As a result, negotiations for Tanker Charters are generally simpler than those in Dry Cargo Chartering and usually take place within a short time frame. However, the challenges in Tanker Chartering can be greater than in other forms of Ship Chartering. The key is to secure a Fixture at a Freight level that aligns with the prevailing Freight Market conditions. Tanker Market fluctuations tend to be rapid and significant, with the situation often changing drastically from one day to the next. This is primarily due to rapid shifts in oil prices, making Tanker Chartering closely tied to commodity trading. The downturn in oil prices and the Contango oil market have led to increased oil trading, strategic stockpiling of oil reserves by major economies, the use of older tankers as Floating Storage ships, and soaring Tanker Freight Rates, especially for larger tanker sizes. Contango refers to a situation where the Futures Price of a commodity is higher than the expected Spot Price. Given the dominance of Oil Majors and the limited number of parties in certain tanker market segments, each event can have a significant impact, sometimes causing a single Fixture to influence the entire Tanker Freight Market for the day. This is particularly true for sub-markets involving larger tankers, such as VLCCs (Very Large Crude Carriers).

GAS CARRIERS

Historically, gas carriers were considered part of the tanker sector analysis and were regarded as the most significant specialised tankers due to their similarities with other tankers used for transporting bulk liquids. However, since the 2000s, gas carriers have evolved into an independent and continually expanding market, thanks to their rapid development and unique features. Gas carriers are vessels designed to transport condensed (liquefied) gases. A liquefied gas is the liquid state of a substance that, at ambient temperature and atmospheric pressure, would typically be a gas. All gas cargoes are transported in liquid form (not as gas vapor), and due to their physical and chemical properties, they are carried either at:

• Pressures higher than atmospheric, or
• Temperatures lower than ambient, or
• A combination of both.

LIQUEFIED PETROLEUM GAS (LPG) generally consists of various petroleum gases that are stored and transported as liquids under pressure. Unlike Liquefied Natural Gas (LNG), LPG does not require cooling to be liquefied. The most common LPG cargoes are butane and propane, although LPG carriers may also transport ammonia and petrochemicals like ethylene, propylene, olefins (e.g., butadiene), and vinyl chloride monomer (VCM). LIQUEFIED NATURAL GAS (LNG) refers to natural gases (typically methane and ethane) that are compressed at moderate pressure but (unlike LPG) cooled to -259°F (-162°C) to remain liquid. LNG’s volume as a liquid is 1/600th of its volume as a gas. LNG is a colorless, odorless, non-corrosive, and non-toxic liquid. It is stored and transported in insulated pressure tanks or containers.

The LPG Carrier and the LNG Carrier are specially designed ships for the safe transportation of liquefied gas cargoes. Their cargo tank construction can be prismatic, membrane, or spherical. Cargo tanks are often made from aluminum, nickel steel, stainless steel, or other highly insulating materials. A unique characteristic of gas carriers is that the cargo is kept under positive pressure to prevent air from entering the cargo system. Therefore, only liquid cargo and cargo vapor are present in the cargo tank, preventing the formation of flammable atmospheres. All gas carriers use closed cargo systems during loading or discharging to prevent vapor from escaping into the atmosphere. To virtually eliminate cargo release and minimize the risk of vapor ignition, equipment requirements are stringent, including temperature and pressure monitoring, gas detection, and cargo tank liquid level indicators. Due to the need for heavy insulation at extremely low cargo temperatures and the complexity of the equipment, the construction costs of these specialized vessels are extremely high. All gas carriers are highly sophisticated, with LNG carriers considered the most advanced commercial ships. It is important to note that an LNG carrier may cost roughly twice as much as an oil tanker of the same size.

Based on the size of the ships, the following sub-segments can be identified in the LPG market:

• Very Large Gas Carriers (VLGC): LPG ships of approximately 65,000 cbm or larger. These ships are fully refrigerated and mainly operate on long-haul trade routes, such as from the Middle East Gulf (MEG) and the United States to Asia. Modern ships of this size may be referred to as “Very Large Ethane Carriers” (VLECs) designed to transport ethane in large quantities.
• Large Gas Carriers (LGC): LPG ships ranging from approximately 45,000 to 65,000 cbm, primarily transporting LPG and ammonia between ports where VLGCs cannot enter due to limitations. West Africa is a significant loading area for these ships, forming a “niche market” with a limited number of participants.
• Mid-Sized Gas Carriers: LPG ships of approximately 20,000 to 45,000 cbm, typically fully refrigerated, carrying ammonia or LPG on intra-regional routes (e.g., within the Americas or Asia) and medium-haul cross-trades (e.g., in the North Sea and Europe). This sector is crucial for global ammonia trade.
• Handy Gas Carriers: LPG ships ranging from approximately 300 to 20,000 cbm. This diverse segment includes semi-refrigerated, fully refrigerated, and some larger pressurized ships that carry a variety of cargoes, such as ethylene, petrochemicals, LPG, and ammonia, on short to medium-haul routes.

According to their specifications, the following types of Gas Carriers may be recognized, from the simplest to the more sophisticated ones:

Fully Pressurised Gas Carriers: LPG ships with a cargo capacity of less than 11,000 cbm, equipped with fully pressurised tanks. These are the simplest type of gas carrier, transporting propane, butane, and chemical gases.
Semi or Fully-Refrigerated and Semi-Pressurised Gas Carriers: LPG ships with a cargo capacity of less than 28,000 cbm, carrying various petrochemical gases except ethylene. Initially semi-refrigerated, they now feature fully-refrigerated and semi-pressurised tanks. A refrigeration plant is installed to provide full refrigeration while maintaining high pressure in the cargo tanks, though not as high as in fully pressurised carriage. A substantial reliquefaction plant is typically installed to allow the loading of cargo as gas and then reliquefy it onboard if needed.
Ethylene Gas Carriers: LPG ships with a cargo capacity up to 22,000 cbm. These ships are more sophisticated than semi-pressurised ones, able to carry ethylene at its atmospheric pressure boiling point in a fully-refrigerated state. They transport most liquefied gas cargoes, except LNG, and feature thermal insulation and a high-capacity reliquefaction plant in cylindrical or bi-lobe tanks. These carriers are versatile, capable of loading or discharging at pressurised and refrigerated terminals, offering great cargo-handling flexibility.
Fully-Refrigerated Gas Carriers: LPG ships with cargo capacities ranging from 18,000 to 86,000 cbm, equipped with fully refrigerated tanks. They transport liquefied gases like LPG, ammonia, and vinyl chloride at low temperatures and atmospheric pressure over long distances, between terminals with fully refrigerated storage tanks. Their prismatic-shaped cargo tanks, made from nickel steel, allow them to carry cargo at temperatures as low as -48°C.
Insulated Gas Carriers (LNG): LNG ships, with cargo capacities ranging from 1,000 to 267,000 cbm, are fitted with independent membrane cargo tanks, enabling the transport of LNG at its atmospheric pressure boiling point of about -162°C, depending on the cargo grade. These highly specialized ships, in smaller sizes, may also carry basic LPG cargoes. If capable of transporting LPG, a reliquefaction plant is installed to handle LPG cargo vapors. Typically, LNG carriers are fully insulated, as liquefying methane onboard is not cost-effective, although early ships with reliquefaction plants have appeared. The LNG market has grown rapidly since 2010, driven by expanding demand in regions like Asia and South America, increased regasification capacity in countries like China and India, and new LNG export projects in locations like Angola, Papua New Guinea, and Australia.

Some general characteristics of the Gas Carriers’ market are as follows:

• Seaborne transportation of liquefied gases began in the 1930s.
• Gas Carriers trade worldwide, with a useful lifespan of over 25 years.
• The gas carrier market is a closed, specialized, and highly sophisticated market because:
◦ Barriers to entry are high.
◦ Investment costs are substantial. Due to this, gas shipping companies may list on stock exchanges to broaden capital sources. As most gas carriers are employed under period charter contracts with major Charterers, this ensures clearer revenue visibility and increases the potential for dividend earnings for stakeholders.
◦ Freight Rates and ship values are highly sensitive/volatile to economic cycles.
◦ Ships are difficult to liquidate due to high investment costs and significant specialization requirements.
◦ Specialized expertise in cargo handling and operations is essential.
◦ The number of Shipowners, Ship Operators, Shipbrokers, and Charterers is relatively small.
◦ Gas carriers, especially LNG ships, are commonly built for long-term charter contracts (sometimes lasting the entire ship’s life) with First-class Charterers. Nearly 70% of LNG ships are employed under period contracts, with only 30% operating in the spot market.
◦ Shipowners and Charterers, particularly in the LNG market, are often long-standing business partners. Chartering contracts generally follow standard forms from BIMCO (e.g., GASVOY for gas voyage charters or GASTIME for time charters of gas carriers), or more commonly, private contracts issued by major Charterers.

• The expansion of the Panama Canal is expected to significantly impact gas trade, cargo shiploads, and ship sizes.

 

 

OFFSHORE SHIPS

The offshore sector, closely tied to the oil and tanker market, focuses on the exploration and extraction of oil in open seas using semi-permanently anchored oil platforms, drilling ships, and drilling rigs. Since the 2000s, a specialized Offshore Charter Market has emerged for these “ships” and their support vessels, known as supply ships. Activity in the Offshore Charter Market fluctuates significantly, directly impacting the demand for supply ships. These vessels can sometimes compete for cargoes with smaller ships in short-sea trades and are also utilized for towing operations.

Additionally, there are advanced Shuttle Tankers, Buoy Loaders, and FPSO/FSO units (Floating Production Storage and Offloading/Floating Storage and Offloading), which are typically constructed by owners for long-term chartering contracts with specific Major Oil Companies. In certain scenarios, these vessels may enter the open market to compete with conventional tankers.

The Offshore Ships’ Market is heavily influenced by oil prices. In a global context of high oil prices, interest in oil exploration rises, driving up demand for offshore ships and increasing Freight or Hire rates. Conversely, lower oil prices lead to reduced demand and rates.

