SHIP MANAGEMENT

STRATEGY.
COMMERCIAL.
Name: Michael Mawufemor Dzikunu FICS

Tel: 00233-543001771
WhatsApp: 0509621521
e-mail: [email protected]
[email protected]

5/22/21 Michael Dzikunu FICS [email protected] 1

COURSE OUTLINE
1 SHIP MANAGEMENT.

1.1 INTRODUCTION TO COMMERCIAL SHIP

MANAGEMENT
1.2 FLEET MANAGEMENT.

1.3 ASSETS PLAY

1.4 FLEET MARKETING

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2. DYNAMICS OF SHIPPING MARKETS
2.1Shipping and Freight Markets

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 3. LINER SHIPPING
3.1 COMMON CARRIER
3.2CHARACTERISTICS OF LINER
SHIPPING
3.3 COLLUSION IN LINER SHIPPING 3.4
CONTAINERIZATION AND MODERN
TRENDS

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4 CHARTERING

4.1 METHODS OF EMPLOYING SHIPS

4.2CHARTER PARTY FORMS –

ESSENTIAL CLAUSES

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5. ELEMENTS OF RUNNING COSTS
5.1 GENERAL INTRODUCTION TO
MARITIME TRANSPORT COST
5.2 COMPONENTS OF SHIPS RUNNING
COST .
6.2COST CONTROL METHODS

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6 SHIPPING AGENCY
6.1 TYPES OF INTERMEDIARIES IN
SHIPPING
6.2FUNCTIONS AND ROLE OF SHIPPING
AGENTS

7. SHIP ACQUISITION
7.1 FORMS OF ACQUISITION 6.2SALE
AND PURCHASE OF SECOND HAND
TONNAGE

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TEXTBOOKS
 Branch, A. E. (2012). Economics of shipping practice and management. Springer
Science & Business Media
 Alderton, P. M. (1995). Sea Transportation–Operation and Economics. Surrey,
UK: Thomas Reed Publications.
 PLOMARITOU, E.& PAPADOPOULOS, A. Shipbroking And Chartering
Practice. 8th edition.
 Dykstra, D.L. Commercial Management In Shipping Published byThe Nautical
Institute.
 Tsoudis, G.N. The Shipbroker’s Working Knowledge. Published in England by
AKAKIA Publications, 2015
 DICKIE, J.W. 21st Century Ship Management. Surrey, UK: Thomas Reed
Publications.
 Stopford, M. Maritime Economics Third edition published in the Taylor &
Francis e-Library, 2008.

5/22/21 Michael 8
TEXTBOOKS
 Lars Gorton, et al, (2009).Shipbroking and Chartering Practice, 7th Edition.
Informa London.
 John, F.W, 2010: Carriage of goods by Sea, 7th Edition.
 Scrutton, T.E. (1996): Scrutton on charter parties 20th Edition.
 Thomas D.R, (2008): Legal Issues Relating to time charter parties, 3rd Edition,
LLP.
 John, S. 2000: Laytime and demurrage,4TH Edition, LLP.

REFERENCES:
 ICS notes
 Lloyd’s publications
 Fair Play Publications
InternetWEBSITES:
 www.drewry.co.uk
 www.hellenic shippingnews.com
 Dewry.com

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INTRODUCTION TO SHIP MANAGEMENT.

Ship management Functions.

Technical
 Crewing
 Operations
 Commercial
Accounting
 Financing.

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The three main management models

Traditional management model

Outsourcing management model
Hybrid management system model

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INTRODUCTION TO SHIP MANAGEMENT.

Why outsource the management of ships?

● Cost savings (overheads reduced by an economy of
scale);
● Flexibility (allows the freedom to invest, divest or
diversify or any combination);
● Benchmarking (how well and cost-effectively the ship
is operated);
● Reducing the problems of legislative demands (and
the resources needed to meet them);
● No in-house expertise to operate the ships (this may
be because the shipowner has no experience of
operating ships).

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4.CHARTERING

What is chartering?

