ECSA - The Tramp Shipping Market Mar 2015

ECSA
The Tramp Shipping Market
3.4.3 Liner Shipping
The liner provides scheduled services at a fixed frequency over a pre-determined route,
making sea transport available to cargo lots of all sizes. Liner companies have extensive
organisations, often in many countries, and the cost of ship operation is a relatively small part
of total expenses. The governing freight document is the Bill of Lading or seaway bill, with
the number of Bs/L issued per ship and even per container varying very substantially,
depending on parcel size.
Containerisation and the dissemination of the just in time approach have subordinated liner
shipping within a door to door context of which the sea leg is only part, and not necessarily
the most expensive part. Liner shipping caters for cargo of all kinds and, despite the high cost
of ships and containers, participation in bulk cargoes is not inconsiderable and rising. Waste
paper, is for example, perhaps the biggest single cargo carried in containerships, because of
the need to return empty containers to loading areas generating better revenues. A healthy
general cargo sector coexists within the liner sector, but, apart from specialist liner services
(heavy lift, forest products, cars, refrigerated cargoes), non-cellular general cargo ships tend
to operate over routes with small cargo constituencies or in countries with poor port
infrastructures, increasingly in short sea trades. In addition cargo liners are involved in
through transport of containers.
4. Differentiation of sea transport demand
4.1 Price and service aspects of sea transport demand
There are four aspects to the service offered by the shipping services discussed in the previous
paragraphs which allow a degree of service differentiation:
1. Price: The freight cost is always important, but the greater the proportion of freight in the
overall cost equation, the more emphasis shippers are likely to place on it. For many
primary commodities shown on the left of Figure 1 price is the major consideration, but
for semi manufactures and manufactures the service elements discussed in 2-4 below are
also very significant.
2. Speed: Time in transit incurs an inventory cost, so shippers of high-value commodities
value speed. The cost of holding high-value commodities in stock may make it cheaper to
ship small quantities frequently even if the freight cost is greater. On a three-month
journey a cargo worth $100,000 incurs an inventory cost of $2,500 if interest rates are 10
per cent per annum, though in today’s low interest environment inventory cost depends
more on the less easily quantified value to the business of fast, prompt and predictable
delivery of the goods in transit. For example fast delivery may be important for
commercial reasons. Reliability: With the growing importance of `just in time' stock
control systems, transport reliability has taken on a new significance. Some shippers may
be prepared to pay more for a service which is guaranteed to operate to time and provide
cargo capacity at all times.
3. Security: Loss or damage in
transit is an insurable risk, but
raises many difficulties for the
shipper, who may well be
prepared to pay more for secure
transportation of his product
without risk of damage.
Table 3: Imports, billion tonnes
2001 2005 2010 2015e
% CAGR
05-15
Europe 1.74 2.06 2.07 2.18 1%
North America 1.01 1.19 0.96 0.82 -4%
China 0.39 0.84 1.66 2.56 12%
India 0.18 0.26 0.45 0.68 10%
Other Asia 2.18 2.38 2.64 3.05 3%
Others 0.81 0.90 1.26 1.68 6%
World Total 6.31 7.64 9.03 10.96 4%
Clarkson Research Services Limited 18 March 2015