The Offshore Ship Market encompasses a wide variety of vessels, including:

  • Mobile Offshore Drilling Units (MODUs): These include oil platforms, submersible and semi-submersible units, jack-up drilling rigs, and drill-ships. Platforms are supported by concrete or steel legs anchored to the seabed, while submersible rigs can be floated to locations and lowered for drilling. Jack-up Rigs are mobile platforms with extendable legs, and drill-ships are ship-shaped structures equipped with advanced drilling and propulsion systems. These units operate in water depths ranging from 1,000 to 12,000 feet.
  • Construction Ships/Platforms: These vessels are involved in installing infrastructure for oilfield production or conducting inspection, repair, and maintenance. Examples include derrick crane ships, pipe/cable layers, heavy lift ships, dive support vessels, and dredgers.
  • Mobile Offshore Production Units (MOPUs): These units facilitate oil production and processing in remote or deepwater areas where fixed platforms or pipelines are impractical. The most common type is the Floating Production Storage and Offloading (FPSO) unit, often converted from oil tankers or purpose-built.
  • Logistics Units: This category includes Floating Storage and Offloading (FSO) units and Shuttle Tankers. FSOs are typically moored near MOPUs to store processed oil until it can be transported to shore. Shuttle Tankers are specialized vessels designed to load oil in open water and transport it to onshore facilities, with sizes ranging from 30,000 to 160,000 DWT.
  • Anchor Handling Tugs (AHT): These tugs handle anchors for offshore rigs, with towing capacities between 1,000 and 25,000 BHP.
  • Anchor Handling Tug Supply ships (AHTS): Dual-purpose vessels for anchor handling, towage, and supply duties, with towing capacities up to 35,000 BHP. They are essential for offshore operations, delivering supplies and providing emergency towing services, especially in harsh environments like the North Sea or ultra-deepwater regions.
  • Platform Supply Ships (PSV): These ships transport materials to rigs and platforms, with cargo capacities up to 8,500 DWT. Larger PSVs operate in challenging conditions, while smaller, faster vessels serve closer to shore.
  • Rescue Salvage Ships: These vessels handle emergency response, salvage operations, or barge towing. Examples include Emergency Response and Rescue Ships (ERRV) and Ocean Going Tugs, the latter capable of towing large offshore units or assisting ships in distress.
  • Survey Units: These conduct seismic, geophysical, or oceanographic surveys, while Utility Support Ships assist larger offshore vessels in their operations.
Some general characteristics of the Offshore Ship Market include the following:
  • It operates as a closed, highly specialized, and sophisticated market.
  • Freight/Hire rates and ship values are entirely dependent on oil prices and economic cycles. When oil supply is abundant and prices are low, oil exploration becomes unprofitable, leaving offshore ships idle while incurring significant fixed operating costs.
  • High investment costs create substantial barriers to entry.
  • Shipowning companies may list on shipping exchanges to access broader sources of capital.
  • Specialized operational expertise is essential.
  • Ships/units are difficult to liquidate due to their high investment costs, specialized nature, and reliance on oil price-driven earnings.
  • Drillships and oil platforms are typically leased to oil majors under medium- to long-term charters. Owners often construct offshore ships, especially costly ones like oil platforms and drillships, only after securing charter contracts with oil Charterers. Spot Chartering is uncommon.
  • The number of Shipowners, Ship Operators, Shipbrokers, and Charterers is very limited.

 

 

COMBINED CARRIERS

Combined carriers are ships capable of transporting both liquid and dry bulk cargoes. The most common types include:

  • OBO: Ore/Bulk/Oil
  • PROBO: Products/Ore/Bulk/Oil
  • O/O: Ore/Oil

These ships range in size from 30,000 to 320,000 DWT. Although Combination Carriers still hold a market position, their role has shifted from their original purpose. Initially, they were designed to perform combined voyages, such as carrying dry bulk cargo in one direction and oil cargo on the return leg. This approach aimed to reduce ballast time, increase earning time, and improve round voyage efficiency. However, such operations demand significant flexibility, skilled management, and strong teamwork among the owner’s staff.

In practice, most Combo Carrier Operators prefer to use their ships either as pure tankers or pure bulk carriers, depending on which market offers better financial returns at the time. This shift has been driven by challenges in combining Freight Contracts and practical issues like the costs of cleaning the ships’ holds between different cargo types.

Historically, Combination Carriers played a vital role by increasing the supply of tonnage in the market where they operated. This ability allowed them to weaken upward trends in Freight levels or strengthen downward trends. However, their influence has diminished over time, as few new combos have been built since the 2000s, and older ones are being scrapped without replacement.

Klaveness Combination Carriers (KCC), a subsidiary of the Norwegian ship owning and operating company Torvald Klaveness, introduced modern Combination Carriers, including CABU-type and CLEANBU-type Combination Carriers. CABU-type Combination Carriers, ranging from 72,500 to 80,500 DWT, are designed to transport caustic soda solution, floating fertilizer, molasses, and various dry cargoes. These ships operate in regions such as the Far East, the Middle East, Australia, Brazil, and North America. Caustic soda shipments are primarily based on Contracts of Affreightment (COA), while dry cargoes are transported through a mix of spot and contract shipments. CLEANBU-type Combination Carriers, at 82,500 DWT, function as both fully-fledged LR1 product tankers and kamsarmax dry bulk carriers. They transport clean petroleum products, heavy liquid cargoes, and a wide range of dry bulk commodities, including alumina, bauxite, iron ore, salt, and coal.

CABU-type and CLEANBU-type Combination Carriers are specialized ships capable of transporting multiple cargo types, such as oil and bulk goods, in a single voyage. These ships are highly efficient and versatile, offering significant operational and environmental advantages. Below is an overview of each type:

CABU-type Combination Carriers

  • Design and Functionality: CABU (Chemical and Bulk) carriers are built to transport both chemical products and dry bulk cargoes, such as grains, fertilizers, or minerals. They feature segregated cargo tanks and advanced cargo handling systems to prevent cross-contamination between different cargo types.
  • Operational Flexibility: CABU (Chemical and Bulk) carriers enable shipowners to switch between liquid chemicals and dry bulk cargoes based on market demand, maximizing vessel utilization and profitability.
  • Environmental and Economic Benefits: By reducing the need for ballast voyages (empty trips), CABU-type carriers enhance fuel efficiency and lower emissions, supporting more sustainable shipping practices.
  • Typical Use Cases: CABU (Chemical and Bulk) carriers are often employed in trades where both chemical and bulk cargoes are in demand, such as transporting chemicals to industrial hubs and returning with agricultural or mineral products.

CLEANBU-type Combination Carriers

  • Design and Functionality: CLEANBU (Clean Bulk) carriers are designed to carry clean petroleum products (e.g., refined oil, diesel, or jet fuel) and dry bulk cargoes (e.g., grain or fertilizers). They are equipped with specialized tanks for liquid cargo and holds for dry bulk, ensuring safe and efficient transportation of both cargo types.
  • Operational Flexibility: Like CABU-type carriers, CLEANBU ships can alternate between liquid and dry cargoes, optimizing operational efficiency and reducing downtime.
  • Environmental and Economic Benefits: CLEANBU carriers also minimize ballast voyages, cutting fuel consumption and emissions. Their ability to carry multiple cargo types in a single trip improves cost-effectiveness and reduces the environmental impact of shipping operations.
  • Typical Use Cases: These ships are commonly used in routes where refined oil products and dry bulk commodities are traded, such as transporting fuel to agricultural regions and returning with grain or other bulk cargoes.

Key Differences Between CABU and CLEANBU Carriers

  • Cargo Types:
    • CABU carriers specialize in transporting chemicals and dry bulk.
    • CLEANBU carriers focus on clean petroleum products and dry bulk.
  • Tank Design:
    • CABU carriers feature tanks designed for chemical compatibility.
    • CLEANBU carriers have tanks optimized for clean petroleum products.
  • Market Focus:
    • CABU carriers are more prevalent in chemical and industrial trades.
    • CLEANBU carriers are frequently used in energy and agricultural trades.

Advantages of Combination Carriers

  1. Versatility: The ability to transport multiple cargo types expands market opportunities.
  2. Efficiency: Reducing ballast voyages saves fuel and lowers emissions.
  3. Cost-Effectiveness: Maximizes revenue potential by adapting to market demands.
  4. Sustainability: Supports global efforts to minimize the environmental impact of shipping.

Combination carriers such as CABU and CLEANBU exemplify a progressive approach in the maritime industry, striking a balance between operational efficiency, economic viability, and environmental responsibility.

 

 

CONTAINERSHIPS

Fully cellular containerships are ocean-going merchant ships specifically designed and built to stack containers efficiently, both in the holds and on deck. These ships exclusively carry standard-sized intermodal containers, which streamline loading, unloading, and transportation to and from the ship. While there is a wide variety of container types, the most common dimensions are 8 feet (2.4 m) in width, 8 feet 6 inches (2.6 m) in height, and either 20 or 40 feet (6.1 m or 12.2 m) in length. The ship’s hull is divided into cells, accessible through large hatches, with additional containers loaded on deck above the closed hatches. Loading and unloading are performed simultaneously using massive traveling cranes at specialized container berths.

Fully Cellular Containerships are highly specialized ships operating exclusively in the liner sector. They face competition from versatile vessels such as cellular containerships with Ro/Ro capability (which transport containers in cells or on truck trailers), modern Tween-Deckers, Multi-Purpose Ships (MPPs) that carry general or dry bulk cargo alongside containers, Con-bulkers designed for dry bulk and containers, and even pure Ro/Ro ships, reefers, car carriers, and the LASH and SeaBee Floating Barge Systems (referred to as Lighters) capable of carrying containers.

The Containership Market is heavily influenced by Panama Canal restrictions, leading to a transition phase. Based on size, the market is divided into the following loosely defined sub-markets:

  • Post-Panamax and Neo-Panamax Containerships: The classification of a containership as Panamax or Post-Panamax depends not on its size (i.e., container capacity in TEU) but on its beam and ability to transit the Panama Canal. Post-Panamax Containerships cannot pass through the Canal and primarily serve long-haul deep-sea liner trades, often being gearless. Before the Neo-Panama Canal Locks, the largest ships able to cross the Canal were long, narrow containerships with a maximum capacity of 5,300 TEU. However, the construction of the third lane of locks now allows containerships of up to 14,500 TEU to pass, creating the “Neo-Panamax” category for ships of 8,000–15,000 TEU. Ships exceeding 14,000–15,000 TEU, depending on their dimensions, are classified as Post-Panamax or Ultra Large Container Ships (ULCV). The sizes of larger container ships continue to grow to achieve economies of scale, significantly increasing the global container fleet’s capacity. Containerships over 8,000 TEU operate on major routes such as Far East–Europe and Trans-Pacific trades.
  • Intermediary and Old Panamax Containerships: These ships, with capacities of 3,000–8,000 TEU, are either too wide or unable to transit the old Panama Canal locks. They are deployed on various routes, including Trans-Pacific, Trans-Atlantic, North–South, non-main lane East–West trades, and intra-regional services. Most are gearless, and their future remains uncertain, with questions about whether they will find new trading opportunities or face scrapping.
  • Sub-Panamax Containerships: With capacities ranging from 2,000–3,000 TEU, these ships are mostly gearless and serve North–South and intra-regional routes, connecting mainline services with secondary ports not directly served by larger liners.
  • Handysize Containerships: These ships have capacities of 1,000–2,000 TEU and are involved in regional, short-sea, draught-restricted, or feeder liner trades, similar to Sub-Panamax ships. Most are geared.
  • Feeder/Feedermax Containerships: With capacities of 100–1,000 TEU, these ships operate in smaller, niche, regional, short-sea, draught-restricted, or feeder liner trades. Most are geared.

