...Background Ocean Carriers Inc. is a shipping company specializing in the operation of capsizes bulk dry carriers. In January 2001, Mary Linn, the vice President of Finance for Ocean Carriers was evaluating the purchase of a new capsize carrier for a three years lease proposed by a motivated customer. The leasing contract offers very attractive terms, but no ship in Ocean Carrier’s current fleet met the customer’s requirements. In addition, this proposed contract is only for three years. Therefore, after three years, the new capsize carrier will have to be leased to other customers. So considering in the long run, Linn had to decide whether Ocean Carriers should immediately commission a new ship which could be completed in two years. In the same time, she would have to consider if the company should still follow the policy of scrapping a vessel after 15 years, even though such vessel has a product life of 25 years. Analysis There are two main factors would affect the daily spot hire rates which are the number of available vessels and imports of iron ore and coal. From the Exhibit 3 of this case, we know that 63 new vessels were scheduled for delivery in 2001. This number decrease to 33 in 2002 and 21 in 2003. So we can infer that the demand of new vessels is saturated temporary. Besides, with Australian production in iron ore expected to be strong and Indian iron ore exports expected to take off in the next few years, we can infer the long-term market demand for capsizes will...
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...registered trademarks of the society incorporated by the Lloyd's Act 1871 by the name of Lloyd's. CONTENTS WELCOME TO THE COURSE ........................................................................................................ 3 STRUCTURE OF THE COURSE ...................................................................................................... 4 INTRODUCTION TO MODULE 1 ................................................................................................... 7 1. ECONOMIC ANALYSIS OF THE SHIPPING INDUSTRY ........................................................... 8 1.1 The Function of Shipping .................................................................................................. 8 1.2 The Structure of World Seaborne Trade and the Demand for Shipping Services....................... 8 1.3 The Ton-Mile as a Measurement of Demand for Shipping Services ....................................... 12 2. ANALYSIS OF GLOBAL COMMODITIES ON-BOARD SHIPS .................................................. 14 2.1 Crude Oil Seaborne Trade .............................................................................................. 14 2.2 Other Challenges for Crude oil Transportation ................................................................... 16 2.3 Iron Ore Seaborne Trade ............................................................................................... 16 2.4 Coal Seaborne Trade...
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...Guidance Note draws attention to the Merchant Shipping (Carriage of Cargoes) Regulations 1999 which replace the Merchant Shipping (Carriage of Cargoes) Regulations 1997 as amended by the Merchant Shipping (Carriage of Cargoes) (Amendment) Regulations 1997. • Key points: The new Regulations introduce additional requirements with respect to the loading and unloading of bulk cargoes, ie. • A loading manual is required to be provided on every ship carrying solid bulk cargoes. • A loading/unloading plan is to be agreed between the Master and the terminal representative before cargo is loaded or discharged. • Cargo operations are to be conducted in accordance with the agreed plan or any subsequent amendment to it agreed to. 3. The new Regulations consolidate the earlier Regulations and implement the amendments to Chapter VI of SOLAS 1974 (Carriage of Cargoes) contained in the IMO Maritime Safety Committee Resolution MSC.47(66). The SOLAS amendments consist of additions to Regulation VI/2.2.2 with regard to cargo information on bulk cargo shipments and to Regulation VI/7 on loading and unloading of bulk cargoes. The Regulations 1. The Merchant Shipping (Carriage of Cargoes) Regulations 1999 entered into force on 15 March 1999, replacing the Merchant Shipping (Carriage of Cargoes) Regulations 1997 as amended by the Merchant Shipping (Carriage of Cargoes) (Amendment) Regulations 1997. 2. Merchant Shipping Notice MSN 1708(M), which...
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...was affected when Japan was struck with natural disasters (Earthquake and Tsunami). This sudden disaster sent everyone around the world into frenzy. It affected Japan’s ports, shipping and logistics. As a result of the natural disasters, ports in the northern area of Japan had to stop operations after the Tsunami washed away port facilities, leaving the area in tatters. Ports such as Hachinohe, Ishinomaki and Onahama were severely damaged and it would take months before operations can resume. It will take some time for Japan to rebuild itself as this is the worst disaster to hit the country since the Hiroshima/Nagasaki nuclear bombing during the World War 2. 1.2 Objectives of Project The team will be doing a research and critical analysis on how the crisis has affected Japan’s economy and how the revival of Japan will benefit the shipping economy. The areas of focus will be on the economic impacts of the various shipping markets and other factors contributing to the crisis and forecasting the future outcome in the shipping industry. We intend to go beyond the surface and dig deep into the crisis to fully understand how dealing with a crisis really works. This includes looking at past records as well as analyzing the situation in a chronological pattern – 1) Before the crisis, 2) During the crisis and 3) After the crisis. 1.3 Methodology and Scope To assist the team’s research, information will be sourced out from newspaper articles, books and internet websites...
