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Friday 16 June 2017

Economics for International Supply Chains

Transport
       A logistics supply chain is a chain of transport of materials with added backwards and forwards information and payment flows
       These lectures will be looking at the economics of transporting goods
       They are rooted in theory and practice
      Economic theories of demand and supply, costs, prices and market structure
      Practice of voyage estimating, buying and selling ships, running networks, etc

Transport Mode
       Refers to any of the following transportation methods: rail, road, air or water
       Water transport includes transoceanic shipping, coastal shipping and inland waterways
       Plymouth University has a particular strength in transportation by sea
      Over 90% of world trade by volume/weight goes by sea
      The falling cost of sea transport in real terms is an important factor in the rise in world trade and the improvement of the global economy

Sea and Air
A mixture of sea and air freight to provide a compromise between the low cost of sea and the speed of air

Shipping Markets: Major Freight markets
       Bulk Shipping: mainly tramp shipping
      Dry bulk
      Wet bulk (tanker)
       General shipping or break bulk: mainly liner shipping
      Unitised (trailer, container, pallet)
      Packaged (box, bale, bag, barrel)

Minor shipping markets include:
       Ferry or Ro-Ro
       Cruise liner
       Yacht etc.

Bulk Shipping
       The whole ship may carry a single cargo, or there may be different types of cargo in different holds/tanks
       Big companies may own their own fleet of ships to service their needs
       More commonly, ships are hired (chartered) as and when needed, for a voyage or a period of time
       By carrying heavy, low-value cargoes (e.g. coal, iron ore) in very big ships, transport costs per tonne are kept down
       Chartering is arranged though shipbrokers in specialised markets (Baltic Exchange)
       The largest dry bulk ships: Very Large Ore Carriers (VLOC) now reach 400,000 deadweight (dwt) – and are often called a “Chinamax” type

Tanker Shipping
       Bulk liquid shipping
       Cargo is pumped into the ship through pipelines
       The ship has her own pumps to discharge the cargo
      No stevedores
       The biggest market is crude oil carried in Very Large Crude Carriers (VLCCs) but the largest ship size is ULCC (>320,000 dwt)
      Dirty tanker market
       Oil products (refined crude oil), liquid gas and chemicals are carried in specialised ships
      Clean tanker market, gas tankers  or parcel tankers
       Some molasses, beer, wine, lard, fruit juices, etc., are carried in liquid bulk form but only in much smaller ships
       Safety is king – charterers demand quality shipping

Payment
       Payment for time charter is known as hire, in $ per day. It is paid by the charterer to the shipowner and includes the daily cost of hire plus the cost of bunkers for the period of the contract and the port costs for the duration.
       Payment for voyage charter is known as freight, in $ per ton. It is a single payment from the charterer to the shipowner out of which the owner has to pay for everything.
      Tanker payments use the Worldscale system or lump sum payments

Liner Shipping
       Cargoes that are too small to fill a ship need to be grouped together
       Liner shipping offers a regular advertised service between ports
       Prices are fixed on a tariff
      They may vary with the value of the goods or be Freight All Kinds (FAK) per box
      Big shippers are offered volume discounts
      Regular shippers are offered rebates
      Tariffs can be changed e.g. Bunker Adjustment Factor (BAF)
       Liner shipping is a complex administrative task
       Each consignment of cargo needs a Bill of Lading or other shipping document
       Ships have to be loaded so that they are stable and in ‘trim’, and the cargo can be reached at the discharge port
       A “loop” or “pendulum” string has to be run with enough ships to keep to the schedule: this is very capital intensive
       A network of agents is needed to book new cargoes

General Cargo ships
These carry all types of “general” cargo – sacks, packaged, palletised. Sometimes containers and heavy lift items such as rail engines are carried on deck.

Car Carrier mv “Faust
       The LCTC (Large Car Truck Carrier) m/v FAUST has a capacity of 8,000 cars or a combination of 3,484 cars and 468 buses. With her 227.8 metres this capacity makes her one of the largest car carriers in the world.
       The vessel is built to the highest class of Lloyd’s Register of Shipping with the following designations: +100 A1 Vehicle Carrier, Movable decks, “deck no. 1, 3, 5 and 8 strengthened for Roll on Roll off cargo”.
       Length over all 227.8 m Beam, moulded 32.26 m  Air draft 51.98 m Height to upperdeck 34.7 m Draft, design/max 9.5/11.3 m Deadweight at maximum draft 30,383 MT
       Gross Tonnage 71,583 GT Net Tonnage 33,546 NT
       Stern ramp width 9.5 m Stern opening height 6.5 m Stern ramp capacity 240 t
       Number of car decks 13 (of which 5 are movable)
       Capacity deck area 67,300 m2 Capacity of car units* 8,000 Capacity of cars/buses 3,484/468
       Basic complement 15, Built 2007, Daewoo Shipbuilding, DSME, Korea IMO Number 9332925
       Flag Swedish Owner Wallenius Lines AB, Sweden Operator Wallenius Wilhelmsen Logistics

Markets in Shipping
       Freight market
       Freight derivatives market
       Ship markets:
      Sale and Purchase market (S&P)
      Newbuilding market
      Demolition market
       Markets for shipping-related services
      Repairs
      Equipment
      Legal
      Shipbroking
      Managing
      Crewing
      Agency
      Bunkering (re-fuelling)

Markets in Shipping
       Freight market
       Freight derivatives market
       Ship markets:
      Sale and Purchase market (S&P)
      Newbuilding market
      Demolition market
       Markets for shipping-related services
      Repairs
      Equipment
      Legal
      Shipbroking
      Managing
      Crewing
      Agency
      Bunkering (re-fuelling)

Freight Markets
       Dry bulk, wet bulk and container markets are segmented by size
       Each size segment has a name and generally recognised range - see extract from:
       Within each size range the market is segmented by route or area of the world

       But note that these size definitions of ships e.g., Panamax, Capesize have evolved over time and are not fixed. As UNCTAD states they are defined “according to generally used shipping terminology” other players may have different definitions.

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