Marine TransportationMarine Transportation

Importance of Marine Transportation

• Most of international trade is carried out by sea.

• Even in many cases landlocked countries use seaports of neighboring countries as gateways

• Global seaborne trade is around 7.5 billion tonnes

• India’s seaborne international trade is 600 million tonnes

Clippers

Maritime History• International maritime history

– Sail ships/ Clippers– Steam boats– Motor ships

• Indian maritime history– Traders from Greece and Arabia to Southern kingdoms– Creation of ship building capacity in Kerala, Gujarat and

Kutch– British Steam Navigation Company– India–Pakistan–Bangladesh–UK-continent conference– Rise and fall of Indian shipping companies– Shipping Corporation of India

Terms associated with shipping• Hull: main body of the ship.• Bow and Stern: front and rear of the ship, respectively• Beam: width of the ship• Port and starboard: Left and right side of the ship while

facing the • Weather deck: top surface of the ship • Lower hold: bottom portion of the ship, meant for holding

cargoes • Bunkers: Fuel oil, which fires the main engine, and diesel

oil, which fires the auxiliary engines• Ballast Tank: Tanks which take in seawater to stabilize its

motion

Terms associated with shipping• Gross register tonnage (GRT): the total internal volume of the

vessel, and includes all the enclosed spaces between the hull and also on the deck available for cargo, passengers, and crew. Equivalent to a volume of 100 cubic feet or about 2.832 cubic metres

• Net register tonnage (NRT): volume of the vessel actually available for cargo. This is derived by subtracting the volumes of spaces, which are meant for purposes other than carrying cargo (i.e. engine room, crew spaces, stores, etc.).

• Deadweight tonnage (DWT): Weight that a ship can carry and includes cargo, crew, passengers, and stores. It is expressed in terms of the difference in the displacement between a loaded and an empty condition. Commercially, this is the most important capacity measure for a sea-going vessel.

Terms associated with shipping• Bale cube or bale capacity: The space available for cargo inside of

the cargo battens, on the frames, and to the underside of the beams, measured in cubic feet.

• Grain cube or grain capacity: The maximum cubic feet of space available for cargo between the shell and deck plating and top of the beam or outside the frames

• Plimsoll line: A maximum draft to which a ship can be loaded without sacrificing the buoyancy, is indicated by lines drawn on the middle of the ship’s side known as Plimsoll line or international load line or waterline

Source: http://www.rhiw.com/y_mor/plimsoll/load_line_01.jpg

International conventions governing shipping

• International Convention on Load Line• International Convention for the Safety of Life

at Sea (SOLAS)• International Tonnage Convention• International Convention on Maritime

Pollution Prevention (MARPOL)

Types of Ships

• Categorization Based on the Nature of Cargo– General cargo ships– Container ships– Combi ships– Heavy-lift ships– Bulk carriers– Roll-on Roll-off (RO-RO) ships– Liquid cargo carriers/ Crude carriers/ Product

tankers– Oil Bulk Ore Carriers– Gas carriers

Source: http://photos.marinetraffic.com/ais/showphoto.aspx?mmsi=246309000&imo=9371581

Source: http://internationalshippingusa.com/ImagesEditor/international_shipping_ro_ro.jpg

Source: http://photo.ekathimerini.com/kath/engs/img/BUSINESS/2012/IO/Ing_carrier_390_1810.jpg

Types of Ships

• Classification by sizes– Handymax: A bulk carrier, typically of 45,000 DWT (between

35,000 and 60,000 DWT), having a length of 150–200 meters or 492–656 feet.

– Panamax: The sizes of these vessels are limited by the dimensions of the lock chambers of the Panama Canal (width of 33.53 metres and length of 320.0 metres)

– Suezmax: largest size vessels, which can navigate the Suez Canal while being fully loaded. Typically of 120–200,000 DWT

– Seawaymax: vessels that can navigate the St Lawrence Seaway– Capesize: more than 1,50,000 DWT, and include VLCC and

ULCC; and bulk carriers transporting coal, ore, and other commodity raw materials

Types of Shipping Services

• Liner Shipping • Tramp Shipping

– Voyage charter– Time charter– Trip-time charter– Bareboat charter– Contract of Affreigtment

Definitions• Tramp Shipping

– Ships which chase cargoes –they go where the cargoes are available

– Generally for bulk movement of grains/fertilizers/ores/coal etc which needs to be moved in millions of tonnes

