(International Logistics and Transport) Shipping

GRADUATE DIPLOMA IN PURCHASING AND SUPPLY CHAIN MANAGEMENT – 2014/2017

Module 06

International Logistics and Transport

Topic No: 02

Kalana Ruchiranga

Index No. 45

Institute of Supply and Materials Management

275/75, Prof. Stanley Wijesundara Mw, Colombo 07.

Deadline for Submission – on or before August 9, 2015

CONTENTS

Page No

1. Executive Summery...............................................................................................................-2

2. Introduction............................................................................................................................-3

3. Role of Maritime Shipping....................................................................................................-6

4. Trends and drivers.................................................................................................................-8

5. International Maritime Organization (IMO) ...................................................................-11

6. Operational Aspect of Liner and Tramp Trade................................................................-20

7. Conclusion.............................................................................................................................-22

8. List of reference ...................................................................................................................-24

1. Executive Summery

Before explain the shipping have to define international trade. That is the exchange of products, services, and money across national borders .I’m going to examine the role played by shipping by giving practical examples as most important international mode of transportation. Also discuss the vital role of international maritime organization (IMO).Then examine various chartering options available in the Tramp trade.

Shipping originally referred to transport by sea. (Carriage of goods by sea).The shipping is one way for the international trade. Shipping will cover export & import in simply. Usually transportation by road, rail & air is higher than the sea transport.

Around 90% of world trade is carried by the international shipping industry.  Without shipping the import and export of goods on the scale necessary for the modern world would not be possible. Seaborne trade continues to expand, bringing benefits for consumers across the world through competitive freight costs. Thanks to the growing efficiency of shipping as a mode of transport and increased economic liberalization, the prospects for the industry’s further growth continue to be strong.

There are over 50,000 merchant ships trading internationally, transporting every kind of cargo. The world fleet is registered in over 150 nations, and manned by over a million seafarers of virtually every nationality.

IMO – the International Maritime Organization – is the United Nations specialized agency with responsibility for the safety and security of shipping and the prevention of marine pollution by ships.

A Tramp service is a ship that has no fixed routing or schedule and is available short notice to load any cargo from any port to any port.

Transport is the essential link between supplier and receiver, and the aim is to receive the goods in good condition, when and where they are needed. For this purposes in Tramp Trade has three type of chartering as Time/Voyage and Bareboat chartering.

These areas has described in detail through this assignment.

2. Introduction

Shipping Development over Last 5,000 years

The history of trade can be divided into three phases. The first started in the Mediterranean, spreading west through Greece, Rome and Venice, to Antwerp, Amsterdam and London. During this phase a global trading network gradually developed between the three great populations Centre in China, India and Europe. At first this trade was by land and was slow and expensive, but when the voyages of discovery opened up global sea routes in the late fifteenth century, transport costs fell dramatically and trade volumes escalated.

The second phase was triggered by the industrial revolution in the late eighteenth century. Innovations in ship design, shipbuilding and global communications made it possible for shipping to be conducted as a global industry, initially through the Baltic Exchange, whilst reliable steamships and technical innovations such as the Suez Canal made it possible for liner companies to operate regular services. For the next century trade grew rapidly, focused around the colonial empires of the European states and the framework of sea trade was radically changed.

Finally in the second half of the twentieth century another wave of economic and technical change was triggered by the dismantling of the colonial empires which were replaced by the free trade economy initiated at Bretton Woods. Manufacturers set out to track down better sources of raw materials and invested heavily in integrated transport systems which would reduce the cost of transporting these goods. During this period we saw the growth of the bulk carrier markets, the containerization of general cargo and specialist shipping operations transporting chemicals, forest products, motor vehicles, gas, etc. An important part of this revolution was the move of shipping away from the nation states which had dominated previous centuries towards flags of convenience. This brought greater economies and changed the financial framework of the industry, but it also raised regulatory problems.