In general, the most important features of the Containerships’ Market are as follows:

  • Containerships are always employed in regular lines. They are either owned and operated by Liner Companies that manage their own liner networks or owned by independent Shipowners who charter them out (typically under Period or Bareboat Charters) to these Liner Companies. As a result, the Containerships Spot Charter Market holds little significance. Additionally, the Time Charter Market for containerships is often one of the first to react to changes in global trade conditions, likely because these ships are involved in the worldwide transport of finished, semi-finished, and some agricultural products.
  • The larger the Containerships:
    • The greater the barriers to entry for both Liner Operators and independent Shipowners.
    • The higher the sensitivity/volatility of ships’ values to economic cycles.
    • The more challenging it becomes to liquidate Containerships.
  • The current trend is to build increasingly larger Containerships, enabling Liner Companies to reduce unit transport costs through economies of scale and offset significant fixed costs.
  • The Containerships market has a dual dimension in terms of involved parties. On one hand, the liner business involves Liner Operators, Shippers, Liner Agents, and Freight Forwarders, whose goal is to book cargoes under a Booking Note and transport them via regular lines under a Bill of Lading. On the other hand, Liner Companies charter ships from independent Shipowners through specialized Shipbrokers’ networks in the Open Market, typically under a Period Charter Party (Time Charter or Bareboat). This aspect is the most critical part of the containerships market from a Chartering/Shipbroking perspective.
  • Containerships operate within a global Liner Network, firmly established in routes connecting highly industrialized regions (e.g., USA, Europe, Asia) with advanced inland transportation systems in both exporting and importing areas. This requires substantial investment in specially equipped ships, port facilities, and terminal infrastructure. The Container Liner Network expands through Hub and Spoke systems, where containers are transported on main routes (e.g., Trans-Atlantic, Trans-Pacific, Asia-Europe) and then transferred to smaller Feeder Ships operating in regional routes (e.g., the Mediterranean Sea) to reach their final destinations.
  • Containerships are often managed by International Alliances, joint ventures, consortia, and pools due to the high investment costs, the need for multinational marketing, and the demand for comprehensive, value-added services from customers.

It is worth noting that there is some overlap between the employment of Liner Ships and Tramp Ships. When Freight Rates for various dry cargoes rise, Charterers explore alternative shipping solutions. As a result, trades traditionally handled by Bulk Carriers, Multi-Purpose Ships (MPPs), or Reefers in pure Bulk Markets (Tramp Markets) may shift to being fully containerized and executed by pure Containerships, General Cargo Liners, or Reefers within a Liner Network. This applies not only to unitized cargoes but also to pure bulk cargoes.

Multi-Purpose Ships (MPPs)

A Multi-Purpose Ship (MPP) is designed to carry various types of dry bulk cargoes, general cargoes, and containers simultaneously, each requiring different handling methods. Con-bulkers and Barge Carriers are not part of the Multi-Purpose Ship (MPP) category. Multi-Purpose Ships (MPPs) are small, versatile ships that are not fully cellular container-capable, meaning they lack fixed cell guides in all holds but may have partial coverage or portable guides. Their container-carrying capacity is at least 100 TEU, while their typical cargo capacity in tonnage ranges from 8,000 to 25,000 DWT. Multi-Purpose Ships (MPPs) generally have a high TEU/DWT ratio. This category includes various types of ships, such as those capable of carrying Roll on/Roll off (Ro/Ro) cargo alongside containers. Minor bulks are often transported as either dry bulk or general cargo.

Multi-Purpose Ships (MPPs) operate globally, providing both Tramp and Liner Services. They can be single-deckers or tween-deckers and are always geared. The market structure for Multi-Purpose Ships (MPPs) follows the principles of perfect competition, with cost control being crucial for all parties involved. Ownership concentration is very low, with Shipowners, Charterers, and Shipbrokers widely dispersed worldwide. Multi-Purpose Ships (MPPs) face intense competition from Containerships, General Cargo Ships, Small Bulk Carriers, Con-bulkers, Ro/Ro ships, Reefers, and other Liner and Tramp ships.

 

GENERAL CARGO SHIPS

This broad category includes various ship types, such as Tween-Deckers, Break Bulk Freighters, Cattle Carriers, Pallet Carriers, Timber Carriers, and more. Sophisticated General Cargo Ships are often built for specific trades, such as Timber Carriers for forest products (6,000–20,000 DWT) or Cattle Carriers for livestock. A standard Tween-Decker typically refers to a ship of 17,000–23,000 DWT, equipped with derricks and/or cranes and featuring one tween-deck throughout. Tween-deckers can be classified as either Multi-Purpose Ships (MPPs) or General Cargo Ships.

Before containerization, all cargo was transported on General Cargo Ships, carrying Break-Bulk Cargo such as bags, sacks, and individual items. With the rise of containerization, the number of General Cargo Ships has declined. These ships now primarily carry cargo too large for containers, such as steel, wire rolls, and machinery, as well as boxed cargoes too small to justify full container use.

Conventional General Cargo Ships mainly operate in regional and secondary lines, though they may also serve Tramp Shipping Markets. Ownership may belong to Liner Companies or independent Shipowners, who charter them to Liner Operators or in the Open Market. Within this sector, General Cargo Liners are faster Tween-Deckers designed for pre-containerization liner trades (usually over 5,000 DWT, with high DWT/TEU ratios and service speeds), while General Cargo Tramp Ships are slower vessels.

REEFER SHIPS

A Reefer Ship is specifically designed to transport cargoes that require refrigeration, such as meat and fruits. These ships feature insulated holds where cold air is circulated at temperatures suitable for the cargo being carried. Reefer Ships operate globally, with their carrying capacity measured in volume, reaching up to 460,000 cubic feet. They can be employed in the Open Market, functioning similarly to Bulk Carriers, or in secondary/regional/short-sea trades within the Liner Market, where they complement or compete with container ships. Modern Reefer Ships often have permanent fittings on deck and above hatches for Reefer Containers, enhancing their capacity and meeting specific customer demands. This allows Reefer Ship owners to compete with regular liner services or even participate in certain liner trades.

The primary competitor to specialized Reefer Ships is the rapidly expanding container fleet. The comparison between the total reefer capacity of containerships and that of pure Reefer Ships reveals a significant dominance of containerships over the years. As a result, the Reefer Ship fleet is aging, and orders for new ships are declining.

To improve profitability and survive in this competitive environment, Reefer Ships can also carry a variety of dry products, such as bagged cargoes, paper, lightweight unitized cargoes, containers, or even cars, provided Freight Levels allow. This places them in direct competition with other ship types, including Tween-Deckers, Multi-Purpose Ships (MPPs), general cargo liners, small bulk carriers, Ro/Ro ships, and Car Carriers operating in the Open Market.

Within this sector, the most common ship types include:

  • Pure Reefers: Fully refrigerated holds for temperature-sensitive cargo.
  • Freezers: Capable of carrying frozen cargo.
  • Container-Capable Reefer Ships: Designed to transport containerized refrigerated cargo.
  • General Cargo Reefers: Able to carry break-bulk cargoes in addition to refrigerated goods.
  • Reefers with Ro/Ro Capability: Equipped to load wheeled cargoes.

Some general characteristics of the Reefer Ships’ market are as follows:

  • The Reefer Ships Market is closed, specialized, and highly seasonal. Demand peaks in the first half of the year when products from the southern hemisphere are shipped to Europe, the USA, and Japan. While bananas and meat are transported year-round, fish, citrus fruits, vegetables, and potatoes are seasonal.
  • Barriers to entry are high.
  • Freight Rates and Reefer Ships’ values are highly sensitive and volatile to economic cycles.
  • The number of Reefer Shipowners, Reefer Ship Operators, and Reefer Ship Shipbrokers is limited. Charterers are often large state or private organizations, and sometimes charters are arranged directly between Shipowners and Charterers without Shipbrokers.
  • Reefer Ships are primarily employed in contract trading, but a significant spot market also exists. Demand depends on crop yields in various regions, and sudden supply issues can lead to rapid rerouting of ships. Shipping programs and contracts typically follow strict schedules and require precise timing.
  • Loading areas for Reefer Ships are worldwide, but discharging areas are concentrated in Europe, the USA, and Japan. This creates a one-way trade route and a significant geographical imbalance in loading and discharging locations.
  • Reliable technical equipment, skilled cargo handling, and proper cargo treatment during voyages are critical. Efficiency is achieved by minimizing ballast and maximizing cargo capacity. Palletization is commonly used to reduce port time and costs.
  • The future of Reefer Ships is uncertain, as the reefer capacity of containerships has far surpassed that of conventional Reefer Ships. The Reefer Ship fleet has been steadily declining.

RO/RO SHIPS and PASSENGER SHIPS

A Ro/Ro Ship is designed to transport wheeled cargo, which is rolled on and off the ship via ramps, as well as cargo loaded using Lift-on/Lift-off (Lo/Lo) equipment (e.g., forklift trucks), containers, and/or break-bulk cargo. Ro/Ro Ships can be self-sustaining and are equipped with large openings at the bow and stern, and sometimes on the sides, allowing rapid loading and unloading through hydraulically operated ramps. Fully loaded trucks or trailers carrying containers are accommodated on the internal decks of Ro/Ro Ships.

The Ro/Ro Ship Market emerged relatively late as a distinct sector. Initially, Ro/Ro Ships were primarily used in short-haul trades between highly industrialized countries. However, several factors transformed them into players in long-distance ocean traffic.

During the 1970s, the overseas transport of industrial products, machinery, vehicles, and building materials surged, particularly from Europe and the United States to the Middle East and from Europe to West Africa. Ports in importing countries had limited capacity, leading to severe congestion due to excessive ship arrivals and an inability to handle the growing cargo volume. At the same time, Liner Companies operating in these regions with conventional General Cargo Ships began renewing their fleets. The solution to these challenges was the ocean-going Ro/Ro Ship, which required minimal port infrastructure, offered fast and flexible cargo handling, and could transport a mix of commodities, including rolling units, cargo movable by forklift trucks, and containers.

Regarding Passenger Ships, large vessels designed solely for passengers are now primarily used for cruising. Most Passenger Ships operate on short-distance routes with frequent, tightly scheduled trips, known as Ferry Traffic. These ships often have significant capacity for rolling cargo, complementing pure cargo Ro/Ro Ships in the same trading areas. The Passenger Ship market is heavily influenced by seasonal variations.

In addition to Cruise Ships and Pure Passenger Ships that do not carry cargo, this sector includes a variety of other merchant ships, such as:

  • Ro/Ro Freighters: Equipped with roll-on/roll-off ramps and limited accommodation for drivers/passengers.
  • Passenger/Car Ferries: Designed with high passenger capacity relative to cargo.
  • Ro/Pax Ships: Focused more on cargo transport than passengers.

Some general characteristics of the Ro/Ro Ships’ Market include:

  • Although Ro/Ro Ships are flexible and versatile, the market is relatively closed and highly specialized due to:
    • High barriers to entry, especially for larger, more expensive ships, leading to concentrated ownership.
    • High sensitivity/volatility of Freight Rates and Ro/Ro Ships’ values to economic cycles.
    • Smaller Ro/Ro Ships being easier to liquidate than larger ones.
    • The need for specialized cargo-handling expertise, as each trade has unique requirements and varying ports of call.
    • Competition with containerships, requiring Ro/Ro Ships to adapt to survive in the market.
  • Ro/Ro Ships operate globally and are particularly useful in regions with underdeveloped port facilities. They are commonly employed in Liner Services, such as North–South trades (e.g., USA–South America, Europe–Africa) and regional routes (e.g., Intra-Asian), as well as short-sea/coastal services and the Open (Tramp) Market.
  • Specialized Ro/Ro Shipbrokers handle the chartering of these ships, with some focusing exclusively on specific segments of the Ro/Ro Ships market.

 

 

CAR CARRIERS

Car Carriers are specifically built to transport fully assembled vehicles and cars. They have the capacity to carry between 2,000 and 8,500 vehicles using a roll-on/roll-off loading system. These Car Carriers are typically designed with hoistable and reinforced decks to accommodate high and heavy vehicle cargoes. While most transported vehicles are medium-sized passenger cars, other types such as lorries, trucks, tractors, and buses are also included. The Car Carriers Market has gained significant importance over the past few decades.