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...The . What are the major determinants the daily hire rates for capesize vessels? Daily hire rates are determined by supply and demand. Future supply = current vessel + new ships delivered - scrapings and sinking The increase in size and efficiency the newer ships offered decreases the number of newer ships needed. Demand for dry bulk capesize is determined by world economy, especially its basic industries such as iron ore and coal, as well as changes in trade pattern. Production and demand for these products increased in a strong economy. 2. How would you characterize the long-term prospects of the capesize dry bulk industry? Growing? Shrinking? Why? The long-term prospects of the capsize bulk industry is expected to grow. Over 85% of the cargo carried by capesizes was iron ore and coals. Also, Australian production in iron ore was expected to be strong and Indian iron ore exports expected to take off in the next few years. Considering a favorable forecast of production in Australia and India, we should expect the same favorable forecast of demand on vessels service over the long run. 3. Do you expect daily spot hire rates to increase or decrease next year? Why? Spot rate is expected to fall in 2001 and 2002, because 63 new vessels were scheduled for delivery in 2001 and that imports of iron ore and coal would probably remain stagnant over the two years. Another important fact is that old vessels accounts for a small percentage of the existing vessels and there won’t...
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...Ocean Carriers’ Case Spring 2012 Ocean Carriers Ocean Carriers Inc. owned and operated capsized dry bulk carriers that carried iron ore worldwide. The company’s vessels were typically chartered on a “time charter” basis for a period of years. The charterer paid Oceans Carriers a daily hire rate for the entire length of the contract, determined what cargo the vessel carries, and controlled where the vessel loaded and unloaded. Ocean Carriers supplied a vessel that complied with internal regulations and manned the vessel with a qualified crew. Additionally, Ocean Carriers ensured adequate supplies and stores onboard, supplied lubricating oils, scheduled the repairs, conducted overall maintenance of the vessel, and placed all insurances for the vessel. Need for Analysis In 2001, Ocean Carriers was in a predicament and it was essential that the company conduct detailed analysis before making major decisions. Ocean Carriers was in negotiations with a charterer for a three-year time charter starting in 2003, but the vessels in Ocean Carriers’ current fleet could not commit to a time charter beginning in 2003. The company’s ships were either already leased during that period or were too small to meet the customer’s needs. It is also noteworthy that there were no sufficiently large capsizes available in the second-hand market. Ocean Carriers had to decide how to handle this situation with the charterer and thorough analysis was certainly necessary. General...
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...Guide for Case Analyses “Ocean Carriers” Objectives of case: The key objective is to develop an understanding of how discounted cash flow analysis can be used to make investment and corporate policy decisions. 1. Determine the value and net present value of a real assets; 2. Distinguishing between book value and market value; 3. Identifying and forecasting incremental expected cash flows, including initial and ongoing capital expenditures, investment in net working capital, and proceeds from asset sales; 4. Understanding the tax consequences of depreciation and asset sales; 5. Evaluating whether a policy of reselling or scrapping a vessel is most valuable. Guideline questions to cover in the case analysis: 1. What is the key issue addressed in this case? Or in other words, what is the major decision to be made by Ocean Carriers? 2. Do you expect daily spot hire rates to increase or decrease next year? 3. What factors drive average daily hire rates? 4. How would you characterize the long-term prospects of the capsize dry bulk industry? 5. Help Ms. Linn to make the purchase decision on the $39M capsize: should she buy it? Make two assumptions – first assume that Ocean Carriers is a U.S. firm subject to 35% taxation. Second, assume that Ocean Carriers is located in Hong Kong, where owners of Hong Kong ships are not required to pay any tax on profits made overseas and are also exempted from paying any tax on profit made on cargo...
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...Ocean Carriers Ocean Carriers Inc. was approached in January of 2001 with a contract proposal for the leasing of one of their ships for a term of 3 years beginning in 2003. Ocean Carriers currently has no ship to accommodate the customer. To commission the construction of a new vessel would take 2 years from start to completion. The average rate in the spot market is $22,000 per day. Ocean Carriers deployed a younger fleet than average carriers and generally earned a 15% premium over the average daily rate placing them in position to capitalize in strong economies. However, the industry is volatile and suseptable to extremes both low and high. Many ship owners sought to sign contracts with time charters in order to shield themselves from the swings in the market. The age of the vessel is another key variable in the rate an owner can demand. Younger ships, as mentioned before, generally take in 15% higher rates than the industry average. However, the older ships, roughly 25 years or over, demanded a 35% discount off of the industry average. Location is also a key factor in determining the demand for dry bulk capsizes. The distance between the US and the EU is relatively short requiring a smaller fleet of ships. Whereas, an upturn in demand in the Asian Pacific would require a greater fleet of capsizes in order to accommodate the time required to ship such distances. Ocean Carriers had to concern themselves especially closely on the global economy because demand for dry bulk capsizes...
