Marine

Transportation

Importance of Marine
Transportation
Most of international trade is carried
out by sea.
Even in many cases landlocked
countries use seaports of
neighboring countries as gateways
Global seaborne trade is around 7.5
billion tonnes
Indias seaborne international trade
is 600 million tonnes

Clippers

Maritime History
International maritime history
Sail ships/ Clippers
Steam boats
Motor ships

Indian maritime history

Traders from Greece and Arabia to Southern
kingdoms
Creation of ship building capacity in Kerala, Gujarat
and Kutch
British Steam Navigation Company
IndiaPakistanBangladeshUK-continent conference
Rise and fall of Indian shipping companies
Shipping Corporation of India

Terms associated with

shipping
Hull: main body of the ship.
Bow and Stern: front and rear of the ship,
respectively
Beam: width of the ship
Port and starboard: Left and right side of the
ship while facing the
Weather deck: top surface of the ship
Lower hold: bottom portion of the ship, meant
for holding cargoes
Bunkers: Fuel oil, which fires the main engine,
and diesel oil, which fires the auxiliary engines
Ballast Tank: Tanks which take in seawater to
stabilize its motion

Terms associated with

shipping
Gross register tonnage (GRT): the total internal
volume of the vessel, and includes all the enclosed
spaces between the hull and also on the deck available
for cargo, passengers, and crew. Equivalent to a volume
of 100 cubic feet or about 2.832 cubic metres
Net register tonnage (NRT): volume of the vessel
actually available for cargo. This is derived by
subtracting the volumes of spaces, which are meant for
purposes other than carrying cargo (i.e. engine room,
crew spaces, stores, etc.).
Deadweight tonnage (DWT): Weight that a ship can
carry and includes cargo, crew, passengers, and stores.
It is expressed in terms of the difference in the
displacement between a loaded and an empty
condition. Commercially, this is the most important
capacity measure for a sea-going vessel.

Terms associated with

shipping
Bale cube or bale capacity: The space available for
cargo inside of the cargo battens, on the frames, and to
the underside of the beams, measured in cubic feet.
Grain cube or grain capacity: The maximum cubic
feet of space available for cargo between the shell and
deck plating and top of the beam or outside the frames
Plimsoll line: A maximum draft to which a ship can be
loaded without sacrificing the buoyancy, is indicated by
lines drawn on the middle of the ships side known as
Plimsoll line or international load line or waterline

Source:
http://www.rhiw.com/y_mor/plimsoll/load_line_01.jpg

International conventions
governing shipping
International Convention on Load
Line
International Convention for the
Safety of Life at Sea (SOLAS)
International Tonnage Convention
International Convention on Maritime
Pollution Prevention (MARPOL)

Types of Ships
Categorization Based on the Nature of Cargo

General cargo ships

Container ships
Combi ships
Heavy-lift ships
Source:
Bulk carriers
http://photos.marinetraffic.com/ais/showphot
o.aspx?mmsi=246309000&imo=9371581
Roll-on Roll-off (RO-RO) ships
Source:
http://internationalshippingusa.
com/ImagesEditor/international_shi
Liquid cargo carriers/ Crude carriers/ Product
pping_
ro_ro.jpg
tankers
Oil Bulk Ore Carriers
Gas carriers
Source:
http://photo.ekathimerini.com/kath/engs/img/BUSINESS/
2012/IO/Ing_carrier_390_1810.jpg

Types of Ships
Classification by sizes
Handymax: A bulk carrier, typically of 45,000 DWT
(between 35,000 and 60,000 DWT), having a length of 150
200 meters or 492656 feet.
Panamax: The sizes of these vessels are limited by the
dimensions of the lock chambers of the Panama Canal
(width of 33.53 metres and length of 320.0 metres)
Suezmax: largest size vessels, which can navigate the
Suez Canal while being fully loaded. Typically of 120
200,000 DWT
Seawaymax: vessels that can navigate the St Lawrence
Seaway
Capesize: more than 1,50,000 DWT, and include VLCC and
ULCC; and bulk carriers transporting coal, ore, and other
commodity raw materials

Types of Shipping Services

Liner Shipping
Tramp Shipping
Voyage charter
Time charter
Trip-time charter
Bareboat charter
Contract of Affreigtment

Definitions
Tramp Shipping
Ships which chase cargoes they go where the
cargoes are available
Generally for bulk movement of
grains/fertilizers/ores/coal etc which needs to be
moved in millions of tonnes
to meet the supply chain demand
to ensure unit cost of transport becomes low in
proportion to low value of such goods

