INTRODUCTION

1.1 INTRODUCTION

International trade is exchange of capital, goods, and services

across international borders or territories. Shipping plays an
important role in the transport sector of worlds economy.
Approximately, 90 percentage of the worlds cargo is moving by
sea. In the above wheel of activities, chartering plays an
important role. It has dominant role in the movement cargo &
vessels across the world, which ensure to meet the demand &
supply of the industry effectively.
Chartering is a process of hiring vessel either by time basis or by
voyage basis. A Charter is a promise. The ship owner are
promise to place his ship at the disposal of the charterer
whereas the charterer promises to pay the agreed freight or hire
within the stipulated time. The CHARTERERS could be
international traders, shippers, receivers, manufacturers, mine
owners or government organizations.
The growing division between ownership and management
driven by the objective for a steady return has led to the
development of OPERATORS. Operators hire ships from the
ship owners and reemploy them for a higher freight or hire. They
are also known as Desponent Owners. The ability of an
operator to obtain contracts for carriage of cargoes for a higher
freight and have a back to back arrangement with the ship
owner for a lesser freight also contributes to his profit. A needle
to say trading and operator is a high risk business and cases of
bankruptcy are not unknown.
The SHIP BROKERS assist in securing cargoes for ships and
the ships for cargoes. Being a successful ship broker calls for
knowledge, hard work and good luck. The last one being elusive

may at times wipe off the good efforts of broker after he almost
fixes the vessel.

1.2 CHARTERING AND ITS TYPES

A Charter is a promise. The ship owner promises to place his ship at the
disposal of the charterer whereas the charterer promises to pay the agreed
freight or hire within the stipulated time.
Thus chartering is all about the process of hiring a ship.
MARKET PLAYERS :
The CHARTERERS could be international traders,
manufacturers, mine owners or government organisations.

shippers,

receivers,

The growing division between ownership and management driven by the

objective for a steady return has led to the development of OPERATORS.
Operators hire ships from the ship owners and re-employ them for a higher
freight or hire. They are also known as ' Desponent Owners '. The ability of an
operator to obtain contracts for carriage of cargoes for a higher freight and
have a ' back to back ' arrangement with the ship owner for a lesser freight
also contributes to his profit. Needless to say trading as an operator is a high
risk business and cases of bankruptcy are not unknown.
The SHIP BROKERS assist in securing cargoes for ships and the ships for
cargoes.
Being a successful ship broker calls for knowledge, hard work and
'good luck '.
The last one being elusive, may at times wipe of the good
eforts of the broker after he almost fixes the vessel.
FREIGHT MARKET :

Selecting the methods of employment for a ship is based on the freight market
and the risks involved with it. Freight market is neither uniform nor
homogeneous with a specific geographical area. The ships which carry similar
cargoes determine the market level. Hence it is essential to understand the
freight market.

FACTORS WHICH INFLUENCE FREIGHT MARKET

1. Supply and demand of Ships of similar type ( new buildings / scrapping )

2. War
3. Strikes
4. Bad Harvests
5. Government subsidies
I

DIVISION OF DRY CARGO MARKET

(A) TWEEN DECKER

(B)

12000 - 23000 DWT

[ Bagged cargoes like Sugar, Rice, Wheat etc. ]

BULKER
- ( i ) HANDY [ 20000 40000 DWT ]
( ii ) HANDY MAX [ 40000 50000 DWT ]
( iii ) PANAMAX [ 50000 80000 DWT ]
( iv ) CAPESIZE [ 80000 1,20,000 ]
( v)
LARGE
CAPE
[ OVER

1,70,000

[ COAL, GRAIN, ORES, SCRAP, CEMENT AND FERTILISERS ]

SELF DISCHARGERS
LAKERS

: SHIPS FITTED WITH GRABS

: SHIPS SPECIALLY CONSTRUCTED WITH
MEASUREMENTS AND FITTINGS FOR PASSAGE
THROUGH ST. LAWRENCE SEA WAY

CLASS

: SUITABLE FOR TRADING BALTIC OR CANADA

DURING WINTER

(C)

CONTAINER MARKET :

Limited one with a small number of brokers. Exclusively chartered by operators

for
a long term.

( D ) RO / RO MARKET :

( ROLL ON / ROLL OFF )

This is another specialised market where the main players are liner and ferry
operators and the automotive industries.

( E ) LINER MARKET :
Long term remuneration is the influencing factor here rather than the single
voyage. The load factor and availability of cargo determine the market.

LOAD FACTOR

LOADED CUBIC
___________________
AVAILABLE CUBIC

( F ) SMALL SHIPS MARKET :

X 100%

LESS THAN 10000 DWT.

Involved in coastal shipping and short-sea trading

( G ) SPECIAL MARKETS :

HEAVY LIFTS
BARGE CARRIERS / LIGHTERS ABOARD SHIP [ LASH ]
TUGS

II TANKER MARKET :
Dominated by small number of oil majors. Loading areas / terminals are
limited. International regulations for tanker safety are stricter due to increasing
concern for the environment.

