Task 1: Voyage Cash flow Analysis and Vessel Chartering You are a trader in charge of physical grain trading in GrainCo. In addition t o regular trading activities you look after transportation requirements of the company too. The company is involved in grain trading and transportation across the world and hires ships under voyage, trip, and time chartercontracts for transportation of cargo. It is 24 October 2017 and you have identified an opportunity to buy a cargo of 50,000mt of Hard Red Winter Wheat based on FOB price of $162/mt, from sellers in the US Gulf (New Orleans). This cargo can be lifted early November 2017 (5-10). At the same time, you have found that a Far East grain importer who is willing to buy 50,000mt of Winter Wheat from you at $197/mt CFR basis, delivery Nagoya or Mizushima. Moreover, stowage factor of this cargo is 1.15 and loading or discharge is expected to take 3 days each. Your ship broker has been active and provided you with the following information.
24 October 2017: Available vessels Vega II:
Supramax, 56,000dwt (62,000cbm) delivery Rotterdam on 24-25 October 2017, redelivery Japan-SK, $8,500/day for 50 to 60 days hire Speed: 13knts; Consumption: Fuel Oil: 25mt/day laden, 23mt/day ballast Consumption: MDO: 2mt/day in port Constants: 400mt
Oceans 11:
Panamax, 64,000dwt (70,000cbm) delivery Cape Passero (Italy) on 24-26 October 2017, redelivery Japan-SK, $8,250/ day for 50 to 60 days hire Speed: 13.5knts; Consumption: Fuel Oil: 33mt/day laden, 30mt/day ballast
will take into consideration several factors involving the logistics, not just the regular costs of transportation. We assume that our purchase and sale contracts are for 50,000+-10% MT of Wheat. Knowing the costs per MT for Pacific Dream, and being a voyage charter, we know that the full amount to be paid to the owners will be USD 19.50 per MT, and assuming in this case the max amount of wheat to be shipped on the vessel will be min/max 50,000 MT of grains, USD 975,000 in total, including Port charges, Canal transits, Fuel, commissions and daily hire. On this trade assuming no other costs involved, we would be making USD 775,000 (sale CFR at USD 197 – freight 19.50 – FOB purchase USD 162 x 50,000 MT) For the other two vessels on time charter, we must calculate the final amount taking into consideration all these costs as we as charterer will need to pay for each one of them separately. We need to add them up and convert the total cost on USD/MT to be able to compare all three candidates. We have assumed USD 10,000 on Agent costs, a consumption of Diesel only in Ports and that a reserve of 5 days laden steaming has to be maintained at all times. As we can see on the Excel Sheet, we have calculated the total costs for MV Vega II of USD 1,195,014 or USD 22.02/MT. In this case because of the dwt of the Supramax and the necessary bunkers for the voyage we will only be able to load a max quantity of 54,261 MT of wheat. Regarding the timing, we know the vessel will be delivered in Rotterdam on the 24-25th October 17 and we need approx. 15-16 days voyage to get to NOLA. ETA NOLA would be around the 9-10th November so at the very end of the loading window. There is some risk the vessel might not be in time, so unless we would be buying our cargo with an extension in case of late arrival, we might enter in default with our seller. In terms of profit, we would be buying 54,261 MT of wheat at USD 162 and paying USD 22.02 on
Owner's Voyage Estimate Form Vessel:
Vega II
Speed L: Knots B:
13 Miles L: 13 Daily B:
