Introduction Chartering

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INTRODUCTION


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1.1 INTRODUCTION

International trade is exchange of capital, goods, and services

across international borders or territories. Shipping plays an

important role in the transport sector of worlds economy.

Approximately, 90 percentage of the worlds cargo is moving by

sea. In the above wheel of activities, chartering plays an

important role. It has dominant role in the movement cargo &

vessels across the world, which ensure to meet the demand &

supply of the industry effectively.

Chartering is a process of hiring vessel either by time basis or by

voyage basis. A Charter is a promise. The ship owner are

promise to place his ship at the disposal of the charterer

whereas the charterer promises to pay the agreed freight or hire

within the stipulated time. The CHARTERERS could be

international traders, shippers, receivers, manufacturers, mine

owners or government organizations.

The growing division between ownership and management

driven by the objective for a steady return has led to the

development of OPERATORS. Operators hire ships from the

ship owners and reemploy them for a higher freight or hire. They

are also known as Desponent Owners. The ability of an

operator to obtain contracts for carriage of cargoes for a higher

freight and have a back to back arrangement with the ship

owner for a lesser freight also contributes to his profit. A needle

to say trading and operator is a high risk business and cases ofbankruptcy are not unknown.

The SHIP BROKERS assist in securing cargoes for ships and

the ships for cargoes. Being a successful ship broker calls for

knowledge, hard work and good luck. The last one being elusive


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may at times wipe off the good efforts of broker after he almost

fixes the vessel.

1.2 CHARTERING AND ITS TYPES

A Charter is a promise. The ship owner promises to place his ship at the

disposal of the charterer whereas the charterer promises to pay the agreed

freight or hire within the stipulated time.

Thus chartering is all about the process of hiring a ship.

MARKET PLAYERS :

The CHARTERERS could be international traders, shippers, receivers,

manufacturers, mine owners or government organisations.

The growing division between ownership and management driven by the

objective for a steady return has led to the development of OPERATORS.

Operators hire ships from the ship owners and re-employ them for a higher

freight or hire. They are also known as ' Desponent Owners '. The ability of an

operator to obtain contracts for carriage of cargoes for a higher freight and

have a ' back to back ' arrangement with the ship owner for a lesser freight

also contributes to his profit. Needless to say trading as an operator is a high

risk business and cases of bankruptcy are not unknown.

The SHIP BROKERS assist in securing cargoes for ships and the ships for

cargoes. Being a successful ship broker calls for knowledge, hard work and

'good luck '. The last one being elusive, may at times wipe off the good

efforts of the broker after he almost fixes the vessel.

FREIGHT MARKET :


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Selecting the methods of employment for a ship is based on the freight market

and the risks involved with it. Freight market is neither uniform nor

homogeneous with a specific geographical area. The ships which carry similar

cargoes determine the market level. Hence it is essential to understand the

freight market.

FACTORS WHICH INFLUENCE FREIGHT MARKET

1. Supply and demand of Ships of similar type ( new buildings / scrapping )

2. War

3. Strikes

4. Bad Harvests

5. Government subsidies

I DIVISION OF DRY CARGO MARKET

(A) TWEEN DECKER - 12000 - 23000 DWT

[ Bagged cargoes like Sugar, Rice, Wheat etc. ]

(B) BULKER - ( i ) HANDY [ 20000 40000 DWT ]

( ii ) HANDY MAX [ 40000 50000 DWT ]

( iii ) PANAMAX [ 50000 80000 DWT ]

( iv ) CAPESIZE [ 80000 1,20,000 ]

( v) LARGE CAPE [ OVER 1,70,000 ]

[ COAL, GRAIN, ORES, SCRAP, CEMENT AND FERTILISERS ]

SELF DISCHARGERS : SHIPS FITTED WITH GRABS

LAKERS : SHIPS SPECIALLY CONSTRUCTED WITH

MEASUREMENTS AND FITTINGS FOR PASSAGE

THROUGH ST. LAWRENCE SEA WAY


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ASS : SUITABLE FOR TRADING BALTIC OR CANADA

DURING WINTER

( C ) CONTAINER MARKET :

Limited one with a small number of brokers. Exclusively chartered by operators

for a long term.

( D ) RO / RO MARKET : ( ROLL ON / ROLL OFF )

This is another specialised market where the main players are liner and ferryoperators and the automotive industries.

( E ) LINER MARKET :

Long term remuneration is the influencing factor here rather than the single

voyage. The load factor and availability of cargo determine the market.

LOAD FACTOR = LOADED CUBIC

___________________ X 100%

AVAILABLE CUBIC

( F ) SMALL SHIPS MARKET : LESS THAN 10000 DWT.

Involved in coastal shipping and short-sea trading

( G ) SPECIAL MARKETS :


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HEAVY LIFTS

BARGE CARRIERS / LIGHTERS ABOARD SHIP [ LASH ]

TUGS

II TANKER MARKET :

Dominated by small number of oil majors. Loading areas / terminals are

limited. International regulations for tanker safety are stricter due to increasing

concern for the environment.