( a ) ULCC
(ULTRA LARGE CRUDE CARRIER)

- MORE THAN 350000 TONS DWT

( b ) VLCC
(VERY LARGE CRUDE CARRIER)

- 250000 350000 TONS DWT.

( c ) SUEZ MAX

- 135000 150000 TONS DWT.

( d ) AFRA MAX

- 70000 100000 TONS DWT.

( e ) PANAMAX

- 55000 65000 TONS DWT.

The last 3 groups of ships used for both product or dirty cargoes depending
on their age and cleanliness.

CHRACTERISTICS OF TANKER MARKET :

1. RAPID FLUCTUATION
2. EVERY OCCURRENCE HAS A GREAT IMPACT ON MARKET
[ E.G. POLITICAL DISTURBANCES ]
PARCEL TANKERS, CHEMICAL CARRIERS
CONSTITUTE THE TANKER MARKET

AND

LPG

CARRIERS

ALSO

III & IV
REEFER MARKET & CAR CARRIER MARKET :
These are closed markets where charters are usually concluded between owners and
Charterers directly without the assistance of the brokers.

INFORMATION CHANNELS :
Exchange of information is vital to chartering. Those engaged in chartering are
both consumers as well as distributors of information. Continuous flow of
information and their evaluation is essential for the judgement of the freight
market.
WHAT IS EXCHANGED ?
CARGO ORDERS = GIVING DETAILS OF THE CARGO TO BE SHIPPED
SHIP POSITION = WHEN WHERE FREE WITH MAIN DESCRIPTION
FREIGHT NEGOTIATIONS - OFFERS AND COUNTER OFFER [WHICH HOPEFULLY
ENDS UP IN A FIXTURE ]

GENERAL INFORMATION :
PORT COST
BUNKER PRICES
OPENING AND CLOSING CANAL
PORT RESTRICTIONS
AVAILABILITY OF LABOUR
FORCE MAJEURE CONDITIONS

INFORMATION CENTRES :

LONDON, NEWYORK, OSLO, TOKYO, PARIS AND PIRAEUS.

INDIA - MUMBAI.

BALTIC EXCHANGE
It is the source of maritime market information and encompasses majority of
world shipping interests. The market assessment is made by a panel of
international ship brokers on 43 dry and wet routes.
Baltic Exchange dry index (BDI) is calculated
handymax
Indices ( BCI, BPI, & BHMI ) by the exchange.

from

cape,

panamax

and

BIMCO - BALTIC INTERNATIONAL MARITIME COUNCIL

It produces balanced standard Shipping contracts (charter parties). Extensive
details on ports including costs, cargo handling equipments delays, strikes and
various warnings provided to the market. It cautions the members on security
issues like stowaways and armed
attack on ships.

1.3 DIFFERENT TYPES OF CHARTERING

VOYAGE CHARTER :
The ship is employed for a single voyage under the voyage charter. The person
who charters is the voyage charterer and the payment is called the freight. It is
governed by the voyage charter party
LIST OF VOYAGE CHARTER PARTY CLAUSES
1.

PREAMBLE

2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.

CA RG O D E S CR I P T I O N / Q UA N T I T Y
LO A D I N G P L A C E S
LO A D I N G O R D E R S / R OTAT I O N
D I S CH A RG I N G P L AC E S
D I S C H A R G E O R D E R S / R OTAT I O N
L AY DAYS A N D C A N C E L L I N G
FREIGHT
C O S T O F LO A D I N G / D I S C H A R G I N G
N OT I C E O F R E A D I N E S S / T I M E C O U N T S
LO A D I N G / D I S C H A R G I N G R AT E S
E XC E P T E D P E R I O D S
D E M U R R A G E / D E S PAT C H
N OT I C E S
SHIPS GEAR
G R A B D I S C H A R G E / S T E V E D O R E DA M A G E
OV E R T I M E
SHIFTING / SEA WORTHY TRI M
C A R G O S E PA R AT I O N & TA L LY I N G
D U E S & TA X E S
PO RTS AG E N TS
BIL LS O F L AD IN G
LIGHTENING
G E N E R A L AV E R A G E
ST R I K E S
E XC E P T I O N S
COMMISSIONS
P R OT E C T I O N C L A U S E S
LIEN
ICE
S I G N AT U R E

CONSECUTIVE VOYAGES
It is a special type of voyage charter when the vessel is contracted for several
voyages consecutively upon each other.

TIME CHARTER

Here vessels are hired for a specific period say 12 months. The crew employed by
the owner is responsible for the nautical operation and maintenance of the vessel.
The time charterer decides the voyage to be made and the cargo to be carried.
Payment is called hire.
DIVISION OF TIME CHARTER RESPONSIBILITIES :
SHIP OWNER

CREWING
REPAIRS
MAINTENANCE & SPARES
CLASSIFICATION
SURVEYS
LUBRICATING OILS
FRESH WATER
INSURANCE OF VESSEL
STORES & PROVISIONS
HEATING & COOKING

CHARTERERS

EMPLOYMENT
BUNKERING
PORT EXPENSES
CANAL TOLLS
STEVEDORING
CARGO HANDLING
INSURANCE OF CARGO
INSURANCE OF BUNKERS
LIST OF TIME CHARTER PARTY CLAUSES

1.
2.
3.
4.
5.
6.
7.

