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The demand for Dry-bulk carrier capacity is determined by the underlying demand for commodities transported in Dry-bulk carriers, which in turn is influenced by trends in the global economy. Seaborne Dry-bulk trade increased by slightly more than 2% on an average annual basis during the 1980s and 1990s. However, this rate of growth has increased dramatically in recent years. Between 1999 and 2006, trade in all Dry-bulk commodities increased from 2.0 billion tons to 2.5 billion tons, an increase of 35% overall. Generally, growth in gross domestic product and industrial production correlates with peaks in demand for seaborne transportation. Certain economies will act from time to time as the "primary driver" of the Dry-bulk carrier market. In the 1990s, Japan acted as the primary driver due to increased demand for seaborne trade and growth in Japanese industrial production. China has been the main driving force behind the recent increase in seaborne Dry-bulk trades and the demand for Dry-bulk carriers.
The extent to which increases in Dry-bulk trade have affected demand for Dry-bulk carriers is reflected in estimates of ton-mile demand. Ton-mile demand is calculated by multiplying the volume of cargo moved on each route by the distance of the voyage.Dry-bulk carriers can be the most versatile element of the global shipping fleets in terms of employment alternatives. However, Dry-bulk carriers seldom operate on round-trip voyages. Rather, the norm is port-to-port liner service and triangular or multi-leg voyages. This means that every voyage has a ballast leg that must be paid for by the laden or revenue earning leg. Hence, trade distances assume greater importance in the demand equation.
The three largest commodity drivers of the Dry-bulk industry, iron ore, steam coal and grains, are all affected by seasonal demand fluctuations. Steam coal is linked to the energy markets and in general encounters upswings towards the end of the year in anticipation of the forthcoming winter period as power supply companies try to increase their stocks, or during hot summer periods when increased electricity demand is required for air conditioning and refrigeration purposes. Grain production is highly seasonal and driven by the harvest cycle of the northern and southern hemispheres. However, with four nations and the European Union representing the largest grain producers (the United States, Canada and the European Union in the northern hemisphere and Argentina and Australia in the southern hemisphere), harvests and crops reach seaborne markets throughout the year.
Chartering activities are influenced by a number of factors which contribute to its cost differentials. De Oceanos Shipbrokers Pvt. Ltd. Is backed by efficient and experienced team of market experts who guide us in providing most cost effective and personalised services which are highly appreciated by our clients. We are giving here a brief detail for our committed clients as to what goes behind chartering activities.
The worldwide Dry-bulk carrier fleet sub-divides into four vessel size categories, which are based on cargo carrying capacity:
Capesize-vessels over 80,000 dwt While this is the traditional definition of a Capesize bulk carrier, in terms of deadweight, the sector is changing. There are a number of new super-Panamaxes which are 82,000 dwt to 85,000 dwt, but which are able to transit through the Panama Canal with full cargo. Thus, a more modern definition of Capesize would be based on vessels over 100,000 dwt. The Capesize sector is focused on long haul iron ore and coal trade routes. Due to the size of the vessels there are only a comparatively small number of ports around the world with the infrastructure to accommodate them.
Panamax-vessels between 60,000 dwt and 80,000 dwt Panamax vessels, defined as those with the maximum beam (width) of 32.2 metres permitted to transit the Panama Canal, carry coal, grain and, to a lesser extent, minor bulks, including steel products, forest products and fertilizers.
Handymax-vessels between 40,000 dwt and 60,000 dwt The Handymax sector operates in a large number of geographically dispersed global trades, mainly carrying grains and minor bulks including steel products, forest products and fertilizers. Vessels less than 60,000 dwt are built with on-board cranes that enable them to load and discharge cargo in countries and ports with limited infrastructure.
Handysize-vessels up to 38,000 dwt which carry exclusively minor bulk cargoes. Historically, the HandysizeDry-bulk carrier sector was seen as the most versatile. Increasingly, however, this has become more of a regional trading, niche sector. The vessels are well suited for small ports with length and draft restrictions and also lacking infrastructure.