Shipping’s ‘industrial revolution’

Trade expansion on this scale would not have been possible without a major reform of the transport system. During the next 35 years many new ship types were developed, including bulk carriers, supertankers, liquefied gas tankers, chemical tankers, vehicle carriers, lumber carriers and, of course, container-ships.

Shipping is a growth industry

Shipping plays a vital role in world trade and is the backbone of the world economy. Without ships and the transportation services these ships provide, the world would not be as prosperous as it is today and many countries would not be able to participate in world trade. In recent years, shipping has proven to be a growth industry witnessing the increase in gross tonnage of the world fleet by millions of tonnage every year.

More fuel efficient:

In general, shipping uses up to six times less fuel than road transport and around half the amount needed for rail operations.

Low carbon emissions:

In terms of grams of CO2 emitted per ton-kilometer,

Versatile:

More than thousands of ports in world

Reliable:

Few unpredictable traffic constraints.

Available:

Almost 100% free capacity on major transport routes.

Low cost:

Between 30-60% cheaper than road transport depending on cargo and route.

Low infrastructure costs:

In the main, our coastlines and seas are free to use. There are no expensive roads and rail tracks to maintain.

Safer:

Shipping operates away from people and is 90 times safer than road transport and five times safer than rail.

Low noise levels:

Shipping enjoys low noise emissions and operates away from major populations.

Less restrictive:

Very few restrictions on night, weekend or holiday operations.

3. Role of Maritime Shipping

Marine transportation is an integral, if sometimes less publicly visible, part of the global economy. The marine transportation system is a network of specialized vessels, the ports they visit, and transportation infrastructure from factories to terminals to distribution centers to markets. Maritime transportation is a necessary complement to and occasional substitute for other modes of freight transportation.

Globalization is motivated by the recognition that resources and goods are not always collocated with the populations that desire them, and so global transportation services are needed (and economically justified if consumer demand is great enough). For example, until the 1950s, most crude oil was refined at the source and transported to markets in a number of small tankers [sized between 12,000 and 30,000 deadweight tonnage (dwt)]. However, economies of scale soon dictated that oil companies would be better off if they shipped larger amounts of crude from distant locations to refineries located closer to product markets. Product could then be more efficiently distributed to points of consumption using a host of transportation modes. This realization ultimately led to the emergence of large tanker vessels (e.g., greater than 200,000 deadweight tons) and drove down the per-unit cost of intercontinental energy transportation.

Similarly, rather than palletize grains, minerals, and other commodities, dry bulk cargo ships were designed to deliver cargoes in raw or semi-raw condition from where they were found or grown to processing facilities (e.g., mills and bakeries) closer to final market. Along with containerization and advances in cargo handling and shipboard technology, these measures reduced crew sizes and long-shore labor requirements which also reduced the per-unit cost of ocean cargo transport.

Lastly, globalization identified labor markets overseas that encouraged transport of semi-raw materials and intermediate products where manufacturing costs were lower. With low-cost petroleum energy for vessel propulsion, facilitated by vessel economies of scale, the per-unit costs of semi-finished and retail products were minimized by multi-continent supply chains. Today it is common for agri-products to be harvested on one continent, shipped to another for intermediate processing, transported to a third continent for final assembly, and then delivered to market. For example, cotton grown in North America may be sent to African fabric mills, and then to Asian apparel factories before being returned to North America for sale in retail stores. Orange juice, wine, and other products have also found markets on continents where seasonal or climatic limitations require an offshore source.

Another trend associated with globalization is the pace at which trade occurs. Globalization has encouraged transactions of goods and services in smaller packets delivered “just-in-time”. This has increased the “velocity of freight” which justified in the 1970s faster, small containerized vessels, and over the last two decades justified faster, large containerized vessels. In a globalized economy, containerization offers the advantage of integrated freight transportation across all modes.

4. Trends and drivers

The world economy and demand for seaborne transport

The world economy is highly dependent on shipping, which meets approximately 85% of the global demand for transport. Over time, changes in global growth are expected to lead to changes in the world’s seaborne trade Centre of gravity.

