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Denmark

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I. Containerization

Containerization is a system of intermodal freight transport using shipping containers. The containers have standardized dimensions. They can be loaded and unloaded, stacked, transported over long distances and transferred from one mode of transport to another. All containers are numbered and tracked using computerized systems.

A. Effects i. System developed after World War II, dramatically reduced transport costs. ii. Supported post-war boom in International Trade and was a major element in Globalization. iii. Displaced thousands of workers who used to help break cargo. iv. Reduced congestion in ports, losses from damage and theft and shortened shipping time. v. Containers that were once sent as small consignments began to be grouped into containers. vi. Manufacturing, Trucking and Rail transport evolved to take advantage of containers. vii. Helped in the advent of Just-in-time manufacturing – a method of reducing flow times within production and response time from suppliers and customers.

B. Issues i. Hazards – Smuggling of contraband (anything that is deemed as illegal). ii. Empty Containers – After unloading, the containers may have to travel empty to another location to refill. iii. Loss at sea – Containers occasionally fall from ships, usually during storms. iv. Trade Union Challenges

II. Container Ships
Container ships are cargo ships that carry intermodal containers in a technique called containerization. Container ships are measured in twenty-foot equivalent units (TEU) where 1TEU = 20 feet long, 8 feet tall. Today, about 90% of non-bulk (packaged) cargo is transported by container ships.

a) Flag States
International law requires that every merchant ship be registered in a country, called its flag state. Panama is the world’s largest flag state for container ships with 541 vessels in its registry followed by Liberia (415) and Germany (248). Comparatively, US and Japan have only 75 and 11 registered while UK has 104.

b) Automatic Identification System
It is an automatic tracking system used on ships for identifying and locating vessels by electronically exchanging data with other nearby ships.

c) Incoterms (International Commercial Terms)
They are a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC). They are widely used in International commercial transactions and procurement processes.

III. Shipping Markets
It determines the sale and purchase of ships. How the ships are chartered and the way the prices are established. The actors moving this market are ship-owners, shipbuilders, charterers and shipping companies.

a) New building market
Here, ships are sold which don’t exist yet. Anticipation of the market is crucial for those contracting the construction of the ship. Prices are very volatile.

Payment is done in 5 parts: 10% upon signing the contract and the rest in parts during the construction phase. Contract negotiations can be very complex and also cover ship specifications, delivery stage and finance.

New build 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.

b) Sale and Purchase Market
Second-hand ships are traded between ship-owners using a standard contract. The value of ships depends on freight rates, age, inflation and expectations. The prices are very volatile.

c) Freight Market
It is the trading of freight and the means to transport this freight. Ship-owners contract to carry cargo for an agreed price per ton while the charter market hires out ships for a certain period of time. Ship-owners, charterers and brokers are key players.

How ships are deployed and used is specified in the Charter. A charter (Charter Party) is a contract between ship-owner and merchants and is done on the basis of time, voyage, freight etc. Prices vary between the two legs of a voyage.

Chartering – The act of hiring a ship to carry cargo.

Types of Charter – * Voyage Charter – Charterer pays the owner on a per-ton or lump sum basis. * Contract of Affreightment – Similar to voyage charter but ship-owner undertakes to carry a number of cargoes within a specified period of time on a specified route. * Time Charter - is the hiring of a vessel for a specific period of time; the owner still manages the vessel but the charterer selects the ports and directs the vessel where to go. * Trip time Charter - A trip time charter is a comparatively short time charter agreed for a specified route only (as opposed to the standard time charter where charterer is free to employ the vessel within agreed trading areas). * Bareboat or Demise Charter - is an arrangement for the hiring of a vessel whereby no administration or technical maintenance is included as part of the agreement. The charterer obtains possession and full control of the vessel along with the legal and financial responsibility for it.

Fright Derivatives – Are financial for trading for trading in future levels of freight levels for containers and tanks. It contains Forward Freight Agreement (FFA) and container freight swap agreements.

Baltic Exchange – Measures cost for shipping goods.

d) Demolition Market
Components of ship are sold for scrap. Transactions happen between ship-owners and demolition merchants.

IV. Present Freight Market
Vast majority of container ships are owned by German ship-owners, with approximately 75% owned by Hamburg brokers.

In mid 2008, rates declined by 75% but stabilized in 2009. Prices are generally lower on larger ships. Most resilient sized vessel is those between 200-300 TEU. As of 2011, there are signs of recovery for container shipping, and combined with increases in global capacity, indicates a positive outlook for the sector in the near future.

Shipping Industry Alliances –
As of March 2015, 16 of the worlds largest container shipping lines created alliances and account for 95% of container cargo.

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