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...Assignments of Port Economics Topic Freight rates have remained low and volatile in the various market segments (container, liquid and dry bulk). What influences freight rates? How has this influenced the demand for port services and the setting of port charges and tariffs? Huda Mohammad Nazmul Student ID: 1120130936 Major: Master’s of Business Management Dalian Maritime University Dalian, China Abstract After the economic crisis in 2007-2008 fiscal years the freight market remained volatile and freight rate remained low in various market segments. The purpose of the study to determine the factors those influence the freight rate and how those influence the demand of port services and setting charges for the port. The depression in market segments affects the supply and demand of the freight of the shipping lines which also has an effect on the demand of port services and setting of port charges and tariffs. The research paper shows the factors that influence the freight rate as well as the influence on the port services and setting charges and tariffs which lead to a change in port operation, reform and regulation. To illustrate the relation among them international trade theory and other historical data has been considered as the evaluations of the paper. In the discussion of different market segments new demands for the port operation and setting charges has been illustrated. Fundamental concepts...
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...Answer to Question #1: The daily spot rate for 2002 will likely decrease despite the 2% forecasted growth in worldwide iron ore shipments as 63 new dry bulk capesizes are expected to be delivered in 2001, and 33 in 2002, thereby increasing worldwide supply of capesizes by 11% and 5.4%, respectively. Furthermore the worldwide capesize fleet is relatively young – only 8 capesizes are at least 20 years old – there should be relatively few scrappings. For example Exhibit 5 of the Ocean Carriers case study shows the direct correlation between the number of shipments of iron ore and the average daily spot rate. From 1995-1996, the average spot rate fell from $20,149 to $11,730 and from 1997-1999, the average spot rate fell from $14,794 to $9,427. Consequently, the iron ore shipments effectuated from 1995 through 1996 and from 1997 to 1999 were stagnant. Based on the foregoing historical data and trends, one could expect the same result for the time period from 2001 through 2003. One could expect cash flows for the company to decline as a result. As such, it is economically preferable for ship owners to enter into short term spot market contracts rather than signing long term time charters which would lock them at a low daily rate for an extended time period. Answer to Question #2: Average daily hire rates are determined by supply and demand for capsizes and market conditions. Supply is affected by the number of ships available, plus new ships...
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...Ocean Carriers Inc. was approached in January of 2001 with a contract proposal for the leasing of one of their ships for a term of 3 years beginning in 2003. Ocean Carriers currently has no ship to accommodate the customer. To commission the construction of a new vessel would take 2 years from start to completion. The average rate in the spot market is $22,000 per day. Ocean Carriers deployed a younger fleet than average carriers and generally earned a 15% premium over the average daily rate placing them in position to capitalize in strong economies. However, the industry is volatile and suseptable to extremes both low and high. Many ship owners sought to sign contracts with time charters in order to shield themselves from the swings in the market. The age of the vessel is another key variable in the rate an owner can demand. Younger ships, as mentioned before, generally take in 15% higher rates than the industry average. However, the older ships, roughly 25 years or over, demanded a 35% discount off of the industry average. Location is also a key factor in determining the demand for dry bulk capsizes. The distance between the US and the EU is relatively short requiring a smaller fleet of ships. Whereas, an upturn in demand in the Asian Pacific would require a greater fleet of capsizes in order to accommodate the time required to ship such distances. Ocean Carriers had to concern themselves especially closely on the global economy because demand for dry bulk capsizes...