The shipping market is characterized to a great degree by market cycles. This volatility creates a potential for high profits, but also for considerable losses. With the current reduced level of world economic growth coinciding with overcapacity in the global fleet, the shipping market is experiencing tough conditions. The next few years will be critical for shipping and for the balance between supply and demand. Three economic areas currently define the maritime trade: North America, Europe and Asia. The shift in the relative importance of these areas will affect the maritime industry substantially in the years to come

Trends in the tanker market

The crude oil tanker market is currently suffering from a very depressed situation with an abundance of tonnage. Owner groups have been losing money for a long time and some companies are on the brink of bankruptcy. Significant deliveries of crude tankers in 2012 may depress rates further. Scrapping can only partly ease the challenges in this market. The growth in demand will predominantly come from non-OECD countries. The product tanker market is also struggling with oversupply and is subject to continuous changes in import needs and trade patterns. The reduction in trans-Atlantic trade due to lower consumption is noticeable. However, while the current order book for product tankers is limited, some owners believe this market will pick up sooner than the crude tanker market.

Trends in the dry bulk market

The dominant factors for the dry bulk market are commodity supply industries such as energy, manufacturing and construction. World trading activity is closely correlated to global GDP levels. In the past, the economies of the US, Europe and Japan have acted as the primary drivers of the dry bulk trade market. However, the contributions of China, India and Brazil are becoming more important as these countries’ GDP growth rates are significantly higher than those of the developed countries. China is by far the largest contributor, and has been so for the past five years.

Environmental regulations

Key environmental regulations coming into force in this decade address emissions of sulphur oxides (SOx), nitrous oxides (NOx), particulate matter (PM) and greenhouse gases (in particular CO2), as well as ballast water management. New international regulations addressing ships’ energy efficiency enter into force on January 1, 2013, while stricter sulphur requirements enter into force for specific sea areas in 2015 and globally in 2020, and demanding ballast water treatment requirements are expected to enter into force before the middle of the decade. Compliance is made challenging by a number of factors, including financial constraints, technological immaturity and uncertainty regarding enforcement and the consequences of non-compliance. The cost of compliance will be high for the maritime industry, and the business consequences of wrong decisions severe. In the longer run, the ability to navigate these regulatory waters is likely to be a key commercial differentiator.

Technology and energy efficiency

Shipping will have to adopt new technologies over the next decade in order to be able to adapt to upcoming regulations and market pressure.

Forthcoming regulations will force ship owners to address technologies that can impact SOx emissions, NOx emissions, ballast water cleaning and energy efficiency. The industry is developing solutions at a fast pace within all these areas. The development of new technologies is seen as impacting the whole value chain, from ship owners to suppliers and start-up companies. For each regulation, a ship owner will have multiple feasible technologies to choose among. Making the right choice will require knowledge of the effects, side-effects and operational implications.

Fuel trends

The shipping industry has become one of the major users of fossil fuels, and an increasing focus is being placed on the usage of maritime fuel due to increased scrutiny of the maritime industry’s emission levels.

5. International Maritime Organization (IMO)

As a specialized agency of the United Nations, IMO is the global standard-setting authority for the safety, security and environmental performance of international shipping. Its main role is to create a regulatory framework for the shipping industry that is fair and effective, universally adopted and universally implemented.

 In other words, its role is to create a level playing-field so that ship operators cannot address their financial issues by simply cutting corners and compromising on safety, security and environmental performance. This approach also encourages innovation and efficiency.

 Shipping is a truly international industry, and it can only operate effectively if the regulations and standards are themselves agreed, adopted and implemented on an international basis. And IMO is the forum at which this process takes place.

 International shipping transports about 90 per cent of global trade to peoples and communities all over the world. Shipping is the most efficient and cost-effective method of international transportation for most goods; it provides a dependable, low-cost means of transporting goods globally, facilitating commerce and helping to create prosperity among nations and peoples.

 The world relies on a safe, secure and efficient international shipping industry – and this is provided by the regulatory framework developed and maintained by IMO.

