Chapter 4 - supply variables

Question 1

What are the five supply variable in the shipping market model?

Answer 1

1. World fleet
2. Fleet productivity
3. Shipbuilding production
4. Scrapping and losses
5. Freight revenue

Question 2

Who are the four decision-makers in the supply of sea transport?

Answer 2

1. Ship owners - primary decision makers
2. Shippers - can become owners or influence with time charters
3. Bankers - influences and finances shipping, pressures firms to scrap
4. Regulatory authorities - ships must meet requirements

Question 3

Discuss the Merchant fleet (world fleet)

Answer 3

In the long run, scrapping and deliveries of shipping capacity determines rate of fleet growth
*Supply adjustment process involves changes in the type of ship within the fleet:
1. Oil tanker fleet - characterised by cyclical growth and contraction; follows demand for oil not oil price
2. Combined carrier fleet - link between wet and dry markets; can carry wet one direction and dry the other
3. Dry bulk fleet - Integral role in growth of deep-sea bulk trades - economies of scale
4. Container ships - traditional liners replaced by container ships

Although there is much specialisation in the shipping market, high levels of substitution. Desirable to be flexible (lateral mobility)
Rapid and significant increases in ship sizes

Question 4

What is a tweendecker?

Answer 4

General cargo ships with two or three decks. Upper deck=main deck. Lower deck=tweendeck

Question 5

Describe fleet productivity

Answer 5

Productivity facilitates flexibility and impacts supply.
Productivity measured in ton miles and depends on:
1. Speed - determines time a voyage takes, decreases with age
2. Port time - physical performance of the ship and terminals plays a role, as well as the organization of the transport operation - affected by congestion
3. Deadweight utilization - bunkers and storage decreases this
4. Loaded days at sea - can try decrease unproductive days (empty running or in ballast) cargo flexibility can increase loaded days at sea

Can lay up ships when too expensive to run, or use for storage

Question 6

What does 1 knot = in km/hr

Answer 6

1.852

Question 7

Discuss shipbuilding production

Answer 7

Long-cycle business with 1-4 year lag time.
*Orders are placed based on expectations
*Decrease may occur due to unions

Question 8

Discuss scrapping and losses. At what age will ship be scrapped (four reasons)

Answer 8

Predicting the age at which a ship will be scrapped depends on:
1. Age - deteriorate as they age, maintenance costs increase
2. Technical obsolescence - reduced efficiency compared to new ships
3. Scrap prices - prices fluctuate significantly depending on S/D in steel industry
4. Current income and future expectations - if expecting a boom, older ships won’t be scrapped, unless company runs out of reserves or when whole industry expects no profits from them

Question 9

Give one reason ships are named ‘she’

Answer 9

Early seagoers spoke of their ships in the feminine gender for the close dependance they had on their ships for life and sustenance.

Question 10

Discuss freight revenue

Answer 10

Ultimately the supply of sea transport is influenced by freight rates
It is the main regulator to motivate decision-makers in supply.
They can:
1. Adjust capacity in the short term - remove ships from lay-up, increase speed and vice-versa
2. Find ways of reducing costs in the long term - freight rates contribute to investment decisions, order and scrap

Question 11

Explain the Plimsoll line

Answer 11

A reference mark located on a hull that indicates maximum depth ship may be safely immersed when loaded. Depends on dimensions, cargo, time of year, water densities