The Freighting system for these movements are

Chartering
Voyage Charter
Time Charter
Contract of affreightment

The document covering contracts is called Charter Party

Charters
Voyage Charter
Contract for movement of one specific parcel from one
or two load ports to one or two discharge ports

Time Charter
Bare Boat Charter- crew will be of that of charterer.
Trip time charter: The ship is chartered on a per diem
rate for a period (USD per day)
Contract of affreightment
A contract for carrying an amount of cargoes between two
places over a period
There is some latitude for ship-owners a number of ships of
a certain types with a flexible time period to carry out the
contract

Characteristics of Voyage
Charter
Lay days- The window in which ship
should report for loading
Notice of Readiness
FI/FO (Free in/Free Out)- Free cargo
handling
Demurrage/dispatch charges
Dead Freight
Draft and speed
Statement of Facts/Lay days statement
and dispatch/demurrage calculation

Factors to be kept in mind

while chartering vessels

Draft Restrictions Load/ Discharge Ports

Port handling facilities
Load/ Discharge Ports
Sea lane restrictions (e.g. Panama size)
Lightening possibilities and costs
International market conditions
Vetting and empanelment of brokers
Lead from port to Inland point
Inland Transport Options

Baltic Exchange/ Containerized

freight index
Baltic exchange provides information on all
open offers, trends, etc., and also have indices
for trends of freight of various cargoes and sizes
of ships. Some of the indices on Baltic Exchange
include the Baltic handymax index (BHMI), the
Baltic panamax index (BPI), the Baltic capesize
index (BCI), and the Baltic dry index (BDI).

Source:
http://www1.chineseshipping.com.cn/resource/img/update/scfiallen.
png

Freight Indices
The Baltic Handymax Index (BHMI), is calculated
from the weighted, average rates on major timecharter
routes, with two trial voyage routes, as assessed by a
panel of brokers.
The Baltic Panamax Index (BPI), is calculated from
the weighted, average rates on major routes, both
voyage and timecharter, as assessed by a panel of
brokers.
The Baltic Capesize Index (BCI), is calculated from
the weighted, average rates on major routes, both
voyage and timecharter, as assessed by a panel of
brokers.
The Baltic Dry Index (BDI), is the average of the Baltic
Handymax Index (BHMI), the Baltic Panamax Index (BPI)
and the Baltic Capesize Index (BCI). The BDI provides a
good general indicator of movement in the dry bulk
market, and continues the established time series of the
Baltic Freight Index (BFI) which was introduced in 1985.

Shipping Agency
Shipping has traditional agency functions
however over a period of time has turned
into deeply outsourced business
Owners Agency
Charterers Agency
Port Agency
Commercial/ Marketing Agency
Ship/Crew Management

Liner shipping
Ships which operate on specific routes
and scheduled dates
Generally for smaller parcels of value
goods which can sustain a higher freight
Break Bulk ships in which goods were
loaded in sea worthy packing now mostly
replaced by container vessels and
container mode of transport
Movement covered by Liner Bill of Lading
or Multimodal Transport document-(this
will be discussed in detail in
documentation section of the course)

Liner Versus Tramp

Item

Liner

Tramp

Commodity

General Cargo

Bulk Materials

Ships

Container ships/Break bulk

ships

Bulk carriers/Tankers/Gas
Carriers/OBOs

Contract

Liner

Charter party

Bill of Lading

Liner

Charter party

Loading /Discharging costs

Part of Freight/responsibility
of ship

Separate- the responsibility

is that of shipper/receiver

Shippers/ Receivers

A large number

One or small numbers

Size of ships

Barring large container

vessels of sizes are not that
big

Can go up to 600,000
tonnes in case of ULCC

Container Lines- Hub and

spoke operations
Container ships are growing by size to
keep pace with competition and with
constant endeavor to reduce unit cost
These ships cannot call at many ports
because of costs and time- yet they have
to be near full
Hence feedering of containers is done to
hub ports
In the Far-East Europe trade Singapore
and Colombo are hub ports for Indian
cargoes
Recently Maersk Line has introduced a
direct service from Chennai to USA and
Chennai port is being used as hub for
containers from Chittagong and Kolkata

Service Routes

Liner and Container

Shipping
Six generations of Container ships

Multimodal Transport
Any national or international transport is
made using more than one of the following
modes of carriage the goods is seemed to
have been carried by Multimodal
transportation covered by one transport
document
Rail
Road
Air
Inland waterway
Ocean

