Demand for shipping

Shipping

First I would like to tell what is shipping. Shipping is defined as the movement of goods and passengers by sea. However with advancement of technology and multimodalism, the concept of shipping has extended from mere port/port to land services/air. The shipping industry is responsible for transporting 90% of the world’s trade. The 42,000 ships that comprise that international trading fleet are technically sophisticated, high value assets and the operation of merchant ships generates an estimated annual income of over US $200 billion in freight rates within the global economy.

Demand for shipping

The demand for shipping, like that for all forms of freight transport, result from the final consumer’s demand for goods. It is not a direct demand but derived demand. Shipping is a factor which is not in demand for its own sake but is derived from the demand for the goods that are being transported. This demand is closely related to the world trade and its growth. The average distance of hauls, cost of transportation and other factors, such as international crises too have an important impact on the level of derived demand for shipping. Therefore we can say that this is an indirect demand.

Type of ships

We can summaries cargoes which are shipped as follows,

Type of cargo	Vessel
· Manufactured goods · Raw materials (Ore/iron, coal, grain, fertilizer) · Liquid bulk cargo (Crude oil/Chemicals, Vegetable oil, Petrol) · Liquefied natural (Petroleum/Gas products) · Vehicular cargo · Heavy lift cargo (Oil rigs/Project machinery) · Fish · Live animals · Passengers	· Containerized ships · Dry bulk ships · Oil tankers · Gas tankers · Roro/Lolo vessels · Specialized heavy lift cargo ships · Trawlers · Cattle carriers · Crews vessels/Ferries

Liner and Tramp trade

Present commercial shipping is categorized into 2 sectors namely, Liner and Tramp. Each has its own characteristics.

Liner:

It’s a fixed scheduled and regular service offered by the ship company, between specified number of ports.

The schedule is advertised in advanced to the exporters and sailing dates are strictly maintained by the shipping company irrespective whether the ship is full or not.

It has fixed tariff and carries different types of cargo under separate bill of lading for each shipment. Generally its high valued cargo.

Vessels of liner service are built for a particularly for a trade and equipped with high tech equipments.

Liner service requires large, complex shored based organization with many staff to handle marketing, documentation, operations etc. Further there should be established offices or agents at each port of call. Such agents are appointed on a long term basis.

Almost all the container carries offer liner service. World’s containerized fleet amount to 11.8 pct from the total tonnage as at 2006.

Tramp:

This has no fixed schedule and each voyage is most of the time individual / scheduled based on the cargo availability.

Tramp trade generally carries homogenous bulk cargoes such as ore, oil, grain, iron.

The carriage of contract is negotiated by each party involved and can have their own terms / freight rate agreed and sign a document named charter party for particular voyage of consecutive voyages. Most of the occasions, the cargo belongs to one shipper and sold to one consignee.

Comparison with liner trade, tramp freight rates are low and measured basis of tonnage.

Tramp service requires a small office, less staff than liner trade. Agents may differ from voyage to voyage and appointed adhoc basis.

Tramp ships too not as advanced and sophisticated as liners. However more than 80pct of world cargo tonnage is stilled carried by tramp service.