PREAMBLE
VESSEL DESCRIPTION
D U R AT I O N O F P E R I O D / D E S C R I P T I O N
TRADING INTENTION / L IMI TS
C A R G O I N T E N T I O N / E XC L U S I O N S
VESSEL CONDITION
OWNERS RESPONSIBILITIES

OF TRIPS

8. CHARTERERS RESPONSIBILIT IES

9 . D E L I V E RY A N D R E D E L I V E RY
10. BUNKERS
11. HIRE
12. OFF-HIRE
13. VESSEL PER FORMANCE
14. VESSEL MAINTENANCE
1 5 . CA RG O C L A I MS
16. MASTER / OFFICERS
1 7 . LO G B O O KS
1 8 . S U P ER CA RG O
1 9 . P O L LU T I O N
2 0 . S A LVA G E
2 1 . L AY I N G - U P
2 2 . A R B I T R AT I O N
23. LIEN
24. ASSIGNMENT
2 5 . E XC E P T I O N S
26. REQUISITIONING
27. BIL LS O F L AD IN G
2 8 . S T E V E D O R I N G DA M A G E
29. COMMISSIONS
3 0 . P R OT E C T I V E C L A U S E S
3 1 . S I G N AT U R E

BARE BOAT CHARTER

This amounts to the lease of the ship from the owner to charterer. The vessel is put
at the dispersal of the charterer without any crew. The charterer takes the
commercial
and technical responsibility and will pay for the maintenance and insurance bearing
only the capital costs to the owner. It is a financial tool for acquiring ship.

CONTRACT OF AFFREIGHTMENT :
To carry a fixed cargo over a period of time at a fixed freight level. Each voyage
under COA is a voyage charter

JOINT VENTURES

SHIPPING ARRANGEMENT
BETWEEN THOSE
WHO CONTROL CARGOES
AND
WHO CONTROL SHIPS

SHIPPING POOLS

POOL TONNAGE
COLLECTIVELY MARKETED
INCOME IS DIVIDED BY WEIGHTAGE SYSTEM

PARCELLING

SMALLER THE PARCEL HIGHER WILL BE FREIGHT

GROUPING PARCELS

LIFTED IN ONE BOTTOM

(MOSTLY ON TIME CHARTERED VESSELS)
SPECIALIST OPERATORS
WIDE LAYCAN
FLEXIBILITY ON CARGO SIZE
HIGHER FREIGHT

PROJECT CARGOES

COMPLETE RESPONSIBILITY OF TRANSPORTATION FOR

PRE FABRICATED STRUCTURES
CONSTRUCTIONAL EQUIPMENT ETC ALSO KNOWN AS TURN KEY PROJECT

1.4 NEED FOR THE STUDY:

Understand thoroughly the Chartering market.

To find out the Chartering Procedure and Practices involved in

the industry.

Understand the ways of fixing ships & cargos.

Points to be taken care of before and after fixing for vessel (pre
fixture & post fixture activities).

Legal aspects involved in the chartering market.

1.5 STATEMENT OF PROBLEM:

It is easy to loose than earning a customer. In the past, many companies look their
customer for granted. Their customer may not have many alternatives source of supply, or all
suppliers were equally efficient in service.
Todays customers are harder to please, they are smarter, more price conscious,
pore demanding, less forgiving and approached by more competitors with equal or better
offers. Under the present scenario, it becomes very difficult to retain the customer fold intact.
Hence, the companies are delivering the best possible after the service to the customer to
satisfy them.
The key to customer retention in customer satisfaction is,
In Highly satisfied customer
a)

Stays loyal longer

b)

Talks favorable about the company and its services.

c)

Pay less attention to completing brand and advertisement.

d) Less sensitive to price.

There are lots of competitors for shipping agency business/companies. Periodically
the shipping agencies are focusing on service quality. Unless the company pays themselves
in a good position for its service, it is difficult to survive in the market. This study is viewed in
GAC Shipping (India) Pvt. Ltd., Chennai is how to improve service quality in order to satisfy
the customers. So also, by doing this project, attempts are made to understand the functions
of Port Agency Operations & also to prepare standardized Service Delivery Procedure (SDP)
for shipping agency services. Moreover, special focus is given on the SWOT analysis for M/s.
GAC Shipping (India) Pvt. Ltd and for the Shipping Agency Industry of India.

1.6. LIMITATIONS

Due to busy atmosphere prevailing in the industry, sufficient data could not collected.

Since the chartering is not so prominent in inida, limitations in collecting data.

Time and Cost were the limiting factors of the study.

There is no organized data to analysis the policies and practices.

1.7 STATEMENT OF OBJECTIVES:

1.7.1 Primary Objective:

Understand thoroughly the Chartering market.

1.7.2 Secondary Objective:

To find out the Chartering Procedure and Practices involved in

the industry.

Understand the ways of fixing ships & cargos.

Points to be taken care of before and after fixing for vessel (pre
fixture & post fixture activities).

Legal aspects involved in the chartering market.