ECSA - The Tramp Shipping Market Mar 2015

ECSA
The Tramp Shipping Market
vary his itinerary and provides greater flexibility than a voyage charter under which the contract
involves the transport of a specific Cargo Parcel.
10.3 The period timecharter
Under a period charter the ship is a hired out by the "shipowner" to the "charterer" for a period of
time specified in the contract ("charter party"). During this period the shipowner provides the
crew and maintains the vessel, whilst the charterer directs its operations. Normally the charter
party will specify a number of admissible days "off hire" each year for repairs and maintenance,
and there will be an agreement in the contract for handling any additional time out of service.
Typically these charters may be three months, six months, twelve months, two years or in a few
cases as long as 10 or even 15 years. Time charters have many different uses. The ship may be
chartered by a cargo owner, for example an oil company, to carry its own cargo. Or it might be
chartered by a shipowner who needs the vessel to meet cargo commitments, for example under a
contract of a affreightment. Finally, some shipowner's may period time charter a vessel in the
hope of trading it on the voyage charter market at a higher rate.
10.4 Main contract terms (timecharter)
Time charter-parties follow the same general principles as the voyage charter (see paragraph 9.4),
but also deal specifically with the ship's performance (i.e. fuel consumption, speed, quantity,
trading limits, prohibited cargoes and allocation of voyage costs and prices of bunkers on delivery
and redelivery) and equipment, and may exclude the items dealing with the cargo.
11. The Bareboat Charter Contracts
Finally, if a company wishes to have full operational/technical control of the ship, but does not
wish to own it, a bare boat charter is arranged. Under this arrangement the investor, not
necessarily a professional shipowner, purchases the vessel and hands it over to the charterer for a
specified period, usually seven to twenty years. The charterer manages the vessel and pays all
operating (including crewing, maintenance, dry docking etc.) and voyage costs and the owner,
who is often a financial institution, is not active in the operation of a vessel and does not require
any specific maritime skills. At the end of the charter the ship is returned to the owner, although
some bareboat charters include an option to purchase the vessel on termination of the charter.
12. Market Reporting & Information Flow
The rates at which charters are fixed depend on market conditions and the free flow of
information reporting latest developments plays a vital part in the market. Shipping has one of the
most extensive market reporting systems of any capital industry and the network of brokers and
information providers ensure a high degree of transparency in all the contract negotiations
discussed above.
13. The Sale and Purchase Market
13.1 Procedure for buying and selling a ship
About 1,300 deep sea merchant ships are sold each year, representing an investment of $25.9
billion in 2014. The market is very open, with ship prices freely reported and subject to open
competition.
The participants in the sale and purchase market are the same mix of shippers, shipping
companies and speculators who trade in the freight market.
Most sale and purchase transactions are carried out through shipbrokers.
Clarkson Research Services Limited 31 March 2015