Broking & Chartering

Practices

Caribbean Maritime University

2020
 Unit 1: The Charter Market

Topics
 Introduction to chartering

 Types of vessels in the chartering market

 Commodity flow in the charter market

 Unit 1: The Charter Market
Objectives
At the end of this unit the participants will be
able to:
 Use some basic terms of the chartering and ship brokering
industry
 Identify and define the types of chartering

 Differentiate the major types of vessels which are used in

the chartering industry
 List the major commodities that are transported in various
charter markets
 Unit 1: Chartering

Definition
 Chartering refers to the hiring of a vessel and the
payment of freight
 These agreements maybe verbal or written if written
they are called charter parties
 Unit 1: Chartering
Definition
 Charter party agreements are of varying types:
 Voyage Charter
 Time Charter
 Bareboat Charter
 Contract of Affreightment
 Ship Pooling
 Parcelling
 Joint Venture
 Unit 1: Chartering

Definition
 The contracting parties are ship owners and the
charterers
 Essential to the contract between a ship owner and a
charterer are:
- the description of the ship
- the trade route
- the time of a vessel’s employment
 Unit 1: Chartering
 A charterer may or may not own the cargo and
employes a (shipbroker) to find a ship to deliver the
cargo for a certain price (freight rate)

 Freight rate is charged on a:

- per ton basis, for a certain route
- per day for the duration on the charter
- on a lump sum basis and is usually paid in US$
 Unit 1: Chartering
 The major objective for chartering a vessel is to find
continuous and suitable employment so as to
maximise revenue earnings

 A primary concern of chartering is finding suitable

cargoes for the vessel

 Chartering requires an evaluation of intended

voyage/s
 Unit 1: Chartering
 In evaluating a charter. It must be clear that it can pay
for:
- the ship
- its operating expenses
- makes a profit
 Unit 1: The Freight Market

 The international freight market does not consist of a

single entity, or place but a collection of the major
groups of the world’s merchant ships above 300GT.
 These vessels can be divided into:
- Dry Cargo Market
-Tanker Market
- Reefer Market
- Car Carrier Market
- Passenger Market
 Unit 1:The Freight Market
Dry Cargo Market
 Major products: iron ore (40%), coal (38%), grain (15%),
bauxite/alumina and phosphate rock
 Minor products: agri-bulk, fertilizer, metals and minerals

 Dry bulk market is highly diversified and complex

 Freight rate for iron ore and coal is closely related to the
demand for steel
 Unit 1: The Freight Market

 Traditional markets: London, Oslo, New York,

Tokyo and Hamburg
 Markets shifting towards the east with China, India
and Republic of Korea becoming increasingly
important. China became very important as a result
of her demand for iron ore and coal
 Baltic Exchange an important freight market
 Large gaps in the freight rate occurs between the
various categories
 Unit 1: The Freight Market
 Bulk vessels of the Charter Market
 Vary greatly in size
a. Tweendecker 17,000 - 23,000 dwt. own gear or crane
b. Handysize 10,000 - 35,000 dwt. own gear
c. Handymax 35,000 - 45,000 dwt. own gear
d. Supramax 45,000 – 55,000 dwt. own grab
e. Panamax 55,000 - 80,000 dwt. gearless
f. Cape size 100,000 dwt. & over gearless
g. Post Panamax in excess of 80,000 dwt. gearless
 Tweendecker

o A standard tweendecker (17,000-23,000 dwt.) can easily

identified along with her gears she has at least one
tweendeck
o A tweendeck is a space between 2 continuous decks on a
 Unit 1: The Freight Market

o Handy Size: own gear, 10,000 dwt – 35,000 dwt:

o Minor bulk goods fertilizer, steel products,

cement,
Unit 1: The Freight Market

o Handy Max: own gear, 35,000 dwt – 45,000 dwt.

o Minor bulk goods fertilizer, steel products,

cement,
 Unit 1: The Freight Market

o Panamax: maximum 80,000 dwt. and gearless

o Accounts for 2/3 of world bulk trade
o Major bulk commodities iron ore, coal, grain &

bauxite/alumina
 Unit 1: The Freight Rate

o Cape size in excess of 100, 000 dwt. and

gearless
o Ships major bulk iron ore, coal, grain,
Unit 1: The Freight Rate

Post Panamax 80000 dwt.

and over
 Unit 1: The Freight Market
Dry Bulk Commodity Flow
Centre of production versus those of consumption
Where do the charter vessels transport the cargo
Iron Ore & Steel
 Centre of production: Australia, Brazil, India

& South Africa

 Importers: China, Japan, India, Indonesia, South Korea,
OECD & USA
 China a major area of consumption and requires large
vessels : VLOC
 Unit 1: The Freight Market
Dry bulk Commodity Flow

Coal
 Similar to that of iron ore

 Go together to make steel

 As well as source of heat

 Major producers: Australia, Indonesia Russia

Federation & Mongolia
 Major importers: China, Japan & OECD
 Unit 1: The Freight Market

Grain
 Food use human/animal

 Fuel

 Major producers: wheat, maize, alfalfa, oats, barley,

soya & sorghum
 Major producers: Australia, Argentina, North
America & EU
 Major importers: Japan, Indonesia, S. Korea, & N. W.
Africa
 Unit 1: The Freight Market
Dry Bulk Market

Bauxite/ Alumina
 Major producers: Guinea, Australia, Brazil, Jamaica
& Suriname
 Major importers: China, Asian Tigers, North America
& OECD
 Unit 1: The Freight Market