In the ages past, a shipping company was involved in

all operations relating to a vessel, even trading. A
shipowner - usually one man - one ship owner - was
involved in: owning, manning, technical operation,
commercial operation even trading (barter trade
short off). In certain cases the shipowner was also
the master of his ship.

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4.CHARTERING

What is chartering?

Till date shipping and shipping companies have

undergone a gradual structural change.
We may say that the, shipping industry is an
organization which changes every day.
Today's needs lead shipping companies to
specialization. The Owner is not necessarily the
manager of his ship.

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4.CHARTERING
Chartering Markets

The dry cargo market

The bulk and 'tweendecker market
The container market
The ro/ro market
The liner market
The small ship market
Special markets
Heavy-lift carriers
Barges and pontoons
Tugs
The tanker market
The "combos"
The reefer market
The car carrier market
The passenger market

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 Market Practitioners:
OWNERS.
There are several functions in a shipowning company
which we can, briefly, describe as follows:
Ownership = finance
Management = manning - technical - spares -
bunkers - claims etc.
Operational = daily routines concerning the vessel
Commercial = employment of the ship

Dzikunu Michael MICS, Regional Maritime University

 Market Practitioners:
CHARTERERS:
The basic rules of supply and demand lead to international
trade. The increase in volume of international trade lead to
increase demand for means of transportation. About 90% of
which is being served by ships – ocean transportation.
The ship owner is not involved with any other terms and
conditions of the trading apart from the ones governing the
transportation (charter party - bills of lading).
The person who will extract from a commercial deal, the
rules which will govern a transportation is called a Charterer.
A charterer is someone ( a company) who requires a sea
transport to be carried out.
Dzikunu Michael MICS, Regional Maritime
University
As a result,
An owner needs to find cargo to be transported by his
ship (s)
A charterer needs to find a ship to transport his cargo.
They need each other. Indispensable partners.
Owner's target: Highest possible freight. Best
information concerning the 'market'
Charterer's target: Lowest possible freight. Best
information concerning the 'market’
Resulting in a conflict of interest

Dzikunu Michael MICS, Regional Maritime

University
 Market Practitioners:
BROKERS
The term “Ship broker” is wide ranging. For the purpose of chartering,
A chartering broker is a person (company) bridging the gap between
charterers and owners, trying to make these 'fighting' parties to reach an
agreement.
What a broker does, is also called 'chartering'
Shipping is an international business, therefore a chartering person has to face
conditions which prevail day by day in the international freight market.
Chartering is essentially a form of exchange of information. Right information
in the right moment is essential in order to be successful. Nevertheless a
broker needs knowledge of the basic Shipping principles in order to utilize
information.
A broker is a judge and a collector / distributor of information
The broker's target is to conclude a 'fixture'.
Concluding a fixture means to have all parties interested in a specific sea
transport, through 'negotiations' reach a 'mutual agreement' on all details in
a 'charter'.
Dzikunu Michael MICS, Regional Maritime University
 Market Practitioners:
TYPES OF BROKERS:
In-house
Exclusive Brokers /semi exclusive
Competitive brokers
Correspondent Brokers.

DUTIES OF CHARTERING BROKERS.

 Drawing up charter parties
 Dealing with subsequent amendments if any.
 Handling communications between the parties
 Dealing with financial exchanges.
Dzikunu Michael MICS, Regional Maritime University
 Market Practitioners:
OPERATORS

Trade in ships
Trade in cargoes
Trade in both.
NVOCC
Disponent owners

Dzikunu Michael MICS, Regional Maritime University

Market Practitioners:

The parties involved on a charter deal are:

the owner or manager or operator or period charterer
(disponent owner). ( someone who uses a ship to make
an income by carrying goods). This party is usually
called the ‘Owner' despite the fact that in most cases is
not the actual owner, on the one hand and
the charterer, On the other hand.