312,00 312,00
Cargo Details: 50000+-10% MT wheat from NOLA to Nagoya or Mizushima
Miles 4852 9473
VOYAGE LEGS Rotterdam to NOLA NOLA to Nagoya or Mizushima
BWA Canal Transit: Loading: 3 Port Time: CARGO CALCULATIONS Dwt: 56.000 Less: Bunkers: 1338,73 C.Weights: 400 = Cargo: 54.261
Daily Bunker Consumption Fuel Oil Diesel Oil Laden Ballast Idle Working 25 23 2 2
Discharg
3 TOTALS:-
Days 15,55 30,36
FO 357,68 759,05
2,00 1,00 6,00 54,91
50 25 1191,73
DO
12 12,00
1738,73 tons VOYAGE EXPENSES
BUNKERS: 400 tons in 792 tons in tons in 12 tons in tons in tons in
FO
DO
Cargo
54.261
Rotterda NOLA
@$ @$ @$ @$ @$ @$
345,00 335,00
=$ 138000 =$ 265231 =$ Rotterda 680,00 =$ 8160 NOLA 610,00 =$ 0 =$ Loading Port Disbursements =$ 80000 Discharging Port Disbursements =$ 90000 =$ Bunkering Port Disbursements =$ 167500 Canal Transit Expenses =$ Insurance Premiums Stevedoring Charges =$ Other Expenses =$ 10000 GROSS VOYAGE EXPENSES: Rate Gross Freight Commissions $/ton 22,02 $ 1.225.655 2.5% $ 30.641,38 $/ton $ %$
=$
411391
=$ 347500 =$ 758891 Net Freight $ 1.195.014 $
Task 2: Tanker Freight Calculation& Chartering It is 23 Jan 2014 and as a chartering manager of a tanker company, you are in charge of operating a clean product tanker (Isabella). The tanker is mainly operating in Euromed region. The vessel is currently heading to Lavera (Marseille, France) to discharge 30,000mt of gasoline. The ETA of the vessel to Lavera is 12:00 noon on 25 January 2014 and is expected to complete discharge 36 hours after. Therefore, you are trying to negotiate and fix her next cargo through a broker. The broker has informed you about the following two opportunities for your vessel: 1- A cargo of 30,000mt of gasoline Rotterdam (the Netherlands) to Philadelphia (US East Coast) for WS 160,laycan of 4-6 February 2014, charterer Sonoco 2- A cargo of 28,000mt of Naphtha from Genoa (Italy) to Rotterdam (the Netherlands) for WS 170, laycan 1-2 February 2014. Given the following information and the attached sheets, and assuming that the running costs of the tanker is $6000/day, a) Calculate the “Net Daily Earnings” and “TCE” of each voyage. Assume 2 days for loading and 2 days for discharge, 2.5% commission. b) Discuss what other factors you consider in accepting to undertake the voyage. AGISILAOS ICE CLASS IA OIL, PRODUCT & CHEMICAL TANKER, IMO II/III
Built 2006 VESSEL PARTICULARS
earnings against the respective expenses of each voyage at hand and make a decision to fix the cargo yielding the highest TCE. Let’s examine whether given her design characteristics, ie cubic capacity and deadweight, the vessel is able to lift either of the two cargoes. In terms of deadweight, as per attached owner’s voyage calculation spreadsheets, on both cases there is spare weight available that the vessel should be able to lift more cargo if need be. However, in terms of cubic capacity, gasoline has a specific gravity of around 0.73-0.74 and therefore with a total cubic capacity of around 41,634m3 including slops (should they be empty) the vessel is able to marginally lift 30,000mts up to not more than about 30,400mts. On the other hand, naphtha has a specific gravity of 0.667 which means that the vessel will be able to lift 27,770mts at most ie, she would shortload by 230mts, rendering her being in a commercially disadvantageous position against her potential competition for the cargo. Assuming that both the broker and the respective charterers are very well aware of the above, the decision is upon us to make the call on which opportunity to fix.
