THE ECONOMIC ORGANISATION OF THE

SHIPPING MARKET

PREPARED BY :-NILESH M ASNANI (3801)HITESH BHADANI (3802)RAM M BHETARIYA (3803)UMANG DAVE(3805)

Flow of presentation

1) The economic role of the shipping industry2) The role seaborne trade in economic development3) Two technical revolutions in shipping4) The cost of sea Transport 5) How v many market6) The international transport system7) Demand for sea transport8) what is Bulk cargo9) What is ‘general cargo’ 10) Obstacle of general cargo11) Limitation of seaborne trade statistics12) The world merchant ships13) The supply of sea transport

THE ECONOMIC ROLE OF THE SHIPPING INDUSTRY

Shipping magnate are subject to the law of supply and demand

Shipping market is group of people like ship-owners , brokers , shipbuilding and banker who together carry out each year the herculean task of transporting more than 4000 bt of cargo by sea.

Shipping is one of the world’s most international industries and in studying maritime economic we drawn into discussion of the world economy as a whole .

Seaborne trade is ,in a sense at the apex of world economy activity .

THE ECONOMIC ROLE OF THE SHIPPING INDUSTRY

We can not ignore political aspect of the maritime market .

If we are understand the economic and political forces that mould development in the shipping market we must appreciate the to-way interaction b/w development in shipping and development in the world economy

“carlo cippola say that transportation industries has been one of prime force responsible for shifting the world from an essentially nations system to the global economy .

THE ECONOMIC ROLE OF THE SHIPPING INDUSTRY

Fast and cheap Mobility to the world Bertrand Russell says that “the world

has become one not only astronomer but for the ordinary citizen”.

Globalization Two-way exchange

The role seaborne trade in economic development

Catalyst of economic development The father of modern economics Adam

smith says that “shipping as one of the stepping stones to economic growth.

It cheapest mode of transportation while considering globalization.

Which can open up wider market to specialization”

The role seaborne trade in economic development

Adam smith also says that “the economically developed countries now have massive inland transport infrastructure , but technology more in shipping industry has more than kept pace.

Shipping business unitization and bulk shipping have played major part in global market

Two technical revolutions in shipping

1. Unitization that is palletization and containerization were introduce to speed up the flow of cargo.

2. Bulk cargo (raw material and final product) which is reduce the cost of production.

The cost of sea Transport

The impressive cost performance was achieved by following way

1. Economic of scale 2. New technology 3. Better ports4. More efficient cargo handling

The cost of sea Transport

Commodity Currency 1960 1990 increase

Oil freight gulf /west

$/barrel .55 .98 1.8

Coal freight H.R/Japan

$/ton 6.9 14.8 2.1

Rail fare $ 23.5 106.1 4.5

Men’s suit (Daks)

$ 84 484 5.8

Dinner at the sovoy

$ 7 52 7.7

Ford car $ 1389 11115 8.0

Crude oil $/barrel 1.5 20.5 13.7

Bread Cents 2.4 42 17.5

House hold coal

$/ton 12 217 18.3

Postage stamp

Cent 4 67 19.0

How many market

1. Liner business :- it take different cargoes ,providing different service and has different economic structure from bulk shipping

2. Single market3. As result supply / demand is imbalances Rochdale concluded that most of industry’s business is

concerned with international trade and inevitably it operates within a complicated world pattern of agreement s b/w shipping companies understanding with shipper and policies of governments.

Different parts :-liner business ,bulk shipping ,the charter market etc.

The international transport system

The aim of the shipper is to obtain better and cheaper transport over the whole distance from origin to destination.

This system consist 1. Road 2. Railway3. Inland waterways4. Shipping lines5. Air freight service

The international transport system

Zone Area Transport sector

Vehicle Volume of cargo move(btm)

1 Inter-regional

Deep sea shipping

ship 12056

Air freight Plane 31

2 Short sea Coastal seas Ship/ferry

3 Land River and Canal

Barge

Road Rail Train and truck

3853

International transport zones and available transport modes

Shipping roughly move four times more than rail and four hundred times more than air freight

The international transport system

1. Transport between region2. Short sea shipping 3. Competition and cooperation in the transport industry Competition b/w rail and road Competition b/w rail and road with SSS Competition b/w deep sea and air freight It also depend on cargo and requirement of countries. Integrated transport systems The driving force which guides the efforts of the

transport system is the quest to win more business by providing cheaper transport and a better sevice.

Demand for sea transport

The nature of transport demand1) Price2) Speed3) Reliability- “Just in Time”4) Security

The Demand for Sea Transport

The Nature of transport demand Customer’s viewpoint, shipping is a

service. The Shipping companies move cargo

around the world and it provide a variety of services to meet the specific needs of the customers.

Price:- The freight cost is always important but

the greater the proportion of freight in the overall cost equation.

Speed:- Time transit incurs inventory cost, so

shippers of high-value commodities value speed.

Reliability:- Shipper may be prepared to pay more for

services which is guaranteed to operate to time and provide services which it has promised.

