GENERAL STRUCTURE OF SHIPPING. WORLD SEA-BORNE TRADE It has been calculated that more than 90% of world trade, in tonnage terms, goes by ship. Despite.

GENERAL STRUCTURE GENERAL STRUCTURE OF SHIPPINGOF SHIPPING

WORLD SEA-BORNE TRADE

It has been calculated that more than 90% of world trade, in tonnage terms, goes by ship. 

Despite the technical innovations that have transformed transport in the last two centuries, ships remain the most economical means of moving large quantities of goods from one place to another.

They are cheaper to build and run than other forms of transport, such as road and railways, and they can carry huge amounts of cargo – some modern oil tankers can carry more than half a million tons of oil at a time.

In tonnage terms, most seaborne trade consists of goods carried in bulk.

World Seaborne Trade Volume

Development 1996-2006 (in million tonnes) - Growth rate in 2006

Source: Indicators issued from various sources such as ISL Bremen for World fleet and trading figures and Clarkson Research Studies for shipbuilding and scrapped vessels.

estimates

+ 2 %

+ 7 %

+ 6 %

+ 5 %

900

1,400

1,900

2,400

2,900

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 (*)

Major trades

4,000

5,000

6,000

7,000

Total World Trade

Crude oil and oil products

The 4 main Dry Bulk Cargoes (Iron Ore, Coal, Grain, Bauxite/Alumina)

Other Cargoes

Total World Trade

(*)

INTERNATIONAL INTERNATIONAL SHIPPINGSHIPPING

- CHARACTERISTICS AND STRUCTURE

LINER AND TRAMP LINER AND TRAMP OPERATIONSOPERATIONS

FORMS OF SHIPPINGS

LINER SHIPPING

Merchandise is carried by regular shipping lines. Shipping services are provided regularly at

specified ports irrespective of quantity of cargo available.

Ships usually carry general cargo ie. An accumulation of small loads belonging to many shippers.

Such services are useful for small exporters. Such shipping lines are not committed to any

discipline in terms of service schedule and the freight rates.

TRAMP SHIPPING

Ships used for transportation of homogeneous cargo which is moved in bulk quantities eg. Grain, coal, wheat etc.

Such ships work on inducement basis and ply indiscriminately between the ports of the world depending upon the laws of demand and supply in the market which also determine the rates.

The shipping lines operating as tramps can operate on any route for which the freight cargo is available.

LINER FREIGHTING

The liner shipping companies provide commitment of regular service on specified sea routes at specified freight rates.

Costs fairly fixed in nature, low variable costs Ships designed for a specific trade route Price according to value of service to maximize

profitability Charges based on a “weight or measure” (W/M)

basis Different commodities would have different W/M

charges

CHARTERINGCHARTERING

CHARTERING

Chartering is an activity within the shipping industry.

Chartering in short refers to hiring of ships.Ships can be hired on Time basis or Voyage basis

CHARTERING – THE TRADITIONAL METHOD

Trade enquiry Shipping dept to give feedback on freight

rates, feasibility, etc When trading deal is finalized, shipping dept

asked to charter ship. Shipping dept controls voyage At the end of the voyage –laytime

calculations & voyage accounting

Pre-fixing

Fixture negotiations

Voyage management

Post-fixture

Chartering – A Working Model

Trade Enquiry given to charterer

Charterer asked to fix ship

Trader negotiatesFinalises deal

Charterer checks Ports condition,

Feasibility, tonnageavailability

Pre-Fixing

Feedback to

trader

Charterer enters market

Evaluates available ships

Negotiates and Finalises best

tonnage

Commencment of voyage

Fixture Negotiations

Nominates vessel to shipper/ Receiver

Gets approval

Instructions of master

Completion of voyage

Control of documentation

Appointment of agents, arranging

bunkers etc.

Voyage Management

Regular monitoring

of voyage

Charterer prepares laytime

calculations

Prepares final voyage accounts

Prepares final voyage accounts

Follow up with

shipper/receiver

Post-Fixture

End of process

TYPES OF CHARTERING

In some cases a charterer may own cargo and employs a shipbroker to find a ship to deliver the cargo for a certain freight rate. Freight rates may be on a per-ton basis over a certain route (e.g. for iron ore between Brazil and China) or alternatively may be expressed in terms of a total sum - normally in U.S. dollars - per day for the agreed duration of the charter.

