Chartering and Operation

8/11/2019 Chartering and Operation

1/35

Dec 2009


2/35

The market Partici ants

Different ways of Chartering

Concluding a Fixture

Risk Management / Freight Derivatives


3/35

u y


4/35

Voyage Costs

Operating and Daily Running Costs

Capital Costs


5/35

(Contracts/hedging/speed/fluctuations)

Port(Wharfage/Linesmen/Harbour dues/Light dues/Towage/Pilot)

Canal

(Suez/Panama/Kiel....) Other Voyage Costs

Commission

(Broker commission/Address commission)


6/35

(All direct and indirect charges)

Stores and Miscellaneous

(Spare parts/Lubricants/Water/General Stores)

Insurance

(H&M and P&I...)

Repair and Maintenance

(Spares/Surveys/Dry Dock...)

Administration Costs(Chartering/Operation/Technical/Crewing/ Finance and

Accouning all shore based)


7/35

apita osts

Size of Loan Repayment Period

Interest Rate


8/35

e ar et art c pants

Owners

Charterers

Brokers

ChartererCharterparty Owner

broker

broker


9/35

w r

The Owner is the vessel controller:

Head Owner

Disponent Owner/Operator

Commercial Manager (Cargo Owners)


10/35

Categorized by size

ULCC > 315,000 MT VLCC 275,000 MT

Suezmax 130,000-160,000 MT

ramax apes ze , - , Panamax 50.000-84,000 MT

, - ,

GP/SR/Small Handy Size 20,000-30,000 MT

,

Barge 1,000 3,000 MT


11/35

The Charterer is the cargo controller:

Producer/Receiver

Selling CIF

Buying FOB Traders

(Shipowners)


12/35

Brokers

Exchange of information

market com etition fixtures

Exclusive/Semi

Exclusive Com titive

Network

(personal relationships...?)

Specialised

(Segments/commodity/ship

Intermediary(Negotiating/knowledge)

sizes) Range of Services

Paperwork

(Recaps/Charterparties)

(Reports,...)

Operations

(ETAs/times/demurrage...)


13/35

Different Ways of Chartering

Voyage Charter

Time Charter

Bareboat Charter


14/35

Voyage Charter

Transport cargo from A to B

Owners pays all voyage related costs

Single Voyage (all space/part space)

Contract of Affreightments (CoA)


15/35

Time Charter

Hire a vessel Agreed period

Description of ship

Cargo and trading exclusions Hire per day/month or per dwt in Usd

(paid in advance)

Chartererer a s all vo a e related costs


16/35

Hire an empty vessel

Long period(Purchase option)

Description of ship

Cargo and trading exclusions Hire per day or per dwt in Usd

(paid in advance)

Chartererer has commercial and technicalrespons y an pays a a y runn ng cos sas well as all voyage related costs


17/35

Tanker Charterin

Single voyage (spot) charters

Low risk Voyage Charter

Low risk

Consecutive voyages

COA (Contract ofAffrei htment

Time Charter Medium risk Charterer hires vessel for an

Demise or Bare Boat Medium risk

variable costs includingbunkers, port costs, canal tolls

Charter High r isk Bare Boat Charter

Charterer hires empty vessel

for a (long) period. Has to g r s prov e an pay or a cos sincluding crew, insurance,drydocking and maintenance


18/35

Employment Type

Bare Boat Time Charter Voyage CharterCosts

Daily Running Costs Charterer Owner Owner

Voyage Costs Charterer Charterer Owner


19/35

arterparty orms

Dry (Amwelsh, Gencon,Polcoalvoy, Baltimore Berth

Grain Welcon Tanker (Asbatankvoy, Exxonvoy,BP Voy, Shellvoy,...)

Time Charter(NYPE 93, Shelltime,BP Time,..)

Bareboat Charter

arecon,..


20/35

onc u ng a xture

Voyage Calculation

Negotiations

Indication

Firm offer


21/35

Example Voyage Calculation


22/35

Laycan: Nov 10-20

,

Freight: Usd 45,50 pmt

emurrage: s , p pr

Laytime: 350/350 mtph l/d shinc rev


23/35

Firm Offer

1. Reply time

2. Subjects

3. Name of Charterer/Owner

. ,

5. Laycan (laydays/cancelling)

6. The car o full descri tion

7. Load port(s) berth(s)8. Discharge port(s) berth(s)

9. Freight

10. Payment of freight

.

12. Laytime

13. Commission

14. Charterparty Form/Terms


24/35

Worldscale

Freight Market Volatility

FFAs

Options


25/35

Risk Mana ement in Shi in

Operational Risk (Freight, Revenue, Cost and Expenses)

,

Traditional Hedging

Time Charter, Bareboat Charter, CoA

Introduction of Freight Derivatives

BIFFEX

FFAs

Options


26/35


27/35

Standard Vessel

Average service speed

Bunker consum tion

Port time

Port costs - In USD converted from local currency rates

Bunker Price


28/35

-

350

300

200

250

S$/t

150

50

100

04/01/2005

04/03/2005

04/05/2005

04/07/2005

04/09/2005

04/11/2005

04/01/2006

04/03/2006

04/05/2006

04/07/2006

04/09/2006

04/11/2006

04/01/2007

04/03/2007

04/05/2007

04/07/2007

04/09/2007

04/11/2007

04/01/2008

04/03/2008

04/05/2008

04/07/2008


29/35

Growth in FFA trading:o ume o an er s xe

400

350

participants

250

onnes

owners

50% oil co/traders

30% financials

150

200

illion

t

100

0

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Data Source: FFABA


30/35

at s a orwar re g t greement

An agreement today to buy or sell a freight rate at a.

To settle at a future dateat apricebased on freightassessments taken durin the settlement eriod .

Based on a defined voyage or time charter.

- -


31/35

Why use FFAs?

HEDGE

mana e frei ht ex osure & SPECULATEcash flow High Volatility

ex y a y o reacswiftly to spot market volatility Clearing available

trade-out of contracts

prior to settlement


32/35

FFAs need to be marked to market durintheir life time.

.

OTC positions need to be monitored for.

The Forward Freight Agreement Brokersssoc a on mem ers repor e r a y

assessments along the curve to the Baltic.

The Baltic publish the average prices daily.


33/35

pt ons - e n t on

the obligation to take an underlying position.

.

You buy a Call Option (The right to buy)

PMax Av 4 TCCal 08 27000 CallCost $1000 per day.

If the market goes above 27000 a day in 08 you have all theprofit, once your cost of 1000 is covered.

If the Market Falls you only lose your 1000 a day.


34/35

Put Option = Option To Sell

Premium = Price Paid For Option

Strike Price = Level O tion Set At

Breakeven = Level at which premium

Long = Buy

Short = Sell

Grantor = O tion Seller


35/35

an you or e a en on

Documents

Chartering and Operation