Security:- Loss or damage in transit is an insurable

risk ,but raises may difficulties for the shipper who may well be prepared to pay more for secure transportation of his product without risk of damage.

Demand for sea transport

What commodities are traded by sea1) Energy trades 45% of seaborne2) Agriculture trades 13% of seaborne3) Metal trades 25% of seaborne4) Forest products trades 4.5 of

seaborne5) Other industrial materials 9% of

seaborne 6) Other manufactures 3% of seaborne

Seaborne trade by economical activity

manufactures

industry material

forest production

metal industry

agriculture

energy

0 1000 2000 3000

Million tons shipped per annum

Million tons shippied per annum

what is Bulk cargo

Major change is come after second world war It is important to certain industries like steel ,

aluminum and fertilizer manufacture , turned to foreign supplier for their raw material

Bulk cargo is classified into four main categories

1. Liquid bulk2. The ‘five major bulks’3. Minor bulk4. Specialist bulk cargoes

What is ‘general cargo’

General cargo consist of consignment of less than ship of hold size .

It high value or delicate cargoes that require a special shipping service.

Classification of general cargo:-1. Loose cargo2. Containerized cargo3. Palletized cargo4. Liquid cargo5. Refrigerated cargo6. Project cargo

Obstacle of general cargo

Labour intensive operation was slow Expensive Difficult to plan Risk of damage More time required for operation and

handling of cargo Economic cost is high Profit margin is less

Limitation of seaborne trade statistics

What is the tonnage of bulk and general cargo shipped by sea?

Can not easy identified percentage that the commodities is move by General cargo

The distinction b/w bulk and general cargo blurred in statistical term in the shipping market in no clarity

Which industry use bulk cargo or general cargo

The world merchant ships

Type of Vessel No of vessel

Non cargo carrying vessel 39088

Fishing boat 23929

Off shore support vessel 2845

Tugs 7721

Research vessel 818

Dredgers 1125

Other non cargo vessel 2650

Type of ship in the cargo vehiclesDevelopment in ship designThe Growth of ship size

The world merchant ships

Development in ship design The Growth of ship size

The increase of size has been greatest in the specialized trades where transport integration has provided the investment in port and cargo handling facilities needed to operate very large vessels.By capitalizing on economy of scale and developing integrated transportation system, bulk shipping as reduced transportation cost to such an extend that it is often cheaper for industries to import raw material by sea from supplier several thousands miles way by than by land from a supplier on a few hundred miles away

Innovation in the world merchant ships

Year Name weight

1852 First bulk carrier 500 dwt

1866 First modem cargo liner ______

1880 first reefer cargo 400 car casses

1886 First oil tanker 3030 dwt

1912 First motor 7400 dwt

1921 First ore- oiler 14305 grt

1945 Last merchant sailing ship _______

1954 First chemical parcel tanker _______

1956 First container ship &car carrier 60 TEU

1962 First open hatch bulk carrier ______

1964 First LNG tanker 27400 cu m

1966 First VLCC 206000 dwt

1980 Biggest merchant ship 550000 dwt

1986 Biggest ore carrier 364768 dwt

The world merchant ships

Cargo specialization The cargo handling revolution Reduce time of handling Economic of scale Decrease service time and waiting time Increase the trade Reduce damages Increase profit

The supply of sea transport

Shipping companies use the ship are available and that offer the best profit.

Main function of shipping market is to flow a cargo with the minimum of waste

The supply of sea transport

The shipping industry unit cost function Unit Cost =(LC+OPEX+CH)

PSLC=Capital cost of the shipOPEX= The cost of Operation the ship over

lifeCH= The cost of handling cargoPS=the tonnage of cargo it can carry

The bulk Shipping Industry

The basic principle is one ship – one cargo. Several different bulk cargoes may be carried in single

ship each occupying a separate hold or possibly even part of a hold in a traditional tramping operation.

Large companies shipping substantial quantity of bulk material and often run their own shipping vehicle to handle a proportion of their transport requirement.

If a shipper has a long term requirement for a bulk transportation but does not wish to become actively involved as a ship owner, he may charter tonnage on a long term basis, ship owner.

The economical reason is cost of production which reduce the marginal cost.

Liner Shipping Industry Liner service provide a transport for a

cargoes those are to small to fill a single ship and need to be grouped with others for a transportation.

The liner operation must be able to: offer a regular service for many small cargo

consignment and process the associated mass of paperwork.

Charge individual consignment on a fixed tariff basis that yield an overall profit- not an easy task when many thousand of consignment must be processed each week.

Load the cargo/container into the ship in a way that ensure that it is accessible for discharge and that ship is stable and in trim.

Run the service to fix schedule while allowing for all the normal daily – arises from adverse whether, breakdown strike etc…

The role of port in transport system

There are three term port, port authority and terminal.

Type of port: Small local port, large local port Large regional port distribution center.

conclusion

It reduce cost of production Developed the world economic Increase the interaction of world and

trade Every country get benefit of quality

product and advantage to the host.

Thank you