A charterer may also be a party without their own cargoes who takes a vessel on charter for a specified period from the owner and then trades the ship to carry cargoes at a profit to the hire rate, or even makes a profit in a rising market by re-letting the ship out to other charterers.

PARTY AGREEMENT

Depending on the type of ship and the type of charter, normally a standard contract form called a charter agreement is used to record the exact rate, duration and terms agreed between the shipowner and the charterer.

DEVELOPMENT IN DEVELOPMENT IN SEA SEA

TRANSPORTATIONTRANSPORTATION

UNITIZATION

The art of packaging cargo into unit loads. A unit is a certain quantity or volume chosen as a

standard. Several units can be combined to one larger unit (e.g. pallet) or divided into smaller sub-units (e.g. consumer packages).

A unit load combines packages or items into a single "unit" of a few thousand kilograms that can be moved easily with simple equipment. A unit load packs tightly into warehouse racks, containers, trucks, and railcars, yet can be easily broken apart at a distribution point, usually a distribution center, wholesaler, retail store, etc.

CONTAINERISATION- MEANING

A method of distribution of goods using containers. The use of containers has facilitated as well as

revolutionized the carriage of goods. The containers are carried by train or road to the sea ports

where they are loaded on the ships for onward transportation to their destination.

CONTAINERISATION- PROCEDURE

The exporters do not need to carry the cargo to the seaports and can directly approach the container freight station or the inland container depot to book the cargo there for transportation to the destination.

The custom clearance of cargo is provided at the inland container depots, and in the process, the exporters are able to save a lot of time.

The packing of cargo in a container is either done at the depot or in the factory of exporter.

TYPES OF CONTAINERS

General purpose containers Refrigerated containers Fruit containers Bulk containers Ventilated containers Open top containers Open sided containers Hanger containers Bin containers

Stuffing of cargo in the container

Different types of packages should be packed separately. Container should be lined with paper or foil in case of

specially sensitive goods. Packing in the boxes should be carefully checked. Exporter should not pack together:

– Wet goods with dry goods– Goods with sharp edges or corners with goods in soft packaging– Dusty goods with dust sensitive goods– Placing heavy packets on light packets– Odour emitting goods with odour sensitive goods

Precautions for Packing the Containers

The container should be thoroughly checked to ensure that:

There are no holes or cracks in walls or roofs. The doors can be easily operated. Locking doors and handles function properly. There are no labels pasted of the previous cargo. Container is water proof. Container is absolutely dry from inside. Container is clean and free of dust. Container is odourless.

Advantages of using Containers

Risk of damage is reduced substantially. Delivery of goods is done in a good condition. Packing costs are reduced substantially. No mishandling of cargo.

INTER AND MULTI-MODAL INTER AND MULTI-MODAL TRANSPORTTRANSPORT

INTER-MODAL TRANSPORT

Intermodal freight transport involves the transportation of freight in a container or vehicle, using multiple modes of transportation (rail, ship, and truck), without any handling of the freight itself when changing modes.

Mostly associated with “piggyback” or container shipments.

BENEFITS OF INTER-MODAL TRANSPORT

Allow freight to be transported faster. Reduced cost Combines advantages (and disadvantages) of each mode

used Reduces risk of theft and loss Shortens customer order cycle time Promotes “seamless” product movement Eliminates unnecessary handling

MULTI-MODAL TRANSPORT

Multimodal Transport is commonly known as referring to a transport operation that is carried out using different modes of transport and organised by a single operator.

Multimodal Transport is also a legal concept strictly defined in the United Nations Convention on the International Transport of Goods and other international instruments, where the specified liability regime of the operator differs from those applicable in modal

operations.

Benefits of Multi-Modal Transport

Multimodal Transport is generally considered as the most efficient way of handling an international door to door transport operation.

Multimodal Transport allows to combine in one voyage the specific advantages of each mode, such as the flexibility of road haulage, the larger capacity of railways and the lower costs of water transport in the best possible fashion.