Alongside the trade of fully assembled vehicles, there is also a market for used cars transported from Europe, the USA, and Japan to Africa, South America, and Asia. Additionally, a substantial volume of car parts, known as Cars Knocked Down (CKD), is shipped for assembly in factories at the receiving destinations. These cargoes can be transported either by Car Carriers or other liner ships.

In large-volume international trade, cars are transported using purpose-built ships called Pure Car Carriers (PCC). Car Carriers designed to also transport large vehicles are referred to as Pure Car Truck Carriers (PCTC). These typically have a capacity of 2,000–7,000 Car Equivalent Units (CEU), though newer “Large Car Truck Carriers” can accommodate over 8,000 CEU. Loading and unloading of PCCs/PCTCs is performed using Ro/Ro methods, ensuring a highly efficient process. The mass transportation of fully assembled ships is exclusively done through the Ro/Ro system using PCCs, Ro/Ro ships, and Ferries. A key reason for this is that Shippers of cars generally avoid shipment via Lo/Lo tonnage (lifting methods) when Ro/Ro alternatives are available.

For smaller shipments (ranging from a few cars up to approximately 100–150 per shipment), liner services handle the transportation at standard liner rates. However, when volumes increase to between 200 and 900 units per shipment, Charterers may opt for Reefer tonnage, which, with multiple “Tween-Decks,” provides the necessary deck space.

The primary trade routes for fully assembled vehicles include shipments from Japan and South Korea to the USA and Europe, as well as from Europe to the USA. Additionally, significant inter-European trade occurs. Secondary trade routes, in terms of volume, extend from Europe and the USA to the Middle East, Africa, Central and South America, as well as from Japan to these regions and Australia. China is increasingly becoming a key player, primarily as an importer rather than an exporter of new cars.

The Car Carrier Market is highly specialized and operates within a closed network. Key characteristics include:

  • A limited number of Car Carrier Shipowners, Ship Operators, Shipbrokers, and Charterers.
  • The Car Carrier Market functions as a closed system with minimal reliance on Shipbrokers, as business is predominantly conducted through long-term chartering agreements between a few Ship Operators and car manufacturers. Car Carriers are frequently built under Time Charters lasting 10–15 years.
  • In addition to standard Time Charters, Contracts of Affreightment (CoA) are also commonly used in the Car Carrier Market.
  • Freight rates and Car Carriers’ values are highly sensitive to economic cycles and market fluctuations.
  • The market does not follow a seasonal pattern but is instead influenced by factors such as World GDP growth, consumption trends, and economic developments in major economies.
  • Car Carriers are not easily liquidated, as the second-hand Car Carrier Market is relatively shallow.
  • High entry barriers exist in the Car Carrier Market, making it difficult for new players to enter.

 

 

COASTER SHIPS

A large number of ships with a capacity of 10,000 dwt or less operate in this segment. Dry cargoes can be transported by small pure bulk carriers, Multi-Purpose Ships (MPPs), or General Cargo Ships, which may also have a small container capacity. Specialized liquid cargoes are carried by small tankers accordingly. These liquid cargoes may include water, wine, edible oils, asphalt, bitumen, waste, slops, palm oil, sulphur, and more.

Most Coaster Ships are engaged in short-sea and coastal trading. In some cases, coastal shipping is exclusively reserved for ships registered in the coastal state, a practice known as “Cabotage Trade.” The charter markets for small ships operate through independent information systems and communication networks. These markets function separately (for example, the market for small bulkers is distinct from that of small tankers), and fluctuations in the Coaster Freight Market and Freight Rates do not necessarily align with those of ocean-going vessels (for instance, the trends in Freight Rates for small coaster tankers may differ from those of ocean-going tankers).

In the dry cargo sector, many shipping companies conduct independent operations with smaller-sized ships. However, the prevailing trend is to use small single-deckers or tween-deckers in scheduled feeder services. As a result, these ships compete with other carriers in the Short-sea Trades, including larger ships carrying part-cargoes, as well as road and rail transportation.

Typical Feeder Ships (Small Containerships or Multi-Purpose Ships) often seek employment in the Open Market based on occasional demand. However, it is also common for ocean Liner Companies, Freight Forwarding Agents, or Charterers managing their own products to operate Feeder Ships as part of their transportation strategy.

Coaster-size and Feeder owners and operators frequently collaborate by pooling their fleets and administrative resources to secure chartering contracts, optimize ship scheduling, maximize employment earnings, and reduce costs.

Some Shipowners specialize in customizing their ships and operations for what is known as Industrial Shipping. This involves long-term cooperation with major exporters, importers, or industries, providing an integrated transportation link within their overall logistics network.

 

 

SPECIALISED SHIPS

Apart from the previously mentioned types of ships—some of which are considered specialised and operate within distinct markets—there are several highly Specialised Ships designed to meet specific transportation needs. Among these, the following types are particularly noteworthy:

  • Heavy-lift Carriers
    Some Shipowners specialize in Heavy-lift Cargoes and technically complex transport operations, where the most challenging aspect is the movement between the quay and the ship. To handle such tasks, ships must be equipped with Heavy Lifting Gear. Special requirements for stability and structural strength are necessary, particularly concerning the ships’ gear.
  • Barges and Pontoons
    This transport system is also used for carrying heavy materials, such as pre-assembled drilling rigs. Additionally, they serve as floating quays, feeders in short-sea traffic, and discharge platforms between an ocean-going ship and the quay. The tug-barge system relies on a logistical approach in which a detachable pushing tug unit serves as the engine for multiple cargo-hold units. The most well-known systems of this type are called LASH and Seabee.
  • Tugs
    The demand for towing ships has increased with the expansion of the offshore industry. Beyond this, towing services for the merchant fleet have remained relatively stable worldwide. Tugs are regularly employed not only to assist ships in arriving at and departing from ports but also for salvage operations.

 

 

 

Ship Charter Rates and the State of the Freight Market

FREIGHT MARKET MECHANISM

Freight plays a pivotal role in a Charter Party, acting as the central component in all segments of the Open Chartering Market. Here, the price for sea transportation, referred to as the Freight, is shaped by the negotiation strength of the Shipowners and the Charterers, influenced by the current conditions of the Freight Market (Charter Market) and specific charter requirements. The Fixture Rate for a particular charter usually aligns closely with the prevailing conditions of the Freight Market for the respective ships and charter types. The dynamics of the Freight Market are determined by the supply and demand for sea transportation services at any given moment. A multitude of factors, both predictable and unpredictable, can impact the supply and demand dynamics, thereby influencing Freight Rates. Furthermore, since the demand for sea transport derives from the need for the cargoes being transported, it’s accurate to say that Freight levels are essentially shaped by the commercial balance and negotiation power between buyers and sellers in the competitive arena of international trade.

Significant differences exist between the Liner Freight Market and the Open Freight Market. The Open Freight Market is where ship tonnage is typically secured on a voyage-by-voyage basis, known as the Spot Market. Here, buyers of sea transport secure the necessary ships (tonnage) to transport available cargoes. This market also encompasses the Time Charter segment and significant contractual arrangements like Bareboat Charter and Contract of Affreightment (CoA). Freight Rates are set through a negotiation process involving Shipowners, Charterers, and their Shipbrokers. Conversely, the Liner Freight Market operates under Freight Contracts between Liner Operators and Shippers, usually on a regular basis like annually or semi-annually, with pricing based on complex schemes categorizing cargoes into groups or classes, each priced according to predetermined tables.

A significant portion of the world’s cargo volume transported by sea is handled in the Open Freight Market, with the remainder managed by Liner Shipping Services through strictly scheduled routes with controlled Freight terms. The total volume of Open Market Fixtures primarily fluctuates between Spot Fixtures and Time Charters, with the share of Spot Chartering increasing during economic downturns, reflecting a reduced demand for sea transport.

The Open Freight Market is shaped by the Laws of Supply and Demand for ships, though it’s an oversimplification to say that the Freight Market (Chartering Market) is driven solely by these factors. Freight Rate fluctuations can be vast and intense, especially for tankers and bulk carriers. Over time, Freight Rate trends in the Dry Bulk Markets and Tanker Markets generally align with global industrial output, although they may diverge due to short-term seasonal changes not only from market fundamentals but also from major external geopolitical, social, and other factors like wars, embargoes, natural disasters, and strikes. The link between Freight Rates and global industrial activity is especially evident with the leading dry bulk commodities, iron ore and coal, which are fundamental to the steel industry, while seasonal demand shifts for ships transporting grain are influenced by the global and local “crop season”.

A portion of the world’s total available cargoes and ships within the Freight Markets is negotiated, often confidentially, between the Shipowners and Charterers, resulting in agreements for Time Charters and other Long-term Period Charter Parties. The remainder comprises cargoes seeking ships and ships in search of employment, which forms the so-called Spot Market (Spot Chartering Market). This market evolves daily, impacting every geographical area and accommodating a broad range of ship types, sizes, and features. The dynamics and terms negotiated in the Spot Market within shipping sectors are continuously reported by Shipbrokers and shipping publications. Despite the availability of information which has somewhat lessened the surprises, the Spot Market still responds swiftly to external factors like war or armed conflict, although the volatility in the Freight Markets has decreased compared to earlier times.

For example, if there are five ships available for a specific loading date within a confined geographical area but only four cargoes, it’s likely that none of the ships will secure a Freight Rate higher than the lowest rate any of the respective Shipowners is willing to accept. Conversely, if there are five cargoes and only four ships, each ship fixed can expect to secure better terms than the one before.

Several factors can influence the overall Freight Conditions, ship costs, and the development of the Open Market (Open Freight Market). These include the general state of the global economy, sudden shifts in demand for certain commodities, economic booms in specific market areas, wartime conditions, blockage of crucial routes, crop failures, severe port congestions, an oversupply of specific ship types, or unusual delays in the opening or closing of ice-bound waters, among others.

Predicting future developments in the Freight Market with any certainty is nearly impossible. Generally, periods of low Freight Market conditions last substantially longer than those with high Freight Rates. There is no standard “Normal Freight Market Level”; rather, the market constantly fluctuates between extremes.

Even during general economic downturns, certain Freight Market regions may experience a temporarily high demand for ships (tonnage). For example, in 1977, dry bulk and tanker Freight Rates were low due to a significant surplus of tonnage, driven by ongoing ship deliveries. However, there was a robust demand for ocean-going Ro/Ro and Reefer ships, resulting in very high Time Charter Rates. A similar market disparity occurred from 2014–2016. While Dry Bulk Spot Freight Rates were low, influenced by China’s reduced growth rate and an oversupply of ships, the Tanker Spot Market thrived, benefiting from the low oil prices and a sparse orderbook for new ships.

Other factors contributing to the unpredictability of the Freight Market include economic changes in key countries and regions like China, the USA, Europe, Japan, Russia, Brazil, India, the Middle East, Latin America, and Australia. Events such as a farmers’ strike in Argentina leading to major port congestions, or flooding impacting Australian coal production, significantly influence Dry Bulk Freight Rates. Also, sudden impacts on the Tanker Freight Markets can arise from United Nations’ embargoes against countries like Libya, Iran, and Iraq. Information about such events often hits the shipping market suddenly, although they are not entirely unexpected. The most striking examples in recent history include the total collapse of international trade and consequently all Freight Markets following the Global Financial Crisis in 2008 and the coronavirus outbreak in 2020.