Key elements influencing the supply of Dry-bulk carriers are vessel deliveries and the loss of existing vessels through scrapping or other circumstances. The number of ships removed from the fleet in any period is dependent upon prevailing market conditions, scrap prices in relation to current and prospective charter market conditions as well as the age profile of the existing fleet. Generally, as a vessel increases in age its operational efficiency declines due to rising maintenance requirements, to the point where it becomes unprofitable to keep the ship in operation. The supply of Dry-bulk carriers is not only a result of the number of ships in service, but also the operating efficiency of the worldwide fleet. For example, port congestion can absorb additional tonnage and therefore tightened the underlying supply/demand balance.
The international Dry-bulk shipping industry is highly fragmented and is divided among state-controlled and independent Dry-bulk vessel owners. As a general principle, the smaller the cargo-carrying capacity of a Dry-bulk vessel, the more fragmented is its market, both with regard to charterers and vessel owners/operators.
There remains significant potential for industry consolidation within each vessel type, especially in the Handysize, Handymax and Panamax sectors in which De Oceanos Shipbrokers currently operate.
Dry-bulk carriers are employed in the market via a number of different chartering options. The general terms typically found in these types of contracts are:
A "bareboat charter" involves the use of a vessel usually over longer periods of time ranging over several years. In this case all voyage related costs, including vessel fuel and port dues as well as all vessel-operating expenses such as day-to-day operations, maintenance, crewing and insurance, are transferred to the charterer's account. The owner of the vessel receives monthly charter hire payments on a per-day basis and is responsible only for the payment of capital costs related to the vessel.
A "time charter" involves the use of the vessel, either for a number of months or years or for a trip between specific delivery and redelivery positions, known as a trip charter. The charterer pays all voyage-related costs. The owner of the vessel receives semi-monthly charter hire payments on a per-day basis and is responsible for the payment of all vessel operating expenses and capital costs of the vessel.
A "voyage charter" or "spot charter" involves the carriage of a specific amount and type of cargo on a load-port to discharge-port basis, subject to various cargo handling terms. Most of these charters are of a single voyage nature, as trading patterns do not encourage round voyage trading. The owner of the vessel receives one payment derived by multiplying the tons of cargo loaded on board times the agreed upon freight rate expressed on a per-ton basis. The owner is responsible for the payment of all expenses including voyage, operating and capital costs of the vessel. Chartering on a single voyage or a trip charter basis may be referred to as spot chartering activity.
A "contract of affreightment" relates to the carriage of multiple cargoes over the same route and enables the COA holder to nominate different ships to perform the individual sailings. Essentially it constitutes a number of voyage charters to carry a specified amount of cargo during the term of the COA, which usually spans a number of years. All of the ship's operating, voyage and capital costs are borne by the ship owner. The freight rate normally is agreed on a per cargo-ton basis.
Charter hire rates paid for Dry-bulk carriers are primarily a function of the underlying balance between vessel supply and demand, although at times other factors may play a role. Furthermore, the pattern seen in charter hire rates is broadly mirrored across the different charter types and between the different Dry-bulk carrier categories. However, because demand for larger Dry-bulk vessels is affected by the volume and pattern of trade in a relatively small number of commodities, charter hire rates (and vessel values) of larger ships tend to be more volatile than those for smaller vessels. Conversely, trade in minor bulks drives demand for smaller Dry-bulk carriers. Accordingly, charter hire rates and vessel values for those vessels are subject to less volatility.
In the time charter market, rates vary depending on the length of the charter period and vessel specific factors such as age, speed and fuel consumption. Short-term time charter hire rates are generally higher than long-term charter hire rates. The market benchmark tends to be a 12-month time charter hire rate, based on a vessel of five to ten years age. Which De Oceanos Shipbrokers generally insist.
In the voyage charter market, rates are influenced by cargo size, commodity, port dues and canal transit fees, as well as delivery and redelivery regions. In general, a larger cargo size is quoted at a lower rate per ton than a smaller cargo size. Routes with costly ports or canals generally command higher rates than routes with low port dues and no canals to transit. Voyages with a load port within a region that includes ports where vessels usually discharge cargo or a discharge port within a region with ports where vessels load cargo also are generally quoted at lower rates, because such voyages generally increase vessel utilization by reducing the unloaded portion (or ballast leg) that is included in the calculation of the return charter to a loading area.