Multimodal Transport also offers the shipper the possibility to rely on a single counterpart, the multimodal transport operator (MTO) who is the architect of the entire journey and only responsible party from pickup to delivery, rather than having to deal with each and every modal specialist of the transport chain.

Benefits of Multi-Modal Transport

The burden of documentation and other formalities connected with segmented transport is reduced.

Loss of time and risk of loss, pilferage and damage to the conventional segmented transport are eliminated.

The through rates offered by MTO make it easier for the exporter to negotiate sales contracts with foreign buyers on the basis of delivered prices.

The resultant cost savings tend to reduce the through freight rates and the cost of cargo insurance.

Multi-Modal Transport Document

Mentions the place of acceptance and place of delivery. May be issued by an operator who does not necessarily

owns the ships used to carry out any sea transport involved.

Confirms that the goods have been “taken in charge”. Involves transshipment. MTD constitutes the title to the goods and is transferable

by endorsement.

Multi-Modal Transport- The Challenge

Multimodal Transport requires a thorough control over all the steps involved in international transport, including multiple storage and handling stages.

This means extensive use of information technologies and carriers networks and regulatory frameworks that can provide freedom to plan and operate to carriers and reliable liablity regimes to customers.

Multimodal transport needs to be competitive in markets where unimodal operations not only have been there for a long time but also are simpler to handle and, most of time, more cost effective.

CFS- Container Freight Stations

CFS is a place where containers are stuffed, de-stuffed and aggregation/ segregation of export/import cargo takes place.

With the growing volume of international trade, the need for expeditious clearance of goods at the port within the minimum possible time has been gaining importance. This is more so when the ports are facing congestion at their premises.

Further, for optimal utilization of existing infrastructure, space, equipment, goods that are landed at ports need to be evacuated straightaway without any loss of time.

Accordingly the concept of Container Freight Stations(CFS) has grown in importance along with the development and growth of ports.

CFS

A CFS is an extended arm of Port/ ICD/Air cargo Complex, where import/ export goods are kept till completion of their examination and clearance.

The imported goods can be immediately shifted from the port to CFS which also helps in the reduction of port congestion.

All the activities related to clearance of goods for home consumption, warehousing, temporary admissions, re-export, temporary storage for onward transit and outright export and transshipments take place from such stations.

Therefore, clearance of goods from CFS is an important point of consideration for trade in respect of export/ import Cargo as it is the final Customs contact point.

Main function of CFS

Receipt,dispatch and clearance of Containerized Cargo, up-to-date inventory control and tracking system to locate containers/cargo.

CFS in case of imports

In respect of import consignment, the Steamer Agents/liners/Importers desiring to take the consignment to CFS, file Import General Manifests in the port.After obtaining the permission,the Container moves to CFS under Customs escort or under bond and bank guarantee. The CFS allow de-stuffing of the goods. The importer files the Bill of Entry at Customs House and then Customs formalities of assessment, examination and payment of duty are completed. Thereafter, Customs gives“Out of Charge” and the Custodian releases the goods from CFS by issuing a Gate-Pass.

CFS in case of exports

In respect of exports, the goods are brought directly to CFS under a Shipping Bill. The export cargo in Less than Container Load(LCL)/ Full container Load (FCL) is received by the Custodian of CFS for safe custody.After stuffing of the goods, Container/ Customs Bonded Truck (CBT) is sealed by the Custom Officer and the same is removed from CFS for export through the desired Port.

ICD

The Inland Container Depot (ICD) is a common user facility with Public Authority status.

It is equipped with fixed installations and offering services for handling and temporary storage of import/export laden and empty containers carried under Customs control and with Customs and other agencies competent to clear goods for home use, warehousing, temporary admissions, re-export, temporary storage for onward transit and outright export.

It has all the loading and non- loading equipments needed to handle container cargo.

Objectives of ICD

Bring shipping services to the doorstep of shippers across the nation.

Assist in decongesting the seaports and make them more user-friendly.

Help revive and modernize the railway as a primary mode for the long distance haulage of cargo.