During periods of a generally low Freight Market, every minor indication of potential growth in demand for sea transport is closely monitored. This includes factors like the overall state of the global economy, its main drivers, geopolitical developments, or trends in specific sectors like steel production, automobile manufacturing, harvest outcomes, and shifts in major consumption areas. When early signs suggest a rise in Freight Rates, most market indicators will display these cues subtly. During such times, Charterers and Shippers may downplay these signs of impending change, whereas Shipowners typically adopt a “wait and see” stance. Once it becomes clear that these market trends have substance, Charterers actively engage in the Time Charter Markets, aiming to lock in Long-term Time Charter Parties at current low Freight levels. This activity reduces the availability of tonnage on the Spot Chartering Market, and Freight levels begin to increase gradually.

In cases where there’s a sudden surge in demand for tonnage in specific trades, like the iron ore transport from Australia to China, a shortage of ships may arise in other regions or trades that require similar ships, such as the iron ore route from Brazil to China. This competition between major iron ore exporters like Australia and Brazil further intensifies the upward trend in Freight levels. Psychological factors then start playing a role, as Charterers and Shippers, anxious about potential acute shortages, rush to finalize their shipping arrangements. Shipowners capitalize on this urgency by demanding higher Freight Rates. If a sudden political crisis occurs, the Freight Market may experience a boom. Trading in Forward Freight Agreements (FFAs) also influences Shipowners’ expectations and decisions regarding fixing ships for future employment.

A common outcome of these dynamics is that owners of older ships, previously inactive during low Freight Market periods, re-enter the market instead of scrapping these vessels. Shipowners begin offering ships that were formerly on Time Charters for Spot Market employment.

Another delayed effect on the Freight Market involves Shipowners ordering new builds, which, if timed poorly, might be delivered during another low Freight Market period. The substantial ordering of new ships can lead to an impending recession in the Freight Market, though its exact timing is unpredictable. As new vessels enter the market, Shipowners look to secure Long-term Time Charters, causing Freight levels to gradually decline. Charterers wait for even lower rates, and as quickly as Freight Rates escalated, they can plummet.

The cycle described was notably evident in 2008. The years 2003–2008 represented the most profitable six-year span in shipping history, with Freight Rates soaring across all major markets, including dry bulk, tanker, and container ships. This led to a surge in shipbuilding orders. However, the “Global Financial Crisis” that erupted in late 2008 halted the shipping market and caused Freight Rates to collapse. The ships ordered prior to the crisis were scheduled for delivery in 2009 and beyond, exacerbating the already struggling Freight Market. The year 2008 marked a significant turning point for Shipowners—it ended the most lucrative era and ushered in a prolonged and severe downturn across various ship types that lasted for years, underlining the unpredictable nature of the market following its peak in May 2008 and the historically profitable summer, only to be reversed by the global crisis later that year.

 

Liner Shipping Pricing Aspects

While the focus of Shipbroking and Chartering typically centers on the Open Market Freight determination mechanism, it is pertinent to briefly address a few liner pricing issues for a comprehensive understanding.

In liner trade routes, as a result of containerization, the Freight cost of transporting a container is segmented into the following five components:

  1. Inland haulage outbound from Shipper to terminal, starting from where the Shipper hands off the cargo to the Carrier until it reaches the loading terminal.
  2. Terminal charge at the port of loading.
  3. Ocean Freight for sea transport.
  4. Terminal charge at the port of discharge.
  5. Inland haulage inbound from terminal to Consignee, beginning from the discharge terminal to the delivery point of the cargo to the Consignee.

While the costs of inland haulage and terminal charges are calculated per container, Ocean Freight varies based on the contents within the container. Given the diversity of cargoes transported by liner ships, each Liner Company implements a complex pricing system tailored to the specific characteristics and properties of each type of cargo. Commodities are grouped and priced according to a pre-established pricing scheme.

Several factors influence Freight Rates in Liner Shipping, with the commodity’s unit value and the cargo Stowage Factor (SF) being pivotal. Although advanced computing has streamlined pricing mechanisms, the fundamental approach remains: different cargo types incur different Freight Rates, despite the prevalent use of containers. Additionally, some cargoes are shipped under Freight All Kinds (FAK) terms, where various cargo types are combined and shipped at a uniform rate, regardless of individual commodity differences. Ocean Freight often includes surcharges such as Currency Adjustment Factors (CAF) and Bunker Adjustment Factors (BAF), which adjust the Freight cost based on currency exchange rates and fuel prices, respectively.

In the past, Liner Conferences offered competitive rates through mechanisms like Deferred Rebate Schemes, where Shippers earned rebates by exclusively using the services of conference members, or through “exclusive contract” or “dual rate schemes”, promoting exclusive cooperation with the conference for better rates. Although Liner Conferences have dissolved and preferential pricing practices are largely prohibited due to anti-trust laws, Liner Companies now engage in modern forms of collaboration like Shipping Alliances or merger and acquisition strategies to consolidate the market. Today, the major Liner Shipping Companies are part of a few significant Shipping Alliances which coordinate mainly on ship scheduling and slot interchange, without controlling Freight Rates.

Liner Shipping Companies, in pricing their services, encounter intense competition and significant constraints. These include strategic decisions by Shippers, the decline of monopolistic practices due to anti-trust regulations, an oversupply in the Liner Shipping Market from large-scale shipbuilding, competition from air and bulk shipping, and challenges within Shipping Alliances.

Liner Shipping Pricing Overview

From the early 2000s, the method for determining Freight Rates in liner shipping transitioned from a tariff-based to a contract-based approach, influenced significantly by regulatory changes in the USA and Europe. This evolution in the Liner Shipping Market has moved away from traditional price enforcement and oligopolistic practices, allowing Carriers and Shippers more freedom to negotiate and finalize terms of Carriage Contracts that suit their individual commercial requirements. While Liner Operators might still use a Tariff system to categorize cargoes based on specific characteristics for pricing, Freight Rates are now negotiated rather than imposed, based on the negotiating strengths of Carriers and Shippers. Final pricing from Carriers to Shippers is calculated after assessing the needed transport services, the types of containers used, and cargo specifics like reefer containers, which are typically priced higher, all while considering the market’s current ship supply and demand. Offers from Liner Shipping Companies are usually valid for set periods, such as up to a year, giving Shippers the ability to manage their transport expenses and plan their logistics needs more effectively. This arrangement has seemingly bolstered the negotiating positions of Shippers over time.

Liner Freight Rates exhibit less volatility compared to those in the Open Market, changing more gradually and with fewer fluctuations, making Liner Shipping a secondary concern in the realms of Chartering and Shipbroking.

Key Factors Influencing Fixture Rates in the Open Chartering Market

The determination of the Freight Rate or Hire Rate is crucial in Chartering Negotiations. The Fixture Rate for an individual ship charter is negotiated through the Open Market (Freight Market) using Shipbrokers and can be influenced by several important factors:

  1. Type of Ship: Common ship types such as tankers and bulk carriers often experience more volatility and sharper rate fluctuations than specialized ship types.
  2. Ship Specifications and Condition: Details like cargo capacity, speed, draught, beam, age, fuel efficiency, class, and cargo handling capabilities influence the ship’s chartering prospects and the Freight Rates achieved.
  3. Geographical Location of Ship: In Voyage Charters, the proximity of the ship to the cargo impacts the Freight Rate. In Period Charters, the ship’s location relative to the delivery location agreed with the Charterer is also a factor.
  4. Charter Period: Spot Freight Rates are more volatile than Time Charter Rates due to the shorter employment term of ships in Spot Charters, reflecting daily market fluctuations, whereas Time Charter Rates mirror longer-term market trends.
  5. Overall Cost of Providing the Ship: Cost-sharing between the involved parties is crucial. For instance, in Voyage Charters, most costs are covered by the Shipowner, whereas in Time Charters, the Charterer bears the voyage and cargo-handling costs. In Bareboat Charters, the Shipowner only handles the ship’s capital costs.
  6. Market Anticipation: Expectations and market forecasts significantly influence all shipping decisions.
  7. Current State of the Shipping Market: Tools like market reports, shipping publications, and indices such as the Baltic Index are essential for understanding the current state of the Freight Market and adjusting strategies accordingly.
  8. Customer Satisfaction and Retention: Today’s marketing strategies require Shipowners to align their chartering strategies with the preferences and needs of Charterers/Shippers.
  9. Negotiation Power of the Parties: The Fixture Rate is greatly affected by the negotiation dynamics between Shipowners and Charterers, which are influenced by various factors such as financial standing, timing, and the long-term relationships and priorities of the parties.

Understanding these determinants is vital for accurately assessing and negotiating Freight Rates in both Open and Liner Shipping Markets.

 

FREIGHT MARKET ANALYSIS 

This section aims to map out the key Freight Markets and thoroughly outline the fundamental factors that influence Freight Rates. It delves into the types of preferred ship Fixtures, benchmark voyage routes, principal ports for loading and unloading, methods of calculating Spot Freight Rates and Time Charter Rates, and the critical indicators of ships’ demand and supply. This approach is applied to each of the four vital Freight Markets within the shipping industry: dry bulk, tankers, gas carriers, and containerships.

DRY BULK FREIGHT MARKET

Bulk carriers transport a wide range of cargoes, but generally, the larger the ship, the greater the volume of cargo it carries and the narrower the range of commodities it typically handles. For instance, capesize bulk carriers predominantly transport iron ore and coal in large shiploads. Panamax bulk carriers are frequently used for coal and grain trades and also for transporting fertilisers, sulphur, salt, bauxite, alumina, and steel slabs. Smaller vessels, ranging from handysize to ultramax bulk carriers, often carry smaller quantities of cargoes like steel products, scrap, and sugar.

In the dry bulk market, Spot Charters are usually arranged on a Voyage basis, with Freight Rates often reported in US Dollars per ton of cargo, along with a Time Charter Equivalent (TCE) basis (TCE: Average Earnings in US Dollars per day) for comparing with Time Charter alternatives. Conversely, Time Charter Hire Rates are consistently reported in US Dollars per day. Leading shipping reviews might present average hire rates across various ship types and sizes, along with different charter durations and ages of ships. Below is a detailed examination of the primary dry bulk freight markets.