• to meet the supply chain demand• to ensure unit cost of transport becomes low in proportion to low

value of such goods• The Freighting system for these movements are

– Chartering • Voyage Charter• Time Charter• Contract of affreightment

– The document covering contracts is called Charter Party

Charters• Voyage Charter

– Contract for movement of one specific parcel from one or two load ports to one or two discharge ports

• Time Charter– Bare Boat Charter- crew will be of that of charterer.– Trip time charter: The ship is chartered on a per diem rate for a period

(USD per day) – Contract of affreightment

• A contract for carrying an amount of cargoes between two places over a period

• There is some latitude for ship-owners a number of ships of a certain types with a flexible time period to carry out the contract

Characteristics of Voyage Charter

• Lay days- The window in which ship should report for loading

• Notice of Readiness• FI/FO (Free in/Free Out)- Free cargo handling• Demurrage/dispatch charges• Dead Freight• Draft and speed • Statement of Facts/Lay days statement and

dispatch/demurrage calculation

Factors to be kept in mind while chartering vessels

• Draft Restrictions – Load/ Discharge Ports• Port handling facilities• Load/ Discharge Ports• Sea lane restrictions (e.g. Panama size)• Lightening possibilities and costs• International market conditions• Vetting and empanelment of brokers• Lead from port to Inland point• Inland Transport Options

Baltic Exchange/ Containerized freight index

• Baltic exchange provides information on all open offers, trends, etc., and also have indices for trends of freight of various cargoes and sizes of ships. Some of the indices on Baltic Exchange include the Baltic handymax index (BHMI), the Baltic panamax index (BPI), the Baltic capesize index (BCI), and the Baltic dry index (BDI).

Source: http://www1.chineseshipping.com.cn/resource/img/update/scfiallen.png

Freight Indices• The Baltic Handymax Index (BHMI), is calculated from the

weighted, average rates on major timecharter routes, with two trial voyage routes, as assessed by a panel of brokers.

• The Baltic Panamax Index (BPI), is calculated from the weighted, average rates on major routes, both voyage and timecharter, as assessed by a panel of brokers.

• The Baltic Capesize Index (BCI), is calculated from the weighted, average rates on major routes, both voyage and timecharter, as assessed by a panel of brokers.

• The Baltic Dry Index (BDI), is the average of the Baltic Handymax Index (BHMI), the Baltic Panamax Index (BPI) and the Baltic Capesize Index (BCI). The BDI provides a good general indicator of movement in the dry bulk market, and continues the established time series of the Baltic Freight Index (BFI) which was introduced in 1985.

Shipping Agency

• Shipping has traditional agency functions however over a period of time has turned into deeply outsourced business

• Owners Agency• Charterers Agency• Port Agency• Commercial/ Marketing Agency• Ship/Crew Management

Liner shipping• Ships which operate on specific routes and

scheduled dates• Generally for smaller parcels of value goods

which can sustain a higher freight• Break Bulk ships in which goods were loaded in

sea worthy packing now mostly replaced by container vessels and container mode of transport

• Movement covered by Liner Bill of Lading or Multimodal Transport document-(this will be discussed in detail in documentation section of the course)

Liner Versus Tramp Item Liner Tramp

Commodity General Cargo Bulk Materials

Ships Container ships/Break bulk ships

Bulk carriers/Tankers/Gas Carriers/OBO’s

Contract Liner Charter party

Bill of Lading Liner Charter party

Loading /Discharging costs Part of Freight/responsibility of ship

Separate- the responsibility is that of shipper/receiver

Shippers/ Receivers A large number One or small numbers

Size of ships Barring large container vessels of sizes are not that big

Can go up to 600,000 tonnes in case of ULCC

Container Lines- Hub and spoke operations

• Container ships are growing by size to keep pace with competition and with constant endeavor to reduce unit cost

• These ships cannot call at many ports because of costs and time- yet they have to be near full

• Hence feedering of containers is done to hub ports

• In the Far-East Europe trade Singapore and Colombo are hub ports for Indian cargoes

• Recently Maersk Line has introduced a direct service from Chennai to USA – and Chennai port is being used as hub for containers from Chittagong and Kolkata

Service Routes

Liner and Container Shipping• Six generations of Container ships

Multimodal Transport

• Any national or international transport is made using more than one of the following modes of carriage the goods is seemed to have been carried by Multimodal transportation – covered by one transport document– Rail– Road– Air– Inland waterway– Ocean

Container shipment types• LCL/FCL also known as CFS/CY• LCL/LCL CFS/CFS• FCL/FCL CY/CY• FCL/LCL CY/CFS• LCL shipments are routed through Container Freight

Stations (CFS) which are common user sheds where the cargoes are received custom examined and containerised or vice versa for imports