Dzikunu Michael MICS, Regional Maritime University

Market Practitioners:
The usual way to reach an agreement for a charter deal
is via brokers or broking agents.
Owners .... VIA ... brokers ... VIA ... charterers
(and vice versa)
owners ... NEGOTIATIONS .... brokers ...
NEGOTIATIONS ... charterers (and vice
versa)

Dzikunu Michael MICS, Regional Maritime University

Market Practitioners:
In one 'fixture' there may be more than one broker involved.
Usually one broker from owner's side and one from the charterer's
side.
The conclusion of a deal leads to a written form which is called
'Charter Party'.
The charter party is usually drawn by the broker who is closer to
the charterer ('Charterers' Broker')
Roughly we can say that the 'map' of a concluded fixture is as
follows:
Negotiations ... Fixture ... Charter Party ... Loading of the
goods ... Bills of Lading ...Freight payment ...
Transportation ... Discharging (unloading)
Dzikunu Michael MICS, Regional Maritime University
Market Practitioners:

A broker works on a commission basis which is calculated on the

freight and/or dead freight and/or demurrage income of the owner.
There are several printed forms of Charter parties. Some of them, for
instance the Gencon , do not include payment of commission for dead
freight and demurrage. Usually, in such Charter Parties, an additional
clause, determining that
commission is also paid on 'F/D/D'(freight/dead
freight/demurrage), is being added.
The usual amount of commission is 1.25%. The commission of each
broker involved in a fixture is calculated on top of the total
commission before him.
It is also quite common that a charterer asks for an address
commission. A cargo with address commission of 2.5% will be ,
usually, given by the charterer's broker with 3.75% to a shipowner or to
another broker and so on.
Dzikunu Michael MICS, Regional Maritime University
Methods of Ship Employment:

Voyage chartering
Consecutive Voyages
Time chartering
Bareboat chartering
Contracts of Affreightment
Joint Ventures
Shipping pools
Parcelling
Project cargoes
Slot charters.
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Classification of ship running costs
Capital cost.
Operating cost
Voyage cost.
Cargo-handling cost.
Periodic maintenance cost.
 Classification of ship running costs
Capital cost.
This is the cost as a result of the ship acquisition
and dependent on the way the ship has been
financed. They may take the form of dividends to
equity, which are discretionary, or interest and
capital payments on debt finance, which are non-
discretionary. The cost repayment amount is
influenced by the amount of loan, the loan
repayment period, Moratorium, bullet and
Currency. This cost element covers about 42% of
the total ship running cost.
 Classification of ship running costs
Operating cost
Operating cost constitute the expenses involved
in the day-to-day running of the ship incurred
irrespective of the trade the ship is engaged in
and whether the vessel has business (cargo) or
not. This includes such costs as manning, stores
and lubricants, repairs and maintenance,
insurance and administrative/general costs. This
cost element accounts for about 14% of the total
ship running cost.
 Classification of ship running costs
Operating cost
OCtm = Mtm + STtm +MNtm +Itm +ADtm

Mtm = Crew cost covers, Crew wages, Travel,

insurance and Victualling.
STtm = General stores and Lubricants
MNtm = Maintenance and Spares
Itm = Hull & machinery & war risks and P&I
ADtm = Registration Costs, Management Fees and
Sundries.
 Classification of ship running costs
Voyage cost
These are the variable costs incurred in
undertaking a particular voyage, which accounts
for 40% of the total costs. The main items are
fuel costs, port dues, tugs, pilotage and canal
charges:

VCtm = FCtm+ PDtm+ TPtm+ CDtm

 Classification of ship running costs
Cargo-handling cost
The fourth major cost item in ship operation is
The cost of loading and discharging cargo
represents a significant component in the total
cost equation, and one to which considerable
attention has been paid by shipowners,
particularly in the liner business. Cargo-handling
costs are given by the sum of loading costs,
discharging costs and an allowance for the cost of
any claims that may arise
CHCv = Lv+ DISv + CLv
 FINANCIAL ELEMENTS OF CHARTER PARTIES

DIVISION OF TIME CHARTER RESPONSIBILITIES.