Capesize Freight Market

Capesize bulk carriers operate between major ports equipped with well-developed infrastructure and typically transport iron ore and coal. These vessels are gearless, relying on port cranes for loading and unloading. The most significant iron ore trade involves imports to China from Brazil or Australia, typically around 175,000 metric tons. Key iron ore trades include:

  • Australia to the Far East and Europe
  • India to the Far East
  • South Africa to the Far East and Europe
  • Brazil to the Far East, Europe, and Argentina
  • Chile to the Far East
  • Norway to Europe
  • Black Sea to the Far East

Coal is primarily exported from South Africa (SAF), Colombia, or Australia to various destinations including Europe and China, in shipments of about 168,000 tonnes. Major coal trade routes, which also encompass smaller shipments carried by panamax, supramax, and handymax bulk carriers, are as follows:

  • Australia to the Far East and Europe, with additional routes to Brazil and Argentina
  • Australia to India and South Africa to India
  • Indonesia to the Far East and Europe
  • South Africa to the Far East and Europe
  • Colombia to Europe
  • USA (East Coast) to the Far East and Europe
  • Canada (West Coast) to the Far East

Panamax and Kamsarmax Freight Market

Panamax bulk carriers are commonly used to transport coal and grain, operating between major ports equipped with well-developed infrastructure. Coal transported by Panamax bulk carriers is typically exported from nations like Australia, South Africa (SAF), the USA, Colombia, Russia, Indonesia, and primarily imported by China, Japan, India, and Europe, in volumes ranging from 65–74,000 metric tons. Additionally, grain for Panamax bulk carriers is loaded in the North Pacific (NOPAC) area and the USA, destined for China, Japan, and Europe in quantities of approximately 55–60,000 metric tons. Key wheat trade routes include:

  • North America to the Far East, Middle East, and Europe
  • Australia to the Far East and Middle East
  • East Coast of South America to the Far East and Europe, with some shipments to the Middle East
  • North Continent to the Middle East and North Africa
  • Black Sea to the Middle East

Soya Beans are another significant grain cargo, with major trade routes including:

  • USA (Gulf/Mississippi) to the Far East, Middle East, and Europe
  • Brazil to the Far East and Europe
  • Argentina to the Far East and Europe

Handymax and Supramax/Ultramax Freight Market

Handymax and Supramax/Ultramax bulk carriers often engage in spot charters and Time Charter Trips (TCT), playing a critical role in the Spot Market. These ships typically transport coal and grain along similar trade routes as Panamax carriers but in smaller volumes. Most Handymax and Supramax/Ultramax bulk carriers are equipped with their own Gear (Geared Bulk Carrier), making them suitable for ports lacking advanced infrastructure. Furthermore, many Handymax and Supramax/Ultramax bulk carriers are Grab-Fitted.

It’s important to note that Handymax and Supramax/Ultramax bulk carriers are frequently chartered under Time Charter Trips (TCT), a type of Time Charter that commits the ship for the duration of a specific voyage. Unlike traditional charters, in a TCT, the Shipowner is compensated in US Dollars per day rather than per ton of cargo.

Handysize Freight Market

Handysize bulk carriers predominantly operate on a Spot Voyage basis and in Time Charter Trips (TCT). Known for their versatility and referred to as the “work horses” of the seas, most Handysize vessels are geared and can access ports with undeveloped infrastructure and low drafts. Handysize ships serve a wide array of major trading regions and are capable of transporting a diverse range of cargoes globally. Their significant role in the Spot Market underscores the importance of this sector for Handysize carriers.

Dry Bulk Freight Market: Demand Influences

The need for bulk carriers is significantly impacted by a variety of dynamic, global elements. For now, only the key factors influencing dry bulk demand will be discussed:

  1. The primary influence on dry bulk demand is China, specifically Chinese policies regarding overall industrial activity, steel production, iron ore production and imports, metallurgical coal (coking coal) and steam coal (thermal coal) demand, grain imports, and pollution control initiatives. Additionally, China’s choice of its main iron ore supplier between the usual competitors, Brazil and Australia, remains pivotal.
  2. GDP growth worldwide, especially in major economic contributors like China and North America, along with other economic regions such as the European OECD countries, Japan, India, other Asian nations, and Latin America.
  3. Worldwide imports of the five major bulks, which include iron ore, coal, grain, phosphates, and bauxite/alumina, as well as steel products and minor bulks.
  4. Steel production globally and in particular regions like China, Japan, Western Europe, and developing Asia, including India, which is crucial. Relevant to this, significant factors also include iron ore and metallurgical coal imports by China, Japan, the European Union, and Asian countries. The role of India in importing steam coal (thermal coal) is anticipated to grow.
  5. Regarding steel products trades, vital aspects are exports from China, Japan, and countries of the former Soviet Union, along with imports into the US, the Middle East, and developing Asian countries.
  6. In terms of grain trade, significant elements are exports from the US, Latin America, Australia, Ukraine, Russia, and imports into China, Japan, other Asian countries, the Middle East, and Africa, as well as seasonality and weather conditions that influence “crop years.”
  7. Demand calculated in ton-mile terms, considering the trade distance in relation to cargo volumes transported. This particularly affects the iron ore trade. For instance, if China switches its iron ore imports from Australia to Brazil, it would significantly increase the demand in ton-mile terms for the same quantity of cargo.
  8. Seasonality.

Dry Bulk Freight Market: Supply Dynamics

Key indicators significantly influence the supply of dry bulk carriers. Below are the primary factors:

  1. Fleet Growth Annually: This factor is shaped by the balance between new ship orders and deliveries versus ship demolitions.
  2. Structure of the Fleet can be explored through several critical points: ◦ Orderbook to existing fleet ratio: This metric assesses the number or tonnage capacity of ships planned to be constructed within the next 2–3 years, compared to the current fleet size. A robust new building orderbook, whether in absolute terms or relative to the existing fleet, indicates that numerous ships will soon join the Freight Market, potentially leading to an oversupply and a decrease in Freight Rates unless the demand is adequate. ◦ Age Distribution: This parameter outlines the age composition of a fleet. Generally accepted in the shipping market, ships are assumed to have a functional lifespan of about 25 years. Therefore, ships less than 10 years old are typically deemed modern, while those over 20 years are often viewed as scrapping prospects. Nevertheless, economic downturns in shipping might prompt scrapping at around 15 years, whereas during booming market conditions, even ships older than 30 years might continue in service as Shipowners delay scrapping decisions. The age structure of a fleet reveals whether it is predominantly modern or aged, affecting how quickly the Freight Market might adjust during periods of low rates, with older fleets more likely leading ships to scrapyards. A percentage indicating how much of the fleet is older than 15 or 20 years helps gauge the fleet’s age and potential scrapping volume in the coming years. ◦ Replacement Ratio: This ratio evaluates the orderbook (number of ships or tonnage capacity in DWT) of forthcoming vessels against the existing fleet that is over 15 years old. It integrates the orderbook size with fleet age to indicate how replacement of older ships with new builds is projected.
  3. Productivity and Innovation in Fleet Operations: Enhancements in fleet productivity are seen with increases in average fleet speed. During periods of low Freight Rates, especially when combined with high oil prices and costly bunkers, employing Slow Steaming can conserve costs and extend fleet employment, thereby effectively reducing ship supply and preventing further drops in Freight Rates. Additionally, technological advancements such as automation, innovations, and efficient fuel (bunker) management techniques like eco-ships can dramatically influence the productivity, operational efficiency, and chartering feasibility of ships.
  4. Fleet Utilisation and Lay-up Practices: Fleet utilization intensifies during robust Freight Markets and declines during weak ones. As evidenced when the Baltic Dry Index (BDI) reached a historic low of 290 points in February 2016, the dry bulk fleet utilization rate was only 82.5%, marking the lowest since 1980. This poor performance was primarily due to an oversupply and a slowdown in China’s economy, leading to the Freight Market’s collapse in early 2016. In such downturns, the lay-up of ships sharply increases as Ship Operators find it challenging to secure viable chartering options. When the earnings from ships are substantially below their operating costs, Shipowners might consider lay-up options, evaluating the costs versus the potential Freight Market opportunities and their ships’ chartering capabilities. Options include Warm Lay-up (where the ship is maintained at anchorage, fully operational and ready to deploy with crew on standby) and Cold Lay-up (a more extended, potentially multi-year option).

 

TANKER FREIGHT MARKET

Tankers are primarily built to transport various types of oil cargoes. Larger tankers focus on crude oil, while smaller ones handle product trades. The following sections detail the different tanker sub-sectors, including a segment on chemical tankers. In Tanker Markets, spot charters refer to Tanker Fixtures arranged on a voyage basis. Tanker Freight Rates are reported in Worldscale Terms (www.worldscale.co.uk), US Dollars per ton of cargo, or on a Time Charter Equivalent (TCE) basis ($ per day), allowing comparisons with Time Charter employment options. Conversely, Time Charters involve Tanker Fixtures on a period basis, with Charter Hire Rates stated in US Dollars per day. Leading shipping reviews might report Average Charter Hire Rates for various tanker types and sizes across different Time Charter Durations and ages, such as modern tankers of 5 years or older tankers of 10-15 years. An analytical overview of the main tanker markets is also provided.

VLCC (Very Large Crude Carrier) Market

VLCCs (Very Large Crude Carriers) predominantly transport crude and other heavy oil cargoes. These ships typically load about 260–280,000 mt of crude oil, mainly exported from Arabian Gulf (AG) ports and, to a lesser extent, from West Africa or the Caribbean Sea. Major importers include Europe, the USA, Japan, China, South Korea, India, and Singapore. Due to their size, VLCCs (Very Large Crude Carriers) are restricted to operating in well-equipped ports. Key global crude oil trades include (covering all sizes, including smaller shipments by suezmax, aframax, or panamax tankers):

• Middle East to Far East, NW Europe, USA, Indian subcontinent, South Africa, Brazil, Red Sea, Mediterranean, and Australasia • Red Sea to Far East, USA, NW Europe, and Mediterranean • West Africa to Far East, NW Europe, Mediterranean, Indian subcontinent, USA, and South America • North Africa to Mediterranean, NW Europe, USA, and Far East • North Sea to USA and Far East • Baltic Sea to UK/Continent, Mediterranean, USA, and Far East • Black Sea to UK/Continent, Mediterranean, USA, and Far East • E. Coast Mexico to USA, Europe, and South America • Caribbean to USA, Europe, South America, Indian subcontinent, and Far East • South America to USA, Europe, and Far East • Indonesia/Malaysia to Far East and Australasia

Suezmax Tanker Market

Suezmax Tankers, the largest vessels capable of navigating through the Suez Canal, are commonly chartered on a spot basis, primarily transporting crude and other heavy oil cargoes like fuel oil, though period charters are also prevalent. Indicative types of spot employment for Suezmax Tankers, typical cargoes and volumes, as well as key loading and unloading ports/areas, are outlined. These ships generally transport crude oil in amounts of about 130–140,000 mt. Their main trading routes include the Black Sea – Mediterranean Sea area, from West Africa to the USA, and from the Arabian Gulf to India.

Aframax Tanker Market

Aframax Tankers (80–120,000 DWT) are often chartered on a spot basis, though period charters are not uncommon. The Spot Chartering of Aframax Tankers sees a more balanced mix between transporting crude oil and various petroleum products, such as dirty cargoes like fuel oil or Dirty Petroleum Products (DPP), and clean cargoes including naphtha, Clean Petroleum Products (CPP), ultra low sulphur diesel, jetoil, gasoil, etc., especially for coated tankers. Key global Dirty Petroleum Products (DPP) trades include (covering all sizes, including larger shipments typically by suezmax or occasionally by VLCC tankers, as well as smaller shipments most often carried by specialized panamax or handy product tankers):

• Middle East to Far East • NW Europe to Far East and USA • Mexico and Caribs to USA, NW Europe, and Far East • Baltic Sea to UK/Continent, Mediterranean, USA, and Far East • Singapore to Far East • Inter-regional trade within Europe/Mediterranean • Inter-regional trade within SE Asia and Far East

Prominent global Clean Petroleum Products (CPP) trades include (encompassing all sizes, including larger shipments rarely by suezmax, as well as smaller ones typically by specialized panamax or handy product tankers):

• Middle East to USA, Mediterranean, Europe, and Far East • NW Europe to USA, Mediterranean, West Africa, and Far East • Mediterranean to NW Europe, USA, and Far East • US Gulf to South America and Europe • Caribbean to USA and Europe • Indian sub-continent to USA, Mediterranean, Europe, and Far East • NE Asia to USWC (US West Coast) and WC South America • Singapore to worldwide destinations • Inter-regional trade within Europe/Mediterranean • Inter-regional trade within Middle East and Indian sub-continent • Inter-regional trade within SE Asia and Far East

Aframax Tankers typically transport crude oil from regions such as the Baltic Sea, Egypt, Libya, Mediterranean Sea, Arabian Gulf (AG), Europe, Indonesia, or the Caribbean Sea. They load cargo in volumes of about 70–100,000 mt and deliver to destinations including Europe, the USA, and Asia. It’s noteworthy that coated Aframax Tankers participate in Clean Petroleum Products (CPP) trades as Long Range 2 (LR2) product tankers, carrying clean cargoes over long distances in large quantities.