Assist in the reduction of overall cost of cargo. Transit cargo to Landlocked neighbouring countries Integration of surface transportation of containers; Cargo consolation point and custom clearance establishment

close to areas of production and consumption; A comprehensive cargo sorting centre and a temporary cargo

facility.

Benefits of ICD

1. Establishment of customs clearance facility close to production and consumption centers,

2. Improved container usage and reduction in the movement of empty containers;

3. Improved turn around time of ships thereby reducing demurrage and avoiding pilferage;

4. Issuance of “Through Bill of Lading” by Shipping lines and thereby assuming liability from dispatch to destination ports;

5. Lower freight to increase trade flows; 6. Optimal use of surface transport and the decongestion of

the sea ports;

Benefits of ICD

7. Reduction in marine pollution activities around the seaport.

8. Easy and safe access to international shipping facilities in the hinterland giving a boost to inland trading;

9. Revitalization of export agriculture leading to multi- product economy and the avoidance of employment opportunities stemming urban-rural drift and increase in revenue to the government

10. Rehabilitation of the surface transport system and enhanced usage of containers.

11. Reducing the pressure on the roads and avoiding the carriage on the road.

INDIAN SHIPPING – INDIAN SHIPPING –

GROWTH, POLICY AND PROBLEMS

eEnterprises LabOverview of the Indian container

shipping industry• India is a peninsular country and there are

dozens of large and several smaller ports along its coastline.– Chennai (Madras), Vizag, Tuticorin, Cochin, Kolkatta

(Calcutta), on the east coast– Goa, Mangalore, Mumbai (Bombay) on the west coast

• The typical volume of containers handled by a medium sized port is in the range of 250,000 – 300,000.

• Most of the business transactions among partners, are currently being done manually.

eEnterprises Lab

Types of companies

Local, small and medium sizedcompanies

– Access to larger clientele because of their international presence

– Sophisticated systems at their foreign operations, but not yet deployed in India

–Lower volumes–Very minimal information systems capabilities

–Elaborate infrastructure for operation–Reasonably good enterprise information systems but almost non-existent business integration

Multinational companies (examples:OCS-NYK line, etc)

Domestic Large (e.g., Container Corporation

of India, St. Johns Freight systems)

eEnterprises Lab

Challenges

• Infrastructure– Power, computing

facilities and connectivity

• Systems/software costs– Varies widely and

is significant

• Processes– By and large well

documented

Remarks: The underlying

infrastructure has become affordable for most companies

The move from manual processes is not only a technological one, but cultural as well.

PORTS PORTS AND AND

PORT TRUSTPORT TRUST

Port

A port is a facility for receiving ships and transferring cargo.

They are usually situated at the edge of an ocean, sea, river, or lake. Ports often have cargo-handling equipment such as cranes and forklifts for use in loading/unloading of ships, which may be provided by private interests or public bodies.

Harbour pilots , barges and tugboats are often used to safely maneuver large ships in tight quarters as they approach and leave the docks.

Ports which handle international traffic will have customs facilities.

Types of Ports

Some ports on a lake, river, or canal have access to a sea or ocean; they are sometimes called "inland ports".

A "fishing port" is a type of port or harbor facility particularly suitable for landing and distributing fish.

A "dry port" is a term sometimes used to describe a yard used to place containers or conventional bulk cargo, usually connected to a seaport by rail or road.

A "port of call" is an intermediate stop, where a ship picks up supplies, fuel, etc.

Port trust

An association or body consisting of chairman and other trustees for governing and regulating the operations of the port.

There are more than 2,000 ports around the world, from single berth locations handling a few hundreds tons a year to multipurpose facilities handling up to 300 million tons a year

More than 80 percent of trade with origins or destinations in developing countries, in tonnage, is waterborne

World port traffic is made for 45% of liquid bulks (mainly oil, petroleum products, and chemicals), for 23% of dry bulks (coal, iron ore, grain, and phosphate), and for 32% of general cargo.

Containerization of general cargo traffic has progressed steadily over the last 20 years

PORTS SECTOR – GLOBAL OVERVIEW

Source : World Bank / UNCTAD

PORTS SECTOR – GLOBAL OVERVIEW

Transport usually accounts for a quarter of total logistics costs in OECD countries, storage for a fifth, and inventories for a sixth.