( a ) ULCC - MORE THAN 350000 TONS DWT

(ULTRA LARGE CRUDE CARRIER)

( b ) VLCC - 250000 350000 TONS DWT.

(VERY LARGE CRUDE CARRIER)

( c ) SUEZ MAX - 135000 150000 TONS DWT.

( d ) AFRA MAX - 70000 100000 TONS DWT.

( e ) PANAMAX - 55000 65000 TONS DWT.

The last 3 groups of ships used for both product or dirty cargoes depending

on their age and cleanliness.

CHRACTERISTICS OF TANKER MARKET :

1. RAPID FLUCTUATION

2. EVERY OCCURRENCE HAS A GREAT IMPACT ON MARKET

[ E.G. POLITICAL DISTURBANCES ]

PARCEL TANKERS, CHEMICAL CARRIERS AND LPG CARRIERS ALSO

CONSTITUTE THE TANKER MARKET


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III & IV

REEFER MARKET & CAR CARRIER MARKET :

These are closed markets where charters are usually concluded between owners and

Charterers directly without the assistance of the brokers.

INFORMATION CHANNELS :

Exchange of information is vital to chartering. Those engaged in chartering are

both consumers as well as distributors of information. Continuous flow of

information and their evaluation is essential for the judgement of the freightmarket.

WHAT IS EXCHANGED ?

CARGO ORDERS = GIVING DETAILS OF THE CARGO TO BE SHIPPED

SHIP POSITION = WHEN WHERE FREE WITH MAIN DESCRIPTION

FREIGHT NEGOTIATIONS - OFFERS AND COUNTER OFFER [WHICH HOPEFULLY

ENDS UP IN A FIXTURE ]

GENERAL INFORMATION :

PORT COST

BUNKER PRICES

OPENING AND CLOSING CANAL

PORT RESTRICTIONS

AVAILABILITY OF LABOUR

FORCE MAJEURE CONDITIONS


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INFORMATION CENTRES :

LONDON, NEWYORK, OSLO, TOKYO, PARIS AND PIRAEUS.

INDIA - MUMBAI.

BALTIC EXCHANGE

It is the source of maritime market information and encompasses majority of

world shipping interests. The market assessment is made by a panel of

international ship brokers on 43 dry and wet routes.

Baltic Exchange dry index (BDI) is calculated from cape, panamax andhandymax

Indices ( BCI, BPI, & BHMI ) by the exchange.

BIMCO - BALTIC INTERNATIONAL MARITIME COUNCIL

It produces balanced standard Shipping contracts (charter parties). Extensive

details on ports including costs, cargo handling equipments delays, strikes and

various warnings provided to the market. It cautions the members on security

issues like stowaways and armed attack on ships.

1.3 DIFFERENT TYPES OF CHARTERING

VOYAGE CHARTER :

The ship is employed for a single voyage under the voyage charter. The personwho charters is the voyage charterer and the payment is called the freight. It is

governed by the voyage charter party

LIST OF VOYAGE CHARTER PARTY CLAUSES

1. PREAMBLE


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2. CARGO DESCRIPTION / QUANTITY

3. LOADING PLACES

4. LOADING ORDERS / ROTATION

5. DISCHARGING PLACES

6. DISCHARGE ORDERS / ROTATION

7. LAYDAYS AND CANCELLING

8. FREIGHT

9. COST OF LOADING / DISCHARGING

10. NOTICE OF READINESS / TIME COUNTS

11. LOADING / DISCHARGING RATES

12. EXCEPTED PERIODS

13. DEMURRAGE / DESPATCH

14. NOTICES

15. SHIPS GEAR

16. GRAB DISCHARGE / STEVEDORE DAMAGE

17. OVERTIME18. SHIFTING / SEA WORTHY TRIM

19. CARGO SEPARATION & TALLYING

20. DUES & TAXES

21. PORTS AGENTS

22. BILLS OF LADING

23. LIGHTENING

24. GENERAL AVERAGE

25. STRIKES

26. EXCEPTIONS

27. COMMISSIONS28. PROTECTION CLAUSES

29. LIEN

30. ICE

31. SIGNATURE

CONSECUTIVE VOYAGES

It is a special type of voyage charter when the vessel is contracted for severalvoyages consecutively upon each other.

TIME CHARTER


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Here vessels are hired for a specific period say 12 months. The crew employed by

the owner is responsible for the nautical operation and maintenance of the vessel.

The time charterer decides the voyage to be made and the cargo to be carried.

Payment is called hire.