To begin with we need to estimate when would the vessel arrive at either of the two loadports. She will finish discharging her cargo at Lavera on January 26th midnight. At 14 knots she would cover 336 miles per day in ballast all going well. Hence, from Lavera she would need less than a day to reach Genoa and Rotterdam in around 6.5 days. For the gasoline cargo ex Rotterdam with a laycan of 4-6 February, she would be arriving on around midday February 2nd, therefore she would incur 1.5 days of waiting time (no rough seas delays). For the naphtha cargo ex Genoa with a laycan of 1-2 February, she would be arriving on January 27th in the evening, therefore she would incur 4 days of waiting time. In order to factor in the bad weather allowance, let’s assume that passing Biscay Bay in the winter will add 1 day to the trip (either in laden or in ballast) and likewise crossing the Northern Atlantic in February will add 1 extra day as well. The total income or gross freight of the two cargoes are easily obtainable by referring to the
Most importantly, seasonality along with trade patterns play an important role. Vessel’s of this size ie. handymaxes commonly trade in the Euromed area. In order to get a better grasp of their trade patterns, let’s have a look on the last decade or so earnings of this group of tank ers within the Atlantic markets. In the appendices pages, we can deduce from the first graph that the average clean handymaxes returns are highly correlated with the Euromed trades, namely cross-Mediterranean and Black Sea loading to the Med. With the repositioning run from the Med to NWE lagging slightly behind. This can be justified once one takes a look at the second graph, which clearly illustrates that NWE trades yield better returns than the average clean handies earnings. Therefore, an owner would be willing to undertake a voyage with relatively worse returns from the Med to NWE, only to find himself in a market that historically overall outperforms the clean handy earnings. This is profoundly true over the winter months, particularly Q1. Looking at the third graph, the seasonality factor of higher gasoline demand in the United States prior or at the beginning of the driving season kicks in. This is evident on the MR returns that are the workhorse of gasoline movements to the US Atlantic Coast out of NWE on 37kt lots. During that period there is “spillage” onto their smaller cousins the handymaxes that lift 30kt parcels instead. To summarise, one can suggest to the owner, that the repositioning voyage to Rotterdam will place her vessel in a strong NW European market during the winter months and by April-May, she can lock into a hefty income from a gasoline cargo the United States. Thus, there is no need for her to rush into picking up a gasoline cargo for the time being and that she can make better returns on the vessel by trading her this side of the pond instead. Note that for the sake of simplicity, switching cargo grades is not touched upon.
Task 3: A Chartering Problem On 30 August 2017, you bought a cargo of 15,000mt of grain, FOB basis on the GAFTA 64 contract
30.Sept.2017
30.Sept 2017
01.Oct.2017 01.Oct.2017
01-06.Oct.17
(Friday)
The seller ( EXP. Grain) inspected the vessel and found traces of coal in two of the cargo holds and after that rejected the NOR and refused to load. After contacting the chartering manager of the shipping company, the master orders the hold to be cleaned and issues the second NOR the next day. Second NOR by this time there is another vessel taken alongside for loading and the ship has missed the loading slot and should wait for 5 more days to be able to start loading. The vessel waited for Berth, after the second NOR. At the moment is unclear if within or outside Port Limits.
Note: The vessel’s previous cargo was coal but the ship-owner has agreed to clean the cargo holds and make sure the vessel be ready to load the cargo. The buyer hired the vessel on the basis of Graincon charter party and instructed the vessel to arrive at loading port based on a voyage charter party with a laycan of 25-30 September 2017.
1.1
Claimant: The Seller. Exp. Grain Defendant: The Buyer Claim: Breach of the contract by not providing the vessel to load on time and hence liable to be compensated by the buyer for missing the loading period. It is the Claimant (“Sellers”) argument that the level of readiness required was such that the vessel
The vessel met these three requirements and in spite of the seller rejected the NOR and refused to load within the delivery period because of the remains of coal in two of the holds cargo. There were no such additional requirements to load: “ NOR on the delivery of the vessel under the charter- hold cleanliness.” In the Soufflet Negoce vs Bunge SA, a case similar to the one in question, the analysis led to the conclusion that the vessel was indeed “presented” for loading there being no physical restrictions rendering it impossible to load (such as excessive draft) and no legal restriction rendering it a breach of law to load (such as disease). Hence, the Sellers were obliged to load whatever concern they might have about say the cleanliness of the vessel. a)
The critical time for the performance of Sellers’ obligations was at the moment of delivery at which stage risk passed to the Buyers. Thereafter the Buyers could treat the goods as they saw fit.
b)
The moment of delivery was at the ship’s rail. To reach that stage the Buyers must have given effective shipping instructions in the sense that the ship nominated by the Buyers must be capable of loading the goods within the shipment period (or any extension). If the holds are unclean that was of no concern to the Sellers.
c)
The Buyers are the Charterers. The shipowner owes the Sellers no duties under the charterparty as to the condition of the holds. It follows that any inability on the part of the shipowners to serve a valid NOR under the terms of the charterparty is of no concern to the Sellers.