Crewing Employment
Maintenance and spares Bunkering
Repairs Port Expenses
Classification Canal tolls
Surveys Stevedoring
Lubricating Oils Cargo Handling
Fresh water Cargo insurance
Hull & machinery insurance Bunker insurance
Stores and provision
Heating/cooling and cooking
 Market Research:
The exchange of information is the basic need of the chartering
departments in order to get to know the prevailing supply and
demand of sea transport services. Those engaged in chartering
are important consumers and distributors of information. The
continuous flow of information and the treatment and
evaluation of the material is necessary for judgment of the
situation and the trends of the freight markets.
A chartering department will have to make a market research
taking into consideration pieces of information gathered from
all possible sources e.gs to be mentioned below. As a result the
chartering person, either the decision maker (shipowner /
charterer) or the
'proposer' (broker) will be in a position to make the best
decision or the best proposition.

Dzikunu Michael MICS, Regional Maritime University

 Market Research:
 The main sources of information are:
Information Centres (London, Piraeus, Tokyo, New York, Oslo,
Hamburg, Paris, Singapore, China etc.) which play an important
role in the distribution of shipping related information.
Operators world-wide are in daily contact with the shipping
centres.

 The Baltic Exchange is a unique and very old institution in

London for the exchange of shipping information. Brokers and
charterers' representatives meet there regularly for a few hours
around noon, to distribute cargo circulars and to exchange
information in confidence.
Cargo Orders , given by charterers / circulated by brokers

Dzikunu Michael MICS, Regional Maritime University

 Market Research:
Position Lists , given by owners / operators , circulated by brokers
(both cargo orders and position lists are nowadays circulated by,
telex / fax / electronic mail / computer networks /Internet /
intranet)
 Market Reports circulated by major broker houses.
 Shipping News Papers , magazines.
 BIMCO reports
 Indicators such as BIFFEX
Notes about bunker prices, costs for the handling of certain
cargoes in various ports, port dues and charges associated with the
ship's call, cost for canal passages etc.
Other important factors which affect the chartering market is
the congestion in several ports, the formation of ice (ice
reports), various sudden occurrences and general economic
circumstances etc.
 Analysis of Charter Market Reports and other Sources of
Information
'Market reports' are special reports circulated by the big
Shipbroking companies to owners, charterers, other brokers
and agents, giving a concentrated picture of the prevailing
situation for the present 'market'.
A market report may include information regarding the freight
level for a particular trade, the hire rate for a certain type of ship
(panamax , laker etc.) in a certain trade (Atlantic or Pacific) for
certain commodities (grain, coal etc.).
It may also include Sale and Purchase of ships. Usually the
market development within different areas / different types of
ships and different commodities is commented on separately.
 In a market report there are recently made representative
fixtures and relevant comments.
Analysis of Charter Market Reports and other Sources of
Information

EXAMPLE:
Analysis of Charter Market Reports and other Sources of
Information

EXAMPLE:
By comparing the conclusions made in the various
reports it is possible to form a fairly accurate picture of
the state of the market in the sectors of particular
interest.

There are also reports published (circulated) by big

Agency companies, announcing important facts or
factors related to a particular port or country.
CARGO / VOYAGE ORDERS
A voyage or a cargo order is the common denominator for every request for
transportation of a specific cargo from one port to another. The order is given
from a party requesting chartering service and it is said to 'place an order on
the market'.
The party requesting a chartering service (either voyage or time charter) may
be a Shipper or a Charterer (a contractor) or an Owner (shipowner) or an
operator etc.
The order is usually circulated between charterers and their brokers and
between brokers and Owners or other brokers, awaiting reaction from the
tonnage that may be interested.
The orders are circulated one by one or by lists covering a number of orders.
An order must be brief nevertheless complete.
The information included in an offer should include information about:
 the type of ship we need as well as information leading to a conclusion as far
as the cost of transportation is concerned.
 Consequently an order should give facts in order to decide which ship(s) out
of a 'position list' is/are suitable to perform the requested voyage(s) and also
facts which will be used in a voyage estimation (cost).
CARGO / VOYAGE ORDERS
The factors which will lead us to the proper ship are:
o the quantity and quality of the cargo (tonnage and type of ship),
o the loading port or the delivery place (is it worth ballasting?) and
the laycan (can the ship meet the requested laycan?).
The factors related to the voyage / cost estimation are:
o the discharging port or redelivery place (distance to
be covered = time & expenses),
the nomination of loading / discharging ports
during voyage charter so that we estimate the
expenses of the particular ports,
o the loading / discharging rate in voyage charter so that we
estimate the time needed, the type of Charter party and the
commission etc.
o Other information given in an order concern certain requirements
such as: sid / mdrn / European flag, needed.
The types of Orders may be divided as follows:
The types of Orders may be divided as follows:
Position Lists
A position list includes information mentioning where
and when vessels are expected to become available
(open) for new employment.
It is circulated by owners and operators to brokers and
charterers. The intention is to generate suggestions for
employment of the mentioned ships.
The position list should include a brief description of
each ship and information as to where and when she
will be'open'.
Position Lists : - Example