Product Tankers: Panamax Tankers and Handy Tankers Market

While Aframax or even Suezmax tankers can transport oil product cargoes, the primary markets for oil product trades are the Panamax and Handy tanker sectors, discussed here together.

Panamax Tankers mainly transport clean cargoes such as naphtha, Clean Petroleum Products (CPP), ultra-low sulphur diesel, jetoil, gasoil, etc., and to a lesser extent, dirty cargoes like fuel oil or Dirty Petroleum Products (DPP). Panamax Product Tankers are known as Long Range 1 (LR1) ships due to their capacity to transport clean cargoes across relatively long distances.

Handy Tankers typically carry clean cargoes and less frequently transport dirty petroleum products. Handy Product Tankers are also referred to as Medium Range (MR) tankers, capable of carrying clean cargoes over medium distances. In industry terms, Handy Product Tankers are sometimes categorized into Medium Range 1 (MR1) tankers of 25–40,000 DWT and Medium Range 2 (MR2) tankers of 40–55,000 DWT. The typical MR Product Tanker today is recognized as having a size of about 48–53,000 DWT.

Clean products are sourced from locations such as the Arabian Gulf (AG), Europe, US Gulf, Singapore, India, the Mediterranean Sea, and the Black Sea. Clean product cargoes are typically loaded in volumes ranging from 30–75,000 tons and are imported worldwide, including to Japan, Europe, the USA, Africa, Australia, and South America. Dirty product cargoes are sourced from regions like the Mediterranean Sea and the Black Sea, UK, Continental Europe, and the Caribbean Sea, loaded in typical quantities of 30–55,000 tons and mainly delivered to the US Gulf and the Mediterranean Sea areas.

Chemical Tankers

Chemical cargoes are classified by the International Maritime Organization (IMO) into categories I, II, and III, where category I includes the most hazardous chemicals. Chemical Tankers are thus categorized based on the type of tanks they possess to safely transport these varying categories of cargoes. Predominantly, Chemical Tankers are designated as IMO II and III due to the limited volume of category I cargoes.

The process known as Parceling is a distinctive feature of Chemical cargo transportation, allowing these tankers to carry different types of chemical parcels simultaneously in either Coated or Stainless Steel tanks. The suitability of a tank for specific cargoes depends on its material; Stainless Steel tanks are necessary for corrosive chemicals like sulphuric and phosphoric acid, while cargoes like vegetable oils are suitable for Epoxy-coated Tanks. The material or coating of the tank also impacts the cleaning speed. Typically, tankers with Stainless Steel Tanks can handle a more diverse range of cargoes and can be cleaned more swiftly between cargoes, which justifies their higher construction costs and charter rates.

Chemical Tankers are available for charter on either a Spot Basis or through Time Charters. Notably, Stainless Steel Chemical Tankers usually receive a significant chartering premium compared to Coated Chemical Tankers of the same size.

Chemical Parcel Tankers often manage cargoes in sizes of 1,000 mt, 3,000 mt, 5,000 mt, 10,000 mt, or 15,000 mt, with tanker sizes typically ranging from 5–50,000 DWT. Principal spot routes include Middle East Gulf exports to diverse destinations, US exports stimulated by the Shale Oil Revolution, as well as trades between developed and developing regions, transatlantic routes between the USA and Europe, transpacific routes between the USA and Asia, and Far East–Europe trades. Rates for Spot Chemical Tankers are generally stated in US Dollars per metric ton, unlike the Worldscale Rates prevalent in other tanker sectors. The Freight Rates for Chemical Tankers tend to exhibit less volatility and fewer sharp fluctuations than those seen in other tanker markets, both in Spot and Time Charter conditions.

Tanker Freight Market: Demand Factors

Tanker demand is deeply influenced by a range of dynamic, worldwide factors. Below are some pivotal drivers of Tanker Demand:

  1. Global imports of crude oil and oil products, along with their annual growth rates, monitored by geographic areas including North America, OECD Europe, Japan, China, other Asia/Pacific, Latin America, Africa, East Europe, and the Middle East.
  2. Oil prices and the dynamics of stock-building. For instance, the oil price collapse during financial crises led to significant inventory buildup in the US and China, amplified by a contango market seen in early 2015. Also, a sustained low oil price environment has moderated oil production in the US and other areas, thereby reshaping seaborne oil trade routes.
  3. Global economic growth, especially in key regions like China and North America, as well as other significant economic areas such as OECD European countries, Japan, and developing Asia.
  4. Oil consumption on a global scale and in specific areas such as North America, OECD Europe, Japan, and China.
  5. Oil production activities in North America, OECD Europe, and OPEC nations, notably with Saudi Arabia as a primary producer. For example, an increase in OPEC production has fueled a rise in oil trade demand.
  6. Outputs and locations of refineries.
  7. Geopolitical issues like Iranian sanctions or unrest in Libya.
  8. Demand measured in ton-mile terms for crude oil and products, along with triangular chartering opportunities. For instance, shifts in export patterns in 2015 from West Africa and Latin America to longer Asian/Pacific routes and increased crude shipments from the Middle East to North America not only boosted ton-mile demand and fleet productivity but also created triangular chartering opportunities, minimizing empty return voyages.
  9. Seasonality.

Tanker Freight Market: Supply Indicators

Several key indicators shed light on the supply dynamics of tanker ships, as summarized below:

  1. Fleet Annual Growth is shaped by the balance of new ship orders and deliveries against ship scrappings.
  2. Fleet Structure is crucial, and within this category, several indicators are noteworthy: ◦ Orderbook to Existing Fleet: This ratio calculates the number or tonnage capacity of ships scheduled to be built in the next 2–3 years as a percentage of the current fleet. ◦ Age Breakdown: This reveals the age distribution within the fleet. For instance, a percentage showing how much of the fleet is over 15 or 20 years old can indicate the fleet’s age and the potential number of ships facing scrapping soon. ◦ Replacement Ratio: This assesses the orderbook (either in number of ships or tonnage capacity in DWT) of new ships relative to the part of the existing fleet that is over 15 years old.
  3. Fleet Productivity, Technological Factors, and Innovation: Productivity rises with an increase in the average fleet speed. High Tanker Freight Rates often boost fleet productivity, which can mitigate some of the gains from increased ton-miles demand. Furthermore, productivity is influenced by technological advancements such as automation, innovation, and efficient fuel (bunker) management practices, including the use of eco-tankers.
  4. Floating Storage: Larger and older vessels may be repurposed for oil storage, which effectively reduces the available supply of tankers for transportation, potentially boosting Freight Rates.
  5. Fleet Utilisation and Ships’ Lay-Up: In early 2015, the crude tanker fleet utilization rate was about 90%, the highest since mid-2010. This contrasts with the dry bulk market during the same period and reflects the robust tanker Freight Market between 2014–2016. Regarding tankers’ lay-up, the market peaked during the two oil crises in the late 1970s and early 1980s.

 

GAS CARRIER FREIGHT MARKET

LPG (Liquefied Petroleum Gas) Carriers exhibit a wide range in terms of size and types of cargoes they transport. These tankers operate either on spot hires or through period charters, accommodating a diverse array of gas cargoes like LPG, ammonia, and fuel gas. The capacity of these vessels varies substantially, from 3,000 to 85,000 cubic meters (cbm). The primary route for Very Large Gas Carriers (VLGCs) spans from Ras Tanura (Arabian Gulf) to Chiba (Japan), with significant exports also from the USA and Qatar and imports by China, India, and South Korea. These ships, able to navigate the new locks of the Panama Canal, play a crucial role today. Large Gas Carriers (LGCs, 40–60,000 cbm) are rarer and generally engaged on Time Charters. These LGCs can traverse the older, narrower Panama Canal locks, although the expansion of the canal impacts this class of ship. Mid-sized Gas Carriers (20–40,000 cbm) mainly transport LPG and ammonia, with key exporters in the Black Sea, Trinidad and Tobago, the Middle East, and North Africa, and main importers in India, Morocco, and Europe. Smaller LPG vessels (3–23,000 cbm), whether semi-refrigerated, ethylene, or pressurized, cater to specific market dynamics, such as petrochemical trades between the USA and Europe, or the Asia-imported ethylene, with propylene being prevalent in local and intra-regional trades. Spot Gas Carrier Freight Rates are negotiated and listed in US Dollars per metric ton of cargo.

LNG (Liquefied Natural Gas) Carriers, along with certain offshore ship types, represent the pinnacle of technological advancement and are among the most expensive in the shipping industry. The majority of LNG ships are on long-term charters, with only a small fraction operating in the spot market. The cargo for these LNG (Liquefied Natural Gas) Carriers is highly specialized. Most LNG ships are dedicated to specific LNG projects that demand consistent transportation services. The sector has seen technological advancements with the introduction of new LNG ships, leading to a tiered LNG ship Charter Market based on vessel specifications. Originally, LNG ships used steam turbines for propulsion, but more modern and advanced systems, such as DFDE (Dual Fuel Diesel Electric) and TFDE (Tri-Fuel Diesel Electric), have since been developed. The term “tri-fuel” reflects the capability of the engines to operate on three different fuel types. Major LNG exporters include the Middle East, Australia, Asia, and North/West Africa, while the main importers are Japan, South Korea, China, and Europe, with emerging players like India, Mexico, and Brazil gaining prominence.

 

 

CONTAINERSHIPS FREIGHT MARKET

Most Fixtures involving containerships are for period charters, with the majority of containerships being time chartered by independent Shipowners (also known as “Charter Owners”) to Liner Operators (also referred to as “Operating Owners”). It is recognized that there is no or very little spot chartering in liner shipping since containerships are engaged by the lines on fixed routes and schedules (liner services).

Post-Panamax Containerships Freight Market

The Post-panamax containerships category includes all containerships that cannot navigate through the Panama Canal. Following the expansion of the Neo-Panama Canal, containerships that can traverse the new locks have a maximum capacity of around 15,000 TEUs. Though this size threshold is not rigid, containerships exceeding this limit are typically referred to as Post-Panamax Containerships. The Post-Panamax Containerships sector is the most rapidly expanding area of the containerships market, garnering significant newbuilding interest from Liner Operators. Often termed Ultra Large Container Vessels (ULCVs), these containerships are primarily used on the Far East–Europe and Far East–USA routes where major Container Liners compete intensely through Alliances and Ship Sharing Agreements. While deployment of Mega containerships on other routes is less common, there may be future opportunities for expansion to other trades. The Post-Panamax Containerships market segment is predominantly dominated by vessels from Tonnage Providers or Liner Operators, making Time Charter Fixtures rare. Typically, Post-Panamax Containerships are Bareboat Chartered by Liner Operators.