As a consequence of both liberalization of maritime transport and corporate restructure in the shipping industry, international freight rates have significantly decreased in real terms over the last 10 years, often by more than 40%

Maritime freight costs, as a percentage of import values, have decreased from 6.64% on average for the whole world in 1980 to 5.24% in 1997. For the developing world, the corresponding figures were 10.4% in 1980, 8.60% in 1990 and 8.04% in 1997, and still 11.53%for Africa.

Total logistics costs (packaging, storage, transport, inventories, administration and management) are estimated to reach up to 20% of total production costs in OECD countries, while freight costs alone (transport and insurance) can make up to 40% of values of exports for several African landlocked countries.

Source : World Bank / UNCTAD

The role of ports have changed from “patronizer” to “facilitator and service provider”

From a mere landing station for ships to load and unload cargo, seaports have emerged as a critical part of the Global value Chain

The past decade has witnessed relocation of industrial manufacturing resulting in shifts in global trade flow

Falling barriers to international trade have allowed businesses to locate different parts of their production processes across the globe

This is done to take advantage of the fine differences in cost, resources, logistics and markets, in their search for competitive advantage

EMERGING ROLE OF PORTS IN WORLD TRADE

The trends in global shipping has tended to increasingly favour deployment of large sized vessels (ULCCs,VLCCs, Cape size, Super cape size, 6000, 10,000 TEU’s) requiring deeper draught ports

Efficient modes of cargo discharge are required to minimize detention time and thus costs

Deep draught berths and efficient modern container handling equipment have become essential to attract mainline vessels

EMERGING ROLE OF PORTS IN WORLD TRADE

INDIAN PORTS SECTOR

The 6000 Km coastline of India is dotted with 12 major ports and around 180 minor and intermediate ports

History of organized major ports in India dates back to the 19th Century, with the commissioning of the Kolkota port in the year 1870 followed by Mumbai Port in 1875 and Chennai Port in 1881

Ennore Port is the youngest and the first corporate port, commissioned in June 2001

Over 95% of the overseas cargo volumes are routed through these ports

The rise of competition, the globalization of exchanges and the resulting international restructuring have forced businesses, now subject to growing competitive pressures, to seek greater competitiveness and differentiation

Subsequently logistics has become an important strategic procedure in the improvement of competitiveness

A structured and powerful logistic service represents a guarantee of efficiency and reliability, the supplier having to deliver the right product, in the right quantity at the right time

Logistics interfaces between producers and distributors, has become critical in establishing competitiveness of products

PORTS AND THE COMPETITIVE EDGE

The concentration of the production units and their relocation far from their destination market implies an increasing recourse to logistic services, which becomes the essential link in this competitiveness approach

PORTS AND THE COMPETITIVE EDGE

WHAT AILS THE INDIAN PORT SECTOR

Evolved as state monopolies, the Indian ports may not exactly be ready to meet the challenges of free trade and economic globalization

In fact Indian ports remain a bottleneck in the supply distribution chain

Monopoly and inadequate investments in technology have resulted in inefficient operations and high cost of services

Bottlenecks in the form of poor Road and rail Connectivity to hinterland have substantially impeded the growth of ports

Labor unions impeded and obstructed the reduction of the labor force and up gradation of skills which is possible only through modernization of port-handling equipment.

Centralized government control slowed down the pace of planning,and the command structures, limited responsiveness to market demand.

Public investment in port infrastructure was insufficient or inadequate, because it relied heavily on state budget.

WHAT AILS THE INDIAN PORT SECTOR

THE ROAD TO REFORM

Globally, Privatization of port facilities has proved to improve efficiency of port operations as well as bring about cost efficiency

Private sector has also proved its ability to bear the financial burden of port expansion and modernization

Private sector is better at planning, financial management and risk management

They are subject to less political interference

OBJECTIVE FOR INDIAN PORTS OF THE FUTURE

Thus Ports of the future need to achieve a high degree of operational efficiency andCost Efficiency to be able to provide the much needed competitive edge to Indian Exports