• FCL shipments are containerised at the factories/ warehouses of shippers and delivered to the lines at Yard or vice versa for imports

• Container Yard-CY and Container Freight Station -CFS

Container handling

ShipCFS

EmptyContainer

YardDeliveryOf Cargo

EmptyContainer

ContainerYardFull

Container

FCL Container fromFactory

Break bulk handling

Port Trust Shed

Cargo DeliveryIn packages

Movement of cargoTo ship’s side

Loading onto the ship

Freight Rates • LCL Rates

– USD Per CBM or 1000 kilos, whichever higher-the figure on which is the freight is charged is also called Revenue Ton or Freight Ton + LCL service charges per CBM or 1000 kilos whichever is higher –also known as LCL THC

• FCL Rates– USD per twenty footer/ USD per forty footer– Note forty footer rate is most of the time is not double of twenty footer and is

marginally lower than double– THC is quoted in the currency of country of origin/destination. It is also

quoted per twenty footer and per forty footer-in India the rate is double for forty footer. In UK /Europe it is the same for both types of containers

• FCL box rates– Commodity Box rates: In some sectors higher value cargoes attract a higher

box rate as compared to low value cargoes Freight All Kinds Box rate (FAK box rates)

– In this case whatever cargoes one puts inside the box will the rate per unit will be the same

Surcharges• BAF or Bunker Surcharge

– Ships normally runs on Heavy Fuel Oil (Furnace Oil) and the auxiliary engine (for lighting and energy) runs on either Light Diesel Oil or normal diesel oil

– As the price of these oils go up the lines recover the increase in the form of a surcharge the amount being determined on the basis of distances

– This is normally on per container basis• Currency adjustment factor or CAF

– When a ship operates in a certain trade routes the ship spends its expenses in various currencies –the revenue is universally in dollars- if the currencies of expense strengthen against dollars the lines will protect revenue by a positive CAF

• Some Charges specific to US trades– ISPS-Internal Ship & Port Security Charge– ACD- Advance Customs Declaration Charges

Miscellaneous Charges• B/L Fees

– At the time of exports• A nominal sum ranging from Rs 500 to Rs 800/- is collected

as B/L fees (linked to the B/L and not number of containers) to cover

• A) Stationery costs• B) Admin costs –B/L is generated by the lines through their

systems-may be web enabled– At the time of Imports

• A) Delivery Order fees is collected by agents to cover manifesting and agency efforts

• B) Container Cleaning & Administration charges are also collected

• These charges are in the nature of supplementary revenues and insulate cost of efforts from market fluctuations of freight

The mechanics of Price fixation• Tariff by conferences and rate agreements

– Conferences and Rate agreements are a grouping amongst the shipping lines operating in a particular trade for self regulation on tariff matters and for approaching common problems with authorities –for particular trade routes

– In the era of restricted markets they were a powerful body and the rates they set used to be mandatory

– Nowadays they do not regulate rate applications but help in determining surcharges/shore side charges etc

– One of the oldest conference system is India –Pakistan-Bangladesh –UK/Europe conference – consisting of several sub divisions –this is probably 100 years old

• Tariff by lines – operation within a band– Open Tariffs– Spot rates versus contract rates– Shipping Contracts is between very large shippers/forwarders and the lines– This has rate specified and period specified with Minimum Quantity

Commitments (MQC) –Sometimes discounts are also offered on deferred basis after the shipper ships the committed quantity

FCL Versus LCL• We classify the goods as LCL if the goods are delivered at the CFS or

taken delivery off at the CFS and Containerization at the CFS in the case of Exports and imports respectively

Even in the case of a consignment which is enough to fill the containers this happens because many a times the factories/warehouses are not equipped to handle containerized cargoes

But most of the times small lots which are not enough in volume/ weight to fill a container is taken to CFS and clubbed with other cargoes

• The Question is when should one treat a lot as FCL or LCL

Activity Chart comparison FCL vs LCLSl.no Activity and Cost Item FCL LCL

1) Off Loading trucks and Stacking at CFS N Y

2) Presentation for customs exam ,opening and sealing N Y

3) Vanning (Loading) of containers N Y

4) Movement of empty /full finally to CY N Y

5) Off loading at CY Y Y

6) Movement to ship side and loading on ship Y Y

7) Unloading at disport and movement to yard Y Y

8) Movement from yard to CFS N Y

9) Loading on transit vehicles Y Y

10) Devanning of containers at CFS N Y

11) Presentation for customs exam at CFS N Y

12) Loading of Domestic Trucks N Y