Dry bulk Market

 Phosphate Rock

 Major producers: Africa / Morocco, Namibia,

Australia & Saudi Arabia
 Major import: North America
 Unit 1: The Freight Market
Containerized Vessel

 Invented over 50 years ago

 Requires large investment especially at port
 Mainly time chartering
 Varying types of cargo: e.g. general & specialized/
wood pulp
 Unit 1: The Freight Market
Reefer Market/Cool and Cold Storage
 Maybe containerized as well as non-containerized

 World wide operation, with greatest importers USA,

Japan & N.W. Europe
 Transported all year, one way route

 Major products: fruit, citrus, potatoes, fish & meats

 Tropical fruit trade is very important especially that

of banana
 Tonnage demand highest in the first half of the year
 Unit 1: The Freight Market
Ro/Ro

 Began in the 1970s

 Short distance service: Kingston /Miami, across the Eastern
& Southern Caribbean
 Cargo is driven off the vessels hence minimum port
infrastructure is requires
 Good transporting motor vehicles
 Ro/Ro Ferry
 Unit 1: The Freight Market
Tanker Market

 Few number of large important charters i.e. oil companies

 Small number of loading areas
 One way trade
 Environment and safety very important to the trade
 Unit 1: The Freight Market
Tanker Market

 Time charter is common also has an important spot

market
 Market divided into a number of crude and product
 Sector continues to trend towards larger vessel ULCC
& VLCC
 Trade also has specialist carriers e.g. LPG & LNG
 Also has an important offshore sector
 Unit 1: The Freight Market
 Review /Quiz
 Unit 1: Individuals &
Organizations in Chartering
Topics
 Role of major players in the charter market

 The Broker’s work

 Role of major organizations in the chartering

business- who has the information
 Unit 1: Individuals &
Organizations in Chartering
Objectives
 On completing this units the participants will be able
to:
 List the major participants of the chartering industry
 Write a brief statement on the role of each major
participant in the industry
 Identify four major international organizations in
chartering and outline their major contribution to the
industry
 Unit 1: Individuals &
Organizations in Chartering
Major Individuals

Ship owners

Charterers

Brokers

Agents
 Unit 1: Individuals &
Organizations in Chartering
Major Players in Chartering
 Ship owner: entity or person who owns a ship for hire

 Charterer: cargo owner/transport operator/any other

person
 Unit 1: Individuals &
Organization in Chartering
Major Players in Chartering
 Broker: an individual or entity that negotiates purchases
or contracts for another and receives a fee or
commission
 Ship’s broker: the intermediary that carries out/
coordinates negotiations for the ship owner. They are
specialist in respective markets .e g. Panamax bulker
 Unit 1: Individuals &
Organization in Chartering
 Charterer’ Broker: negotiates on behalf of the cargo
interest
 An important principle of chartering is that of
confidentially and exclusively
 Hence the need to separate the owner’s broker from
that of the charters broker
 Ship’s broker negotiate with the charterer’s broker
 Unit 1: Individuals &
Organizations in Chartering
 Example of workings of Ship’s brokers & Charterer’s
Broker (Negotiations)
 Unit 1: Individuals &
Organizations in Chartering
Other Individuals
 Correspondence Broker: where a group of brokers
work together in centres to seek tonnage and cargo
they are called correspondence broker/s
 Port Agent: in respective port there is an agency
which represent chartered vessel often times they will
seek cargo for the vessel
 Unit 1: Individual &
Organizations in Chartering
Organizations
 Provide critical information: market reports

 Give support: lobby government groups etc.

 Foster industrial development: standardization,

technological support
 Educational support to membership
 Unit 1: Individual &
Organizations in Chartering
Organizations

Baltic Exchange

o Very old English institution

o Located in London
o Ship owners and brokers meet there regularly to

exchange market information in confidence

o Formal fixture also take place in confidence
 Unit 1: individuals &
Organizations in Chartering
Organizations
Baltic International Maritime Council
(BIMCO)
 Located in Copenhagen

 Membership includes shipbrokers, port agents and P

& I clubs
 Important in chartering because of the work it does in
the standardization of charter party forms and clauses
 Unit 1: Individual &
Organizations in Chartering
Organizations
INTERTANKO

 Independent Tanker Organization

 Important in chartering as a result of work done in
safety, environment and standardization of charter
party forms for tanker chartering
 Unit 1: Individuals &
Organizations in Chartering
Organizations
Institute of Chartered Shipbrokers

 The only internationally recognized professional

body representing shipbrokers, ship managers and
agents
 It provides ship related education and training
through its programme called Tutor-ship
 Unit 1: Individuals &
Organizations in Chartering
Organizations
International Maritime Organization (IMO)

 Provides technical standards in respect of vessel

safety, seaworthiness, pollution standards etc.
 Seafarers training standards
 Marketing report inclusive of freight rate market
 Unit 1: Individual &
Organization in Chartering
Information Centres
 Where there is a great deal of trading: New York,
Tokyo, Berlin, Hong Kong, Shanghai & Singapore
 Specialized markets: Oslo & Piraeus
 Very important ports: Singapore, Rotterdam &
Hamburg
 Financial centres: London, New York & Paris
 Unit 1: Individuals &
Organizations in Chartering

Marketing Reports
 Done by the various organization or publishing
houses where trends in the various markets and
freight rates over a particular period are highlighted
in a comprehensive market report. Important markets
are usually highlighted.
 Reports are done for vessels as well as commodities