d)
Indeed the irrelevance of the contractual requirement of readiness to load is confirmed
shipping law, partial NOR is not acceptable and this could cause further complications down the line for the buyer. Furthermore, the buyer is not privy of the port infrastructure. The seller under its FOB delivery obligation should have made available another berth within the port or should have arranged for loading to take place at the anchorage if same was feasible. Hence, sellers’ contestations that you, as the buyer, are in breach of the contract by not providing the vessel to load the cargo on time and hence liable to compensate the seller for missing the loading period have no reasonable ground whatsoever. Vice versa, the buyer has a repudiatory breach against the seller and can file for damages. If we had to take another vessel on charter from the market then we could claim damages against the potentially higher freight rate charged from the second shipower; loss of earnings in lieu of say a further sale of the cargo with a specific discharge window and so forth.
Task 4: Theory Question Discuss different factors that affect the supply and demand for shipping freight market. Then explain the formation of shipping freight rate in tramp market based on the interaction between supply and demand forces under different time frames. The role of maritime shipping in maritime policy in the overall development of every country is significant. To regulate supply and demand, the shipping market uses different economic mechanisms, and every cycle on the shipping market brings new possibilities and warnings, so in only several months, the shipowner’s cash flow can change significantly, which means that the market value of his fleet can vary millions of dollars. In world practice the supply and demand model is used to understand the state of the market. There are differents factors influencing the formation of freight rates on maritime shipping markets.
It is very crucial to understand why the state of the maritime shipping market as well of the state of the world economy, is so important to make decisions in the maritime market within the internal and external connections. There are three different time frames when considering the supply and demand for shipping freight market and in particular the tramp market. Namely the momentary equilibrium, the short-term equilibrium and the long-term equilibrium. Within the momentary equilibrium, the time frame that is dealt with is less than a week and focuses mainly on the interaction between regional supply and demand. Momentary imbalance triggered by the number of cargoes in a region being more than the supply of ships will force freight rates to rise sharply in most cases. The reverse is observed when the amount of cargoes is less than the number of available ships and freight rates will consequently fall. Furthermore, if at any given time a small number of owners control a large number of the available tonnage in a region, then despite an otherwise balanced supply and demand structure, the shipowners may be able to wait so that the market further improves. Thus, leading to a fictitiously undersupplied market that will lead to improvement in freight rates. The short-run supply and demand equilibrium is governed mainly by the global ton-miles covered by the vessels. The longer the ton-miles, the fewer the available vessels to pick