 IMO measures cover all aspects of international shipping – including ship design, construction, equipment, manning, operation and disposal – to ensure that this vital sector for remains safe, environmentally sound, energy efficient and secure.

 Shipping is an essential component of any programme for future sustainable economic growth. Through IMO, the Organization’s Member States, civil society and the shipping industry are already working together to ensure a continued and strengthened contribution towards a green economy and growth in a sustainable manner. The promotion of sustainable shipping and sustainable maritime development is one of the major priorities of IMO in the coming years.

 

Energy efficiency, new technology and innovation, maritime education and training, maritime security, maritime traffic management and the development of the maritime infrastructure: the development and implementation, through IMO, of global standards covering these and other issues will underpin IMO's commitment to provide the institutional framework necessary for a green and sustainable global maritime transportation system. 

Role of IMO

Maritime Safety

IMO's work in developing international safety regulations and recommendations for shipping.

Maritime Security

Maritime security is an integral part of IMO's responsibilities. A comprehensive security regime for international shipping entered into force on 1 July 2004.

Marine Environment

IMO's work in developing international regulations and recommendations to prevent pollution of the seas by ships.

Legal Affairs

Information on Liability and compensation regimes developed by IMO and issues dealt with by IMO's Legal Committee.

Human Element

Focuses on the human side of shipping - the people involved in every aspect of ship safety and prevention of marine pollution, from seafarers to ship operators to port state control officers.

Facilitation

Information relating to IMO's work at the ship-port interface, including standardization and harmonisation of procedures as well as security issues.

Technical Co-operation

Information on IMO's Technical Co-operation Programme which is designed to assist Governments which lack the technical knowledge and resources that are needed to operate a shipping industry successfully.

Member State Audit Scheme & Implementation Support

Implementation of IMO treaty instruments lies with States that are Parties to those instruments. The Member State Audit aims to determine the extent to which these States give full and complete effect to obligations and responsibilities contained in a number of IMO treaty instruments in their capacity as flag, port and/or coastal States.

Conferences

The Conference Division is responsible for the co-ordination and servicing of all IMO Meetings in the six official languages of the Organization: Arabic, Chinese, English, French, Russian and Spanish.

Communications and Outreach

A key element of the Organization’s work. IMO's Public Information Service promotes global awareness of the Organization, its programmes and activities through coordinated, connected and integrated outreach activities.

EVENTS OF IMO

World Maritime Day

 Every year IMO celebrates World Maritime Day, which is used to focus attention on the importance of shipping safety, maritime security and the marine environment and to emphasize a particular aspect of IMO's work. Each World Maritime Day has its own theme, which is reflected in IMO’s work throughout the year in question, and its own logo. World Maritime Day is celebrated in the last week of September each year, although the exact date is up to individual governments around the world.

Future-Ready Shipping 2015

 The joint IMO-Singapore International Conference on Maritime Technology Transfer and Capacity Building will be held in Singapore from 28-29 September. Future-Ready Shipping 2015 will include sessions covering international regulatory trends and the impact on shipping; promising energy-efficient ship technologies; multilateral networks and partnerships for successful technology solutions; and approaches to capacity-building and technology transfer.

Exceptional Bravery at Sea

 This annual award was established by the Organization to provide international recognition for those who, at the risk of losing their own life, perform acts of exceptional bravery, displaying outstanding courage in attempting to save life at sea or in attempting to prevent or mitigate damage to the marine environment.

International Maritime Prize

 The International Maritime Prize is awarded annually by the IMO Council to the individual or organization judged to have made the most significant contribution to the work and objectives of IMO.

 

Safety of ships carrying passengers on non-international voyages

 The international Conference on the enhancement of safety of ships carrying passengers on non-international voyages, held in in Manila, the Philippines, on 24 April 2015, drew attention to the need to enhance the safety of ships carrying passengers on non-international voyages and adopted guidelines to address the question of whether a ship is fit for purpose for its intended role.