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...Case #1: Butler Lumber Company Questions 1. Why does Mr. Butler have to borrow so much money to support this profitable business? 2. Do you agree with his estimate of the company’s loan requirements? How much will he need to borrow to finance his expected expansion in sales (assume a 1991 sales volume of $3.6 million)? 3. As Mr. Butler’s financial advisor, would you urge him to go ahead with, or to reconsider, his anticipated expansion and his plans for additional debt financing? As the banker, would you approve Mr. Butler’s loan request, and, if so, what conditions would you put on the loan? 4. Has Butler Lumber Company created value for shareholders? Hint: It might help you to analyze the case if you conduct the following analyses: 1. 2. 3. 4. Construct a common-size (percentage) income statement. Construct a common-size (percentage) B/S Using information from 1&2 to find out the operating efficiency Assuming the same operating efficiency in 1990, forecast cash needs for the target growth Case #2: Ocean Carriers Questions Ocean Carriers uses a 9% discount rate. 1. Do you expect daily spot hire rates to increase or decrease next year? 2. What factors drive daily hire rates? 3. How would you characterize the long-term prospects of the capesize dry bulk industry? 4. Should Ms Linn purchase the $39M capesize? Make 2 different assumptions. First, assume that Ocean Carriers in a U.S. firm subject to 35% taxation. Second, assume that Ocean Carriers is located in Hong Kong, where...
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...Chapter-1 – INTRODUCTION 1.1 Indian Scenario in Shipping Maritime transport, which plays a vital role in the development of the country, comprises ports, shipping, shipbuilding and ship repair, and inland water transport systems. According to the Ministry of Shipping, Government of India, approximately 95% of the India’s trade by volume, and 70% by value, is moved through maritime transport. India is among the top 20 leading countries having large number of merchant fleets in the world. The Gross Tonnage (GT) under the Indian flag was 10.1 million GT as of 1.09.2010, with as much as 1029 ships in operation. Ports act as an interface between ocean transport and land transport. India has 12 major ports viz. Kolkata (including Dock complex at Haldia), Paradip, Vishakapatnam, Chennai, Ennore, Tuticorin, Cochin, New Mangalore, Mormugao, Jawaharlal Nehru at Nhava, Mumbai, and Kandla, and 187 minor ports. Despite recessionary conditions, traffic handled at major ports has grown on an average by 5.7% in the year 2009-10, over the year 2008-09. However, ports like Haldia (-20.4%), Ennore (-6.9%) and New Mangalore (-3.2%) are few of the main ports that witnessed negative growth in 2009-10. Nevertheless, most of the ports have not achieved their target for the year 2009-10. Mormugao (8.5%), Tuticorin (8.1%) Mumbai (2%), Kandla (2%), and Paradip (1.8%) were the only ports which achieved their growth target for 2009-10. Haldia (-22.1%)...
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...Edition: 1.1 February 2002 Distance Education Course ML–302.5 Marine Terminal Operations Unit 1 Marine Terminals The three lessons in this unit will cover the topics of: • the role and function of marine terminals • terminal development • operational planning • civil engineering aspects of terminal design. Module B: Certificate in Maritime Logistics Diploma in Shipping Logistics—Jamaica Maritime Institute 1−1 Unit 1: Marine terminals Marine Terminal Operations Unit 1 ...........Activities and expectations Agenda To complete this unit, you will: • Read and study the text in this unit and any assigned passages in the Student Reader. • Apply the information by performing the Activities • Test yourself by doing the Practice Exercises and checking your answers. Resources There is no textbook for this course. All the information you require is in this Study Guide. In addition, your Student Manual lists some books that you may wish to read to expand your knowledge. Learning outcomes When you have completed this unit you will be able to: • • Explain some of the considerations in equipment selection. • Discuss the needs for storage areas. • Discuss safety and emergency response considerations. • 1−2 Describe the role and functions of marine terminals. List the broad categories of studies that are needed in planning a new terminal. Module B: Certificate in Maritime Logistics (Course...
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...increasing stability of manufacturing process. General information related to Value Chain * A firm is profitable if the value it commands exceeds the costs involved in creating the product. Creating value for buyers that exceeds the cost of doing so is the goal of any generic strategy. * Value activities can be divided into two broad types; primary and support activities. * Primary – activities involved in the physical creation of the product and its sale and transfer to the buyer as well as after sale assistance. In relation to this case the primary value activity would be the vessel. (Inbound logistics, Operations, Outbound logistics, Marketing & Sales, Service) * Support – activities support the primary activities and each other by providing purchased inputs, technology, human resources and various firm-wide functions. (Human Resources Management, Technology development, Procurement) Porter's 5 Forces Analysis 1. Threat of New Entrants. Economies of Scale/ Government Policy The threat of new entrants is high. New Entrants like Brazil, South Korea, Yugoslavia, and Poland were growing two to three times as fast as the rest of the industry due to low labor cost, centralized planning and new capacity. Also the government offered tax incentives for the development of shipbuilding such as tax allowance programs, depreciation tax deferment, rebates and credit assistance. * On a per ton basis building a 200,000 DWT tanker would be...
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