up the cargoes that create the higher demand, the higher the freight rates will be over time. Conversely, more short-haul business will lead to vessels being more frequently available for further employment, leading to falling freight rates. The long-run supply and demand equilibrium is dependent on global trade. The more goods being traded, the higher the demand for sea transport will be, the higher the freight rates overall. A healthy shipping freight market will entice shipowners to build more ships and scrap less of the older tonnage and hence over time the new increased supply of vessels will eventually meet the higher demand that will lead to downward readjustment of freight rates.
Task 2: Tanker Freight Calculation & Chartering (Appendix)
Mediterranean 30k against Average Clean Handy Earnings $/Day 50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
-5,000
9 0 0 2 / 2 / 1
9 0 0 2 / 2 / 4
9 0 0 2 / 2 / 7
9 0 0 2 / 2 / 0 1
0 1 0 2 / 2 / 1
0 1 0 2 / 2 / 4
0 1 0 2 / 2 / 7
0 1 0 2 / 2 / 0 1
1 1 0 2 / 2 / 1
1 1 0 2 / 2 / 4
1 1 0 2 / 2 / 7
1 1 0 2 / 2 / 0 1
2 1 0 2 / 2 / 1
2 1 0 2 / 2 / 4
2 1 0 2 / 2 / 7
2 1 0 2 / 2 / 0 1
3 1 0 2 / 2 / 1
3 1 0 2 / 2 / 4
3 1 0 2 / 2 / 7
3 1 0 2 / 2 / 0 1
4 1 0 2 / 2 / 1
4 1 0 2 / 2 / 4
4 1 0 2 / 2 / 7
4 1 0 2 / 2 / 0 1
5 1 0 2 / 2 / 1
5 1 0 2 / 2 / 4
5 1 0 2 / 2 / 7
5 1 0 2 / 2 / 0 1
6 1 0 2 / 2 / 1
6 1 0 2 / 2 / 4
6 1 0 2 / 2 / 7
6 1 0 2 / 2 / 0 1
Handy Augusta - Lavera 30k (Earnings $/Day)
Handy Tuapse - Agioi Theodoroi 30k (Earnings $/Day)
Handy Augusta - Rotterdam 30k (Earnings $/Day)
Average Handy Clean (Earnings $/Day)
Source: Clarkons Research
7 1 0 2 / 2 / 1
7 1 0 2 / 2 / 4
7 1 0 2 / 2 / 7
7 1 0 2 / 2 / 0 1
Continent 30k against Average Clean Handy Earnings $/Day 50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
-5,000
9 0 0 2 / 2 / 1
9 0 0 2 / 2 / 4
9 0 0 2 / 2 / 7
9 0 0 2 / 2 / 0 1
0 1 0 2 / 2 / 1
0 1 0 2 / 2 / 4
0 1 0 2 / 2 / 7
0 1 0 2 / 2 / 0 1
1 1 0 2 / 2 / 1
1 1 0 2 / 2 / 4
1 1 0 2 / 2 / 7
1 1 0 2 / 2 / 0 1
2 1 0 2 / 2 / 1
2 1 0 2 / 2 / 4
2 1 0 2 / 2 / 7
Handy Tee s - Amst erdam 30k (Earnings $/D ay)
2 1 0 2 / 2 / 0 1
3 1 0 2 / 2 / 1
3 1 0 2 / 2 / 4
3 1 0 2 / 2 / 7
3 1 0 2 / 2 / 0 1
4 1 0 2 / 2 / 1
4 1 0 2 / 2 / 4
4 1 0 2 / 2 / 7
4 1 0 2 / 2 / 0 1
5 1 0 2 / 2 / 1
5 1 0 2 / 2 / 4
5 1 0 2 / 2 / 7
5 1 0 2 / 2 / 0 1
6 1 0 2 / 2 / 1
6 1 0 2 / 2 / 4
6 1 0 2 / 2 / 7
6 1 0 2 / 2 / 0 1
Handy Vent spils - Amst erdam 30k (Earnings $/Day)
Average Handy Clean (Earnings $/Day)
Source: Clarksons Research
7 1 0 2 / 2 / 1
7 1 0 2 / 2 / 4
7 1 0 2 / 2 / 7
7 1 0 2 / 2 / 0 1
Augusta-Rdam 30kt against TC2 MR 37kt and Average Clean Handy Earnings $/Day 50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
-5,000
9 0 0 2 / 2 / 1
9 0 0 2 / 2 / 4
9 0 0 2 / 2 / 7
9 0 0 2 / 2 / 0 1
0 1 0 2 / 2 / 1
0 1 0 2 / 2 / 4
0 1 0 2 / 2 / 7
0 1 0 2 / 2 / 0 1
1 1 0 2 / 2 / 1
1 1 0 2 / 2 / 4
1 1 0 2 / 2 / 7
1 1 0 2 / 2 / 0 1
2 1 0 2 / 2 / 1
2 1 0 2 / 2 / 4
2 1 0 2 / 2 / 7
2 1 0 2 / 2 / 0 1
3 1 0 2 / 2 / 1
Handy Augusta - Rotterdam Clean 30k (Earnings $/Day)
3 1 0 2 / 2 / 4
3 1 0 2 / 2 / 7
3 1 0 2 / 2 / 0 1
4 1 0 2 / 2 / 1
4 1 0 2 / 2 / 4
4 1 0 2 / 2 / 7
4 1 0 2 / 2 / 0 1
5 1 0 2 / 2 / 1
5 1 0 2 / 2 / 4
5 1 0 2 / 2 / 7
5 1 0 2 / 2 / 0 1
6 1 0 2 / 2 / 1
6 1 0 2 / 2 / 4
6 1 0 2 / 2 / 7
6 1 0 2 / 2 / 0 1
7 1 0 2 / 2 / 1
MR Rotterdam - New York Clean 37k (Earnings $/Day)
Source: Clarksons Research
7 1 0 2 / 2 / 4
7 1 0 2 / 2 / 7
7 1 0 2 / 2 / 0 1