A position list may include more details of the ship,

especially if the ship is new in the market (new
delivery).
NEGOTIATIONS
The negotiation stage is divided into two parts.
 The negotiation of the so-called main terms and
 The negotiation of the details.

Firm Offers (firm bid):

An Indication:
Counter offers
Details included in Firm Offers (Voyage Charter)
In voyage chartering the first offer that starts the firm negotiations will
usually contain the following details:
The Ship's name and particulars (Description)
Name of the Shipowner (full style)
Name of the Charterers
Cargo quantity and description of the commodity
Loading and discharging ports and berths.
Laydays/Canceling day
Loading and discharging rates and terms
Demurrage and despatch rates
Freight amount and conditions for payment of freight
Clauses governing time counting, Ice clause, War Risk clause, Bunker
clause, Clauses covering extra insurance premiums, taxes and dues, etc.,
which the owner considers to be of prime importance.
Charter party form
Commissions
Details included in Firm Offers (Voyage Charter)
Terms included in the above 'pro forma' which are not
known to the offering party are usually expressed with a
'subject‘
e.g
 Subject to knowing charterer’s name
 Subject to nomination of loading/ discharging ports
Subject to details, etc.
Details included in Firm Offers (Time Charter)
In time chartering the offer will contain the following details:
The Ship's name and particulars (Description)
Name of the Shipowner (full style)
Name of the Charterers
Description of the time charter engagement
Place of delivery and redelivery
Layday/canceling day for the delivery
Intended trade with geographical limits and other trading limits
from the owner's side
Quantity and price for bunkers on board on delivery and redelivery
Hire and conditions for hire payment
Other clauses which the owner wished to negotiate as main terms
Charter party form
Commissions
Details included in Firm Offers (Time Charter)
a firm offer usually commences with:
'OWNERS OFFER FIRM FOR REPLY WITHIN ... '
Since the contents of the above firm offer 'pro
forma' include the main terms only , an 'offer' or a
'counter offer' will be usually ended by the words:

'SUBJECT TO DETAILS' OR
'SUB DETS' OR 'SUB DETS / CHRTS
PROFORMA'
Details included in Firm Offers (Time Charter)
The details of the vessel that are included in the particulars
given in the main terms negotiations are:
Vessel's name.
Year of built
Flag
Deadweight (DWT)
Cargo space cubic (Grain / Bale capacity)
Number of hatches and holds
Cargo gear
Speed (time charter and sometime in voyage charter)
Bunker consumption in FO and DO
Other details of importance for the intended cargo and
trade.
Details included in Firm Offers
The ship’s description is followed by the words, ALL
DETAILS ABOUT or ALL DETAILS GIVEN WITHOUT
GUARANTEE BUT GIVEN IN GOOD FAITH AND
BELIEVED TO BE CORRECT.

COUNTER OFFERS
The reply to a firm offer (the counter offer), usually,
commences as follows:
Charterers Accept Owners' offer , except...... …for reply
within ...........
or
Charterers A/E for reply within ............. ... followed by
the terms that charterers wish to change.
 LAYTIME
Laytime is the period allowed for cargo work
(laoding/discharging) under a voyage charter party where the
charterer negotiates to be responsible for cargo handling.