DIVISION OF TIME CHARTER RESPONSIBILITIES :

SHIP OWNER

CREWING

REPAIRS

MAINTENANCE & SPARES

CLASSIFICATION

SURVEYS

LUBRICATING OILS

FRESH WATER INSURANCE OF VESSEL

STORES & PROVISIONS

HEATING & COOKING

CHARTERERS

EMPLOYMENT

BUNKERING PORT EXPENSES

CANAL TOLLS

STEVEDORING

CARGO HANDLING

INSURANCE OF CARGO

INSURANCE OF BUNKERS

LIST OF TIME CHARTER PARTY CLAUSES

1. PREAMBLE2. VESSEL DESCRIPTION

3. DURATION OF PERIOD / DESCRIPTION OF TRIPS

4. TRADING INTENTION / LIMITS

5. CARGO INTENTION / EXCLUSIONS

6. VESSEL CONDITION

7. OWNERS RESPONSIBILITIES


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8. CHARTERERS RESPONSIBILITIES

9. DELIVERY AND REDELIVERY

10. BUNKERS

11. HIRE

12. OFF-HIRE

13. VESSEL PERFORMANCE

14. VESSEL MAINTENANCE

15. CARGO CLAIMS

16. MASTER / OFFICERS

17. LOG BOOKS

18. SUPER CARGO

19. POLLUTION

20. SALVAGE

21. LAYING-UP

22. ARBITRATION

23. LIEN24. ASSIGNMENT

25. EXCEPTIONS

26. REQUISITIONING

27. BILLS OF LADING

28. STEVEDORING DAMAGE

29. COMMISSIONS

30. PROTECTIVE CLAUSES

31. SIGNATURE

BARE BOAT CHARTER

This amounts to the lease of the ship from the owner to charterer. The vessel is put

at the dispersal of the charterer without any crew. The charterer takes the

commercial

and technical responsibility and will pay for the maintenance and insurance bearing

only the capital costs to the owner. It is a financial tool for acquiring ship.


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CONTRACT OF AFFREIGHTMENT :

To carry a fixed cargo over a period of time at a fixed freight level. Each voyage

under COA is a voyage charter

JOINT VENTURES

SHIPPING ARRANGEMENT

BETWEEN THOSE

WHO CONTROL CARGOES

AND

WHO CONTROL SHIPS

SHIPPING POOLS

- POOL TONNAGE

- COLLECTIVELY MARKETED

- INCOME IS DIVIDED BY WEIGHTAGE SYSTEM

PARCELLING

- SMALLER THE PARCEL HIGHER WILL BE FREIGHT

- GROUPING PARCELS


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- LIFTED IN ONE BOTTOM

(MOSTLY ON TIME CHARTERED VESSELS)

- SPECIALIST OPERATORS

- WIDE LAYCAN

- FLEXIBILITY ON CARGO SIZE

- HIGHER FREIGHT

PROJECT CARGOES

COMPLETE RESPONSIBILITY OF TRANSPORTATION FOR

PRE FABRICATED STRUCTURES

CONSTRUCTIONAL EQUIPMENT ETC ALSO KNOWN AS TURN KEY PROJECT

1.4 NEED FOR THE STUDY:

Understand thoroughly the Chartering market.

To find out the Chartering Procedure and Practices involved inthe industry.

Understand the ways of fixing ships & cargos.

Points to be taken care of before and after fixing for vessel (pre

fixture & post fixture activities).

Legal aspects involved in the chartering market.

1.5 STATEMENT OF PROBLEM:


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It is easy to loose than earning a customer. In the past, many companies look their

customer for granted. Their customer may not have many alternatives source of supply, or all

suppliers were equally efficient in service.

Todays customers are harder to please, they are smarter, more price conscious,

pore demanding, less forgiving and approached by more competitors with equal or better

offers. Under the present scenario, it becomes very difficult to retain the customer fold intact.

Hence, the companies are delivering the best possible after the service to the customer to

satisfy them.

The key to customer retention in customer satisfaction is,

In Highly satisfied customer

a)Stays loyal longer

b)Talks favorable about the company and its services.

c)Pay less attention to completing brand and advertisement.

d)Less sensitive to price.

There are lots of competitors for shipping agency business/companies. Periodically

the shipping agencies are focusing on service quality. Unless the company pays themselves

in a good position for its service, it is difficult to survive in the market. This study is viewed in

GAC Shipping (India) Pvt. Ltd., Chennai is how to improve service quality in order to satisfy

the customers. So also, by doing this project, attempts are made to understand the functions

of Port Agency Operations & also to prepare standardized Service Delivery Procedure (SDP)

for shipping agency services. Moreover, special focus is given on the SWOT analysis for M/s.

GAC Shipping (India) Pvt. Ltd and for the Shipping Agency Industry of India.

1.6. LIMITATIONS

Due to busy atmosphere prevailing in the industry, sufficient data could not collected.

Since the chartering is not so prominent in inida, limitations in collecting data.

Time and Cost were the limiting factors of the study.

There is no organized data to analysis the policies and practices.


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1.7 STATEMENT OF OBJECTIVES:

1.7.1 Primary Objective:

Understand thoroughly the Chartering market.

1.7.2 Secondary Objective:

To find out the Chartering Procedure and Practices involved in

the industry.

Understand the ways of fixing ships & cargos.

Points to be taken care of before and after fixing for vessel (pre

fixture & post fixture activities).

Legal aspects involved in the chartering market.

Introduction Chartering

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