Meeting to Address Unsafe Mixed Migration by Sea

 A High-Level Meeting to Address Unsafe Mixed Migration by Sea held at IMO Headquarters (4-5 March 2015) to facilitate dialogue and promote enhanced cooperation and harmonization between United Nations agencies, international organizations, non-governmental organizations, Governments and the shipping industry.

Day of the Seafarer

 Day of the seafarer is an official United Nations international observance day which takes place every year on 25 June. It is organized by the International Maritime Organization and aims to increase awareness among the general public of the world’s 1.5 million seafarers for their unique, and all-too-often overlooked, contribution they make to the well-being of all of us.

6. Operational Aspect of Liner and Tramp Trade

Liner Service

Liner service consists of regularly scheduled shipping operations on fixed routes. Cargoes are accepted under a bill-of-lading contract issued by the ship operator to the shipper.

Competition in liner service is regulated generally by agreements, known as conferences, among the ship-owners. These conferences stabilize conditions of competition and set passenger fares or freight rates for all members of the conferences.Eg; In the U.S., steamship conferences are supervised by the Federal Maritime Commission in accordance with the Shipping Act of 1916. Rate changes, modifications of agreements, and other joint activities must be approved by the commission before they are effective. Measures designed to eliminate or prevent competition are prohibited by law.

Tramp Shipping

Tramps, known also as general-service ships, maintain neither regular routes nor regular service. Usually tramps carry shipload lots of the same commodity for a single shipper. Such cargoes generally consist of bulk raw or low-value material, such as grain, ore, or coal, for which inexpensive transportation is required. About 30 percent of U.S. foreign commerce is carried in tramps.

Tramps are classified on the basis of employment rather than of ship design. The typical tramp operates under a charter party, that is, a contract for the use of the vessel.

The center of the chartering business is the Baltic Exchange in London, where brokers representing shippers meet with ship owners or their representatives to arrange the agreements. Freight rates fluctuate according to supply and demand: When cargoes are fewer than ships, rates are low. Charter rates are also affected by various other circumstances, such as crop failures and political crises.

Charter parties are of three kinds, namely, the voyage charter, the time charter, and the bareboat charter.

The voyage charter, the most common of the three, provides transport for a single voyage, and designated cargo between two ports in consideration of an agreed fee. The charterer provides all loading and discharging berths and port agents to handle the ship, and the ship owner is responsible for providing the crew, operating the ship, and assuming all costs in connection with the voyage, unless an agreement is made to the contrary.

The time charter provides for lease of the ship and crew for an agreed period of time. The time charter does not specify the cargo to be carried but places the ship at the disposal of the charterer, who must assume the cost of fuel and port fees.

The bareboat charter provides for the lease of the ship to a charterer who has the operating organization for complete management of the ship. The bareboat charter transfers the ship, in all but legal title, to the charterer, who provides the crew and becomes responsible for all aspects of its operation.

The leading tramp-owning and tramp-operating nations of the world are Norway, Britain, the Netherlands, and Greece. The carrying capacity of a typical, modern, well-designed tramp ship is about 12,000 dwt, and its speed is about 15 knots. The recent trend is toward tramps of 30,000 dwt, without much increase in speed.

7. Conclusion

When we explain the shipping have to define international trade. That is the exchange of products, services, and money across national borders .I have examined the role played by shipping by giving practical examples as most important international mode of transportation. Also discussed the vital role of international maritime organization (IMO).Then examine operational aspect of liner and tramp trade.

The history of trade can be divided into three phases. The first started in the Mediterranean, spreading west through Greece, Rome and Venice, to Antwerp, Amsterdam and London. The second phase was triggered by the industrial revolution in the late eighteenth century. Finally in the second half of the twentieth century another wave of economic and technical change was triggered by the dismantling of the colonial empires which were replaced by the free trade economy initiated at Bretton Woods.

Shipping originally referred to transport by sea. (Carriage of goods by sea).The shipping is one way for the international trade. International shipping transports about 90 per cent of global trade to peoples and communities all over the world. Shipping is the most efficient and cost-effective method of international transportation for most goods; it provides a dependable, low-cost means of transporting goods globally, facilitating commerce and helping to create prosperity among nations and peoples.