LAYTIME may be:

1. Normal or Non-reversible
2. Reversible and
3. average
 LAYTIME

STAGES FOR LAYTIME CALCULATION.

I. Read the relevant clauses in the contract (c/p)

II. Obtain the statement of facts.
III. Determine how much laytime is available or allowed.
IV. Establish the commencement of laytime.
V. Allow for interruptions to laytime.
VI. Establish when laytime will cease.
VII. Calculate how much demurrage or dispatch is payable.
 LAYTIME
DURATION
For definite laytime, we see terms like

“cargo to be loaded within five weather working days of 24

consecutive hours”

“cargo to be loaded within five working days of 24 consecutive

hours” weather permitting

“cargo to be loaded within five working days of 24 consecutive

hours” weather permitting” for all purpose laytime
 LAYTIME
DURATION
CALCULABLE LAYTIME: ( tonnage or hatch measurements)
For Tonnage Calculations , we see terms like

“the vessel is to load/ discharge at a set rate of tons/ day/hour.

Special cases for “MOL” contracts

 LAYTIME
DURATION
CALCULABLE LAYTIME: ( tonnage or hatch measurements)
For Hatch calculations , we see terms like

“the vessel is to load/ discharge at a set rate of tons:

PER HATCH DAILY.
PER WORKABLE HATCH DAILY

Here the number of hatches of the vessel must be considered.

 LAYTIME
DURATION
INDEFINATE LAYTIME:

Custom of port (COP)

Customary Dispatch (CD)
Customary Quick Dispatch (CQD)
Fast As Can (FAC)

Here reasonability of operations become paramount.

 LAYTIME
DURATION

EFFECT OF DEADFREIGHT ON LAY TIME:

English law and American Law perspectives.

EXAMPLE:
A charterer booked for 20,000 tons of cargo min/max and loading
rate is 5000 tons per day. Freight is 200 USD per ton. The contract
is on DHD basis.
At the time of loading actual cargo supplied is 15000 tons.
Compute earnings and expenditure for both parties where
applicable based on American and English law respectively.
 LAYTIME
COMMENCEMENT OF LAYTIME:

Arrival conditions.
Readiness.
Contractual Commitments ( entered at local customs and in free
pratique).
Congestion.
Turn Time.

ARRIVAL BEFORE LAYDAYS.

 LAYTIME
INTERUPTIONS:

a. Weekends and holidays

b. Shifting between berths
c. Strikes
d. Bad weather
e. Equipment Breakdown.

CESSATION:
Simultaneously with cargo operations.
 VOYAGE ESTIMATING
A realistic assessment of the profitability of ship’s
voyage(s) and time charter trips. (Cost and Revenue)

METHOD:
This is divided into Five steps:
 Itinerary
 Cargo Quantity
 Expenses
 Income
 Results
Itinerary
1. Voyage Plan
2. Duration
3. Bunker Consumption

Alternative I Via Gilbrator and the Suez Canal 11461nm

Alternative II Via Pamana Canal 11905 nm
Alternative III Via Cape of Good Hope 12951 nm
 SHIPPING AGENCY
 TYPES OF INTERMEDIARIES IN SHIPPING
 FUNCTIONS AND ROLE OF SHIPPING AGENTS

What is Agency?
Who is an agent?
SHIPPING AGENCY
SHIPPING AGENCY
MAIN CATEGORIES OF SHIP AGENT:

PORT AGENT: organises and coordinates the port call, acting

on behalf of the owner or operator of the vessel.
(HUSBANDRY OR COMMERCIAL)
CARGO AGENT: solicits cargo on behalf of the owner, or
operator, usually within a defined geographical area
OWNERS/CHARTERERS AGENT: acts for another party that
has an interest in the port call. The specific duties undertaken
vary depending on the relationship between the parties

OTHERS: as the principal may decide or require

 Agent’s Duties.
.

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Liner Agent’s Duties.
.

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