Neo-Panamax Containerships Freight Market

The rapidly expanding segment of Neo-Panamax containerships involves ships ranging from 8–15,000 TEUs and features efficiency benefits from their size and deployment flexibility. Neo-Panamax Containerships primarily operate on the Transpacific, Far East–Europe, and North–South routes (primarily with Latin America). Containerships between 12,000–15,000 TEUs are often called Very Large Container Vessels (VLCVs), and those between 8,000–12,000 TEUs are referred to as Large Container Vessels (LCVs). The expansion of the Neo-Panama Canal facilitates the passage of larger containerships, potentially lowering the costs of trans-ocean shipping services between the Far East and US East and US Gulf Coast ports. The maximum capacity for a containerships passing through the Panama Canal has increased from about 5,000 TEU (previous “Panamax Containerships” size) to approximately 14,000–15,000 TEU (the Neo-Panamax Containership size), significantly impacting the container market sector and necessitating considerable investment in the US East Coast port infrastructure. The Asia–US West Coast route (Transpacific trade) is notably served by this category of containerships.

It is important to note that the state of the Liner Container Market, i.e., the Container Freight Rate paid by Shippers to Liner Container Operators for transporting a container to its destination, significantly influences the state of the Containership Charter Market, namely the Containership Hire Rates paid by Liner Container Operators to independent Shipowners for chartering ships on Period Charters. This relationship arises because Liner Container Operators are inclined to pay higher rates to charter-in containerships from the Open Market (Ship Chartering Market) when they anticipate these CONTAINERSHIPS will effectively meet their liner transport needs against Shippers, profitably. Thus, one might expect that Time Charter rates for containerships would generally be higher during periods of elevated Liner Container Freight Rates.

Intermediary Containership Freight Market 

The Intermediary Containership category, featuring ships ranging from 3,000 to 8,000 TEUs, encompasses both the types previously known as Panamax Containership and the wider-beam, shallow-draft type once referred to as Post-panamax Containership. Following the addition of a third, larger lane in the Neo-Panama Canal, all these vessels can now navigate this essential waterway. Typically, these medium-sized containerships operate on North–South and non-core East–West routes, such as the Shanghai–Santos and Shanghai–Durban trade lanes. The Intermediary Containership sector has been affected by the cascading effect, where larger Containerships take over lesser-used routes, generally resulting in lower Freight earnings. The demand for newbuilding contracts for Ex-panamax Containership sizes has been minimal in recent years, with only a few orders placed as the focus shifts towards larger vessels. The expansion of the Panama Canal has led to a decline in orders for Ex-Panamax Containerships. Although many of these Ex-pPnamax Containerships have been reassigned to other routes, their narrow-beam and less fuel-efficient design render them less competitive against the newer, more fuel-efficient wide-beam models. While it appears that Ex-panamax Containerships in the 4,000–5,000 TEU range may suffer due to the canal’s expansion, there may be new trading and chartering prospects for the entire 3,000–8,000 TEU intermediate fleet in the future.

Small Containerships Market

Small Containerships in the 2,000–3,000 TEU range are typically referred to as Sub-Panamax Containerships, those between 1,000–2,000 TEU are known as Handysize Containerships, and those under 1,000 TEU are termed Feeder Containerships. This smaller segment often faces supply challenges from the cascade effect, as well as limitations related to port operations and size restrictions. Intra-Asian and intra-European routes are among the most prevalent for these Small Containerships. The fleet of Small Containerships has been in decline since 2012, driven by increased scrapping and limited new investment.

 

Containerships Freight Market: Demand Factors

The need for containerships is significantly influenced by a variety of dynamic, worldwide factors. Below are brief comments on some key factors driving the demand for containerships:

• GDP growth globally and especially in China, the USA, European countries of OECD, and Japan. • International container trade, particularly TEU imports in North America, Europe, Japan, Southeast Asia, China, S. Korea, Taiwan, Hong Kong, Australia, Latin America, and Africa. • Commodity prices. • Worldwide manufacturing and the placement of manufacturing capacities. • Geopolitical risks. • Currency exchange and interest rates. • Seasonality.

Containerships Freight Market: Supply Factors

Below are the primary indicators concerning the supply of containerships:

• Annual growth of the cellular and non-cellular containerships fleet, which depends on new orders and deliveries versus scrapping.
• Containerships Fleet structure, which includes: ◦ Orderbook to existing Containerships fleet ratio: this indicates the number or carrying capacity of the containerships scheduled to be built within the next 2–3 years, compared to the current fleet. ◦ Age breakdown: This details the age distribution within a containership fleet. ◦ Replacement ratio: This calculates the orderbook (number of ships or tonnage capacity in TEU) of the ships to be constructed, as a percentage of the existing containership fleet.

• The status of the idle (laid-up) containership fleet. The lower the idle tonnage, the quicker the market recovery for containerships when market conditions improve. • Containership Fleet productivity, technological factors, and innovation. • Containership Fleet utilization.
• Cascading of Containerships

• Significant Containership Alliances controlling liner services in major trade lanes. Through this cooperation, each Containership Alliance secures substantial market presence and operational savings from fleet efficiency and enhanced ship utilization. Additionally, the liner market is further consolidated through mergers and acquisitions of shipping companies, which can also affect the actual supply of ships.
• Oil prices as a crucial component of containerships’ operational costs.
• Port congestion issues: Port and terminal productivity.

 

 

FREIGHT INDEXES

Freight Indexes or Freight Indices serve as financial instruments designed to track the present conditions, state, and trends of the Freight Market. Unlike a single, unified market, the Freight Market (Charter Market) is composed of various distinct markets. These markets are neither completely isolated nor entirely interdependent, often moving in different directions within the broader Freight Market. This diversity necessitates the development of specific Freight Rate indicators.

In shipping market practices, the establishment of Freight Indexes primarily relies on four critical aspects of Freight Market (Charter Market) segmentation: the type and size of ships, the nature of cargoes transported, the types and durations of charters, and the geographic areas where ships trade.

Since Freight Indexes reflect the current status of Freight Markets, their configurations are as dynamic as the shipping industry itself. Hence, a comprehensive overview of Freight Indexes cannot be entirely exhaustive and up-to-date. The Baltic Exchange issues daily Freight Indexes for both dry bulk and tanker markets, based on the evaluations of independent Shipbrokers situated in major shipping centers globally. In the dry bulk sector, key indices include the Baltic Dry Index (BDI), which gauges the general Freight Rate levels, and specific indices like the Baltic Capesize Index (BCI), Baltic Panamax Index (BPI), Baltic Supramax Index (BSI), and Baltic Handysize Index (BHSI), each reflecting the condition of their respective market segments. In the tanker sector, significant indices are the Baltic Dirty Tanker Index (BDTI) for dirty cargo trades such as crude oil and the Baltic Clean Tanker Index (BCTI) for clean cargo trades.

A Freight Index typically utilizes a weighted calculation system where selected chartering alternatives like Standard Voyage Routes, Time Charters, Trip Charters, and Round Voyages from specific ship groups contribute to the index at predetermined weights. The level of Freight Rates on these benchmark chartering options is assessed daily, based on actual Chartering Fixtures or estimates from authorized Shipbrokers, with the weighting factor of each chartering option reflecting its significance. The current index level is shaped daily based on these assessments, using the set weighting factors. Freight indices are generally presented in index points or US Dollars per day.

It’s important to highlight the most notable Freight Index of our times. Since 1 November 1999, the Baltic Dry Index (BDI), succeeding the Baltic Freight Index (BFI), has been a key indicator of Freight Rate levels across the entire dry bulk market. The BFI, which measured daily Freight Rate levels from 4 January 1985 until it was replaced by the BDI on 1 November 1999, was a significant shipping index. The Baltic Dry Index (BDI) measures the overall condition of the dry bulk Freight Market and is often seen as an indicator of industrial output and global economic trends. The BDI is calculated daily as follows:

[(BCI TCavg + BPI TCavg + BSI TCavg + BHSI TCavg) / 4] * 0.113473601

Where:

  • BCI = Baltic Capesize Index
  • BPI = Baltic Panamax Index
  • BSI = Baltic Supramax Index
  • BHSI = Baltic Handysize Index
  • TCavg = Time Charter average = the average rate of Time Charters contributing to each index.

The multiplier, introduced when the BDI took over from the BFI, has evolved as the contributing indexes and calculation methods of the BDI have been updated.

 

 

FREIGHT DERIVATIVES

The narrative began at the Baltic Exchange, an international Freight Exchange hub, which in 1985 launched the Baltic International Freight Futures Exchange (BIFFEX). This exchange hosted two daily sessions for trading Charterparties and Futures Contracts, set to be executed up to two years later, based on a Weighted Freight Index known then as the Baltic Freight Index (BFI), which is the precursor to the Baltic Dry Index (BDI). This index tracked the state of the dry bulk Freight Market. BIFFEX Freight Futures Contracts allowed Shipowners, Charterers, and others in the shipping industry, including speculators, to hedge against or capitalize on the Volatility of Freight Rates and Time Charter rates.

In 1991, a more refined Freight Derivatives method was introduced: the Forward Freight Agreement (FFA), which gradually took over from BIFFEX contracts. This system addressed the need for more tailored contracts rather than settling against a global Freight index. FFAs are “over-the-counter (OTC) forward products traded principal to principal,” unlike the BIFFEX contracts, which were Futures traded on an exchange. For added security in contract performance, an FFA can also be executed through a Clearing-House such as the Norwegian Futures and Options Clearing House (NOS), the London Clearing House (LCH), the Singapore Exchange (SGX), the Chicago Mercantile Exchange (CME), or the Intercontinental Exchange (ICE). When cleared through an exchange, the Clearing House stands as the counter-party to each original party, thus minimizing credit risk.

It’s important to note that FFAs are often customized to meet the specific hedging needs of a Shipowner or Charterer. Here is a simple example of how FFA trading functions: A buyer (Charterer) and a seller (Shipowner) agree to enter into a Forward Freight Agreement (FFA) Contract. The Baltic Exchange now provides a comprehensive array of daily assessments and indexes for Tanker and Dry Bulk Freight Markets, offering a selection of cargoes and routes to serve as the underlying object of the derivative. Through their FFA Broker, the Charterer and the Shipowner will agree on:

  • the selected route;
  • the day, month, and year of settlement;
  • the quantity of the contract; and
  • the contract rate for settling differences.

Typically, the settlement price is determined as the average value of a specific Freight Index or route at a set future point—for instance, the average of the Baltic Panamax Index over the last seven days of a specified month. Suppose the FFA Buyer (Charterer) needs to move a Panamax cargo from Rotterdam to China in two months and worries that the Time Charter (T/C) Market might rise soon. The FFA Seller (Shipowner), with two Panamax bulk carriers available in the region during that time, seeks to lock in a minimum Time Charter (T/C) Rate for at least one of his carriers. After negotiations, they settle on an FFA contract rate of $15,000 per day. The settlement will likely reference the Route P2A_03 of the Baltic Panamax Index (BPI). Two months later, on the settlement date, the average rate for the last seven days of the agreed BPI route is $17,000 per day, above the contracted FFA rate. Therefore, the FFA Seller (Shipowner) compensates the Buyer (Charterer) the difference of $2,000 per day for 65 days (the duration of the voyage), totaling $130,000. This amount helps the Charterer offset the higher rates payable for a ship in the real Spot Market. Although the Shipowner absorbs some loss on the FFA, securing income for one ship, the other bulk carrier benefits from the higher Freight Rates on the Physical (Spot) Freight Market.