As above mentioned around 90% of world trade is carried by the international shipping industry.  Without shipping the import and export of goods on the scale necessary for the modern world would not be possible. Seaborne trade continues to expand, bringing benefits for consumers across the world through competitive freight costs. Thanks to the growing efficiency of shipping as a mode of transport and increased economic liberalization, the prospects for the industry’s further growth continue to be strong.

There are over 50,000 merchant ships trading internationally, transporting every kind of cargo. The world fleet is registered in over 150 nations, and manned by over a million seafarers of virtually every nationality.

When explaining role of maritime shipping can get idea by studying globalization. Globalization is motivated by the recognition that resources and goods are not always collocated with the populations that desire them, and so global transportation services are needed. For example, until the 1950s, most crude oil was refined at the source and transported to markets in a number of small tankers [sized between 12,000 and 30,000 deadweight tonnage (dwt)]. However, economies of scale soon dictated that oil companies would be better off if they shipped larger amounts of crude from distant locations to refineries located closer to product markets. Product could then be more efficiently distributed to points of consumption using a host of transportation modes. This realization ultimately led to the emergence of large tanker vessels (e.g., greater than 200,000 deadweight tons) and drove down the per-unit cost of intercontinental energy transportation.

Also I’ve bring down the trends & drivers of maritime trade. The crude oil tanker market is currently suffering from a very depressed situation with an abundance of tonnage. (Trend of tanker market)Key environmental regulations coming into force in this decade address emissions of sulphur oxides (SOx), nitrous oxides (NOx), particulate matter (PM) and greenhouse gases (in particular CO2), as well as ballast water management(environmental regulations). Shipping will have to adopt new technologies over the next decade in order to be able to adapt to upcoming regulations and market pressure (technology & energy efficiency).The shipping industry has become one of the major users of fossil fuels, and an increasing focus is being placed on the usage of maritime fuel due to increased scrutiny of the maritime industry’s emission levels. (Fuel Trends)

IMO – the International Maritime Organization is the United Nations specialized agency with responsibility for the safety and security of shipping and the prevention of marine pollution by ships. Shipping is a truly international industry, and it can only operate effectively if the regulations and standards are themselves agreed, adopted and implemented on an international basis. And IMO is the forum at which this process takes place.IMO measures cover all aspects of international shipping including ship design, construction, equipment, manning, operation and disposal to ensure that this vital sector for remains safe, environmentally sound, energy efficient and secure. The world relies on a safe, secure and efficient international shipping industry and this is provided by the regulatory framework developed and maintained by IMO.

A Tramp service is a ship that has no fixed routing or schedule and is available short notice to load any cargo from any port to any port.

Transport is the essential link between supplier and receiver, and the aim is to receive the goods in good condition, when and where they are needed. For this purposes in Tramp Trade has three type of chartering as Time/Voyage and Bareboat chartering.

Liner service is that operates within a schedule and has a fixed port rotation with published dates of call at the advertised ports and with high level of cargo safety.

This is the overall conclusion of assignment completed by me.

8. List of Reference

· Text book ISMM

· Lecture Notes

· http://shippingandfreightresource.com/thank-you/

· http://www.howtoexportimport.com/Inco-Terms/default.aspx

· http://www.howtoexportimport.com/Difference-between-ex-works-and-FOB-400.aspx

· https://en.wikipedia.org/wiki/Tramp_trade

· http://www.imo.org/en/OurWork/Pages/Home.aspx

· http://www.seinemaritime.net/suports/uploads/files/Glossary%20of%20Port%20and%20Shipping%20Terms.pdf

· http://www.undp.org/content/dam/undp/documents/procurement/documents/UNDP-Shipping-Guide.pdf

· http://www.dnv.nl/binaries/shipping%202020%20-%20final%20report_tcm141-530559.pdf

· http://shippingandfreightresource.com/liner-and-tramp-service/

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