Shipping market
The shipping market is the whole that determines the sale and purchase of ships. How the ships are chartered and the way the prices of this is established. The actors moving this market are shipowners, shipbuilders, charterers and shipping companies. This market is formed by five markets that interact to form and are each part of the overlapping market:
- The newbuilding market
- The freight market
- The sale and purchase market
- The demolition market
- FFA-Forward Freight Agreements Market
The newbuilding market
This market is set by the shipbuilders and the brokers who act as mediators between first mentioned and shipowners (to be). The largest difference between other markets is that the product traded does if fact not yet exist. Payment is usually done in parts as the new ship is being completed. Newbuild ships are not necessarily more expensive than similar second-hand ships. This is because of the time it takes for the ship to be available and the current fluctuations of offer and demand.
The freight market
The freight market is the trading of freight and the means to transport this freight. The better known origin of this market lies in the Baltic Exchange. This has now become a website. And most of this trade now goes by the internet. As shipping companies sell the use of ships, the way these ship are deployed must be agreed upon, including whether the charter has full control or a certain degree of it. This is done by the charter. In this contract the obligations of both parties are described. This can be done on basis of time, voyage, freight, etc. Even the party responsible for maintenance and crewing is hereby settled.
The sale and purchase market
The actors are again the same as in previously mentioned markets. Despite the reason of sale, this is typically done free of any financial obligations tied to the ship and with instant delivery. Shipbrokers usually act as a middle man in these sales, but the internet replaces more and more of them. The price of the ship depends on many factors. The most important is the momentary demand for transport which that type of ship could deliver. Despite any debt that a selling owner may have, or the interest that a third party may have, in a ship being sold, the crew always has first lien to the value of the ship if they are still to be paid.
The newbuild market
The significant difference with the sale and purchase market is that the ships that are sold here don't exist yet. Anticipation of the market is crucial for those contracting the construction of a ship. Payment is usually done in five parts. Ten percent upon signing the contract. The rest in even parts during different phases of construction; cutting of the steel; laying of the keel; launching; delivery. Prices are determined, as always, by price and demand. Also resources must be taken into account.
The demolition market
After a ship's lifespan is exceeded it will be demolished. Its steel and components will be dismantled and sold. Since this work is hard, dangerous and badly paid it is done in the India, Far East or Northern parts of the UK..
References
'Maritime Economics' by Martin Stopford
External links
economics