Container shipment types

LCL/FCL also known as CFS/CY

LCL/LCL
CFS/CFS
FCL/FCL
CY/CY
FCL/LCL
CY/CFS
LCL shipments are routed through Container
Freight Stations (CFS) which are common user
sheds where the cargoes are received custom
examined and containerised or vice versa for
imports
FCL shipments are containerised at the
factories/ warehouses of shippers and delivered
to the lines at Yard or vice versa for imports
Container Yard-CY and Container Freight Station
-CFS

Container handling
Delivery
Of Cargo

Empty
Container
Yard
Empty
Container

CFS

Full
Container

FCL
Container from
Factory

Container
Yard

Ship

Break bulk handling

Cargo Delivery
In packages

Port Trust Shed

Movement of cargo
To ships side
Loading onto the
ship

Freight Rates

LCL Rates
USD Per CBM or 1000 kilos, whichever higher-the figure on which is
the freight is charged is also called Revenue Ton or Freight Ton + LCL
service charges per CBM or 1000 kilos whichever is higher also
known as LCL THC
FCL Rates
USD per twenty footer/ USD per forty footer
Note forty footer rate is most of the time is not double of twenty footer
and is marginally lower than double
THC is quoted in the currency of country of origin/destination. It is
also quoted per twenty footer and per forty footer-in India the rate is
double for forty footer. In UK /Europe it is the same for both types of
containers
FCL box rates
Commodity Box rates: In some sectors higher value cargoes attract a
higher box rate as compared to low value cargoes Freight All Kinds
Box rate (FAK box rates)
In this case whatever cargoes one puts inside the box will the rate per
unit will be the same

Surcharges
BAF or Bunker Surcharge

Ships normally runs on Heavy Fuel Oil (Furnace Oil) and

the auxiliary engine (for lighting and energy) runs on either
Light Diesel Oil or normal diesel oil
As the price of these oils go up the lines recover the
increase in the form of a surcharge the amount being
determined on the basis of distances
This is normally on per container basis

Currency adjustment factor or CAF

When a ship operates in a certain trade routes the ship

spends its expenses in various currencies the revenue is
universally in dollars- if the currencies of expense
strengthen against dollars the lines will protect revenue by
a positive CAF

Some Charges specific to US trades

ISPS-Internal Ship & Port Security Charge
ACD- Advance Customs Declaration Charges

Miscellaneous Charges
B/L Fees

At the time of exports

A nominal sum ranging from Rs 500 to Rs 800/- is
collected as B/L fees (linked to the B/L and not
number of containers) to cover
A) Stationery costs
B) Admin costs B/L is generated by the lines
through their systems-may be web enabled
At the time of Imports
A) Delivery Order fees is collected by agents to
cover manifesting and agency efforts
B) Container Cleaning & Administration charges
are also collected
These charges are in the nature of supplementary
revenues and insulate cost of efforts from market
fluctuations of freight

The mechanics of Price

fixation
Tariff by conferences and rate agreements

Conferences and Rate agreements are a grouping amongst the

shipping lines operating in a particular trade for self regulation on
tariff matters and for approaching common problems with
authorities for particular trade routes
In the era of restricted markets they were a powerful body and the
rates they set used to be mandatory
Nowadays they do not regulate rate applications but help in
determining surcharges/shore side charges etc
One of the oldest conference system is India Pakistan-Bangladesh
UK/Europe conference consisting of several sub divisions this is
probably 100 years old

Tariff by lines operation within a band

Open Tariffs
Spot rates versus contract rates
Shipping Contracts is between very large shippers/forwarders and
the lines
This has rate specified and period specified with Minimum Quantity
Commitments (MQC) Sometimes discounts are also offered on
deferred basis after the shipper ships the committed quantity

FCL Versus LCL

We classify the goods as LCL if the goods are delivered
at the CFS or taken delivery off at the CFS and
Containerization at the CFS in the case of Exports and
imports respectively
Even in the case of a consignment which is enough to fill
the containers this happens because many a times the
factories/warehouses are not equipped to handle
containerized cargoes
But most of the times small lots which are not enough in
volume/ weight to fill a container is taken to CFS and
clubbed with other cargoes
The Question is when should one treat a lot as FCL or
LCL

Activity Chart comparison FCL

vs LCL

Sl.no

Activity and Cost Item

FCL

LCL

1)

Off Loading trucks and Stacking at CFS

2)

Presentation for customs exam ,opening and sealing

3)

Vanning (Loading) of containers

4)

Movement of empty /full finally to CY

5)

Off loading at CY

6)

Movement to ship side and loading on ship

7)

Unloading at disport and movement to yard

8)

Movement from yard to CFS

9)

Loading on transit vehicles

10)

Devanning of containers at CFS

11)

Presentation for customs exam at CFS

12)

Loading of Domestic Trucks