Lecture 6 : Liner & General Cargo

Question 1

What is the strong determining factor distinguishing general from bulk cargo?

Answer 1

Dry bulk commodities e.g grains , sugar, rice , usually go by tramp shipping. But if they are packed in drums, bags and containers, they are considered general cargo.

Question 2

What are the main types of general cargo?

Answer 2

Dry cargo, break bulk, neobulk, and containerized cargo (dominant)

Question 3

What is the primary characteristic of break bulk cargo?

Answer 3

Goods of various sizes and weights shipped as packaged cargoes.

Question 4

What are the characteristics of general cargoes?

Answer 4

• Dry
• Goods of various sizes and weights shipped as packaged cargoes
• Goods of uniform sizes and weights shipped as loose cargoes
• Transported in Liner Shipping
• Examples include: Containers, Break-bulk, Neo-bulk

Question 5

What are the characteristics of Bulk Cargo?

Answer 5

Characteristics of Bulk Cargoes:
* Dry or liquid or liquefied gas
* Neither packaged nor of uniform sizes and weights
* Transported in Tramp Shipping
* Examples include: Dry Bulk, Liquid Bulk, Liquefied Gas

Question 6

What is the main difference in routes between liner and tramp shipping?

Answer 6

Liner shipping operates on fixed routes, while tramp shipping follows flexible routes based on opportunities.

Question 7

What is the typical cargo composition for tramp shipping?

Answer 7

Usually one bulk commodity from a single shipper.

Question 8

What document is used in liner shipping as a contractual agreement?

Answer 8

Bill of Lading.

Question 9

How are freight rates determined in liner shipping compared to tramp shipping?

Answer 9

Liner freight rates are published and non-negotiable, while tramp rates are negotiable.

Question 10

What are the three general types of shipping routes?

Answer 10

Port-to-port, pendulum, and round-the-world routes.

Question 11

Why is the pendulum route preferred over port-to-port and round-the-world?

Answer 11

It offers better coverage with less time and fuel wastage compared to round-the-world routes.

Question 12

What is the market structure of liner shipping & tramp shipping respectively?

Answer 12

Liner: Oligopoly, with high entry barriers and limited sellers.
Tramp: near perfect competition.

This is characterized by:

1. A large number of small players.
2. Flexible operations without fixed routes or schedules.
3. Negotiable freight rates based on market demand and supply.

Question 13

What 5 factors influence freight rates?

Answer 13

1. Distance,
2. cargo weight/dimensions,
3. additional charges,
4. currency adjustment factor
5. Bunker adjustment factor.

Question 14

How does increased cargo volume benefit liner shipping?

Answer 14

It justifies investment in larger vessels, reducing overall shipping costs per unit (economy of scale).

Question 15

What defines a liner company?

Answer 15

A Liner Service is a fleet of ships under common ownership or management, which provides a fixed service at regular intervals between named ports, and offers transport to any goods in the catchment area served by those ports and ready for transit by their sailing dates.
A fixed itinerary, inclusion in regular service, and the obligation to accept cargo from all comers and to sail, whether filled or not, on the date fixed by a published schedule are what distinguish liner from the tramp.

Question 16

What are the key strategic decisions liner companies have to make?

Answer 16

❑ Which services/ routes to operate? Port to port or Pendulum/ Round the World?
❑ What sizes and types of ships to operate? EOS(Big or small vessels) & New/Old vessels?
❑ Service frequency? Biweekly or weekly? Weekly requires more vessels
❑ Purchase or charter ships? Newbuilds or Charter ships?
❑ Freight rate?

Question 17

Tramp or liner shipping will likely face challenges in capacity management. Discuss why.

Answer 17

Liner shipping.
1. Obligated to sail in fixed itineraries and schedules
2. Has a fixed sailing date whether vessel filled or not, vessel may not be filled.
3. Due to the nature of liner shipping having multiple shippers, it is less flexible in changing capacity for each container.

Question 18

What are the 4 major segments in Liner shipping?

Answer 18

1. Cargo
   –> generates derived demand for general cargo, dry bulk packed in containers, are also considered general cargo
   - Increased cargo volume→ Invest in larger vessels→ Brings benefit of Economy of scales(EOS) → Reduce overall shipping cost per unit
   - Cargo Differentiation: High-value and urgent cargoes typically have different transportation demand profiles compared to low-value, minor bulk cargoes, particularly on long routes.
2. Service Routes
   Liner services in shipping are characterised by fixed schedules, operating at regular intervals between designated ports. They offer loops of services that provide various arrival and departure dates at different ports, with published freight rates for easy reference. Major trade routes in container liner services include:
   East-West Trade
   Intra-Regional Trade
   North-South Trade
3. Fleet
   e.g Container, Ro-ro, Multipurpose vessel, General cargo vessel, Barge carrier
4. Liner Company

Question 19

What are the 4 characteristics of a liner company?

Answer 19

1. Market Structure
   Oligopoly, with limited sellers.
2. Service Homogeneity
   Little differentiation in service, offering similar or homogeneous products.
3. Entry Barrier
   High entry barriers due to capital investment and regulatory requirements.
4. Price Setting
   High ability to set prices, typically led by a price leader, resulting in more stable pricing.