Getting the Cargo & Charter Combination Right

Capt Rahul Bhargava

“Matching Iron Ore, Coal, Steel Crude Oil & Containers to Ship purchase, COAs, Time Charters & Spot trading options.”

…. Your freight is too high, I lost my bid due to high

freight

What is AWRP, KNR. My Power Purchase

Agreement does not allow to increase coal

price….

My NSR is not acceptable at your freight, cannot sell

steel

What are you doing, Cal 13

Cape is trading at half

the price of Nov 12. Did u cover forward

freights

No.. FFA is gambling…..

So, what do we do…..

• Core Business

• Volume for shipment

• Trading pattern

• Year around or seasonal

• Government regulations

• Risk Assessment

Look within your organisation

Strategy to optimise freight --Business needs

• “Assess your situation, consider your options - plan for a better future”

• Know your business, define your needs. • Structure your ocean transportation with clear and

consistent information, standardised across your network of carriers.

• Use last year's business profile and performance statistics as the baseline to build this year's plan.

• The more definitive you can be about your needs for capacity—by region, by lane, by transit time, by equipment, and by other service factors—the easier it will be for the carrier to respond in kind, and for you to evaluate their proposals equally.

Strategy to optimise freight – Planning • Know your supply chain characteristics and categorise

services. • Define Crucial versus less crucial requirements. • Less crucial or flexible services like regular replenishment

of raw material can be planned in advance. • Advance planning = cheaper freight. • Crucial services or absolute services are planned at short

notice and thus come with high cost. Like finished steel products comes with LDS and penalties. Its for various destinations. Perishable product or products with short shelf life must have absolute service which may come with a higher cost.

• Understand where you can be flexible, and where you need absolute service. Design your plan to address these varying service and capacity needs.

Continually monitor, measure and adjust.

• Follow up contracts that are made• Monitor and adjust the contracts with the need • Measure plan against performance to ensure

commitment to/ from carrier • Continual dialogue is mandatory between

charterer and Shipowner's to u/stand each other needs

• Above could at times reduce cost if the communication is effective.

• Disconnect could disrupt supply chain and increase cost.

Price V/s Cost • Understand the difference

between price and cost. • Lowest price is not the

cheapest cost. • Reliability of service

provider• Loss of inventory • Loss of productivity• Late delivery penalties• Amendments to l/c’s • Cost towards expedited

shipment

Options available

Buy ships

Enter into long term CoA

Have short term contract

Partnership between Owner and Charterer

Play spot and enjoy the market

A combination of above

Market Intelligence

Risk Management • Logistics can change the profitability of an organisation.

Thus freight is a risk which has to be managed effectively and efficiently.

• After evaluating the needs, cover your risk with a long term view.

• Covering a part of cargo with ship owning in present market can be advantageous.

• Few operators are willing to give freight for forward, it can be a good strategy to enter long term CoA.

• FFA is an option, if its acceptable to organisation. • Play spot and enjoy the present market conditions. • A mix of all above in the proportion as per the risk

appetite of the company will give best result.

Optimum freight

Market Intelligence

Risk assessment

Needs, Planning, monitor

& control

Scramble of various strategies gives Optimum freight

Optimum freight

Long term CoA

Ship ownin

g

Spot marke

t

Scramble of various options gives the optimum freight

THANKS