Exam revision Flashcards
(112 cards)
1
Q
What are some maritime threats?
A
-Terrorism
-Hijack
-Piracy
-Human trafficking / migration
-Stowaways
-Drug trafficking and other smuggling
-Theft
2
Q
What does ISPS stand for?
A
The International Ship and Port Facility Security Code
3
Q
When was the ISPS Code entered into force?
A
The code was adopted in 2002 and entered into force in July, 2004
4
Q
Is the ISPS Code a part of SOLAS?
A
Yes, and compliance is mandatory for the contracting parties to SOLAS
5
Q
What is the ISPS Code primarily for?
A
The code is designed primarily to detect security threats to ships and port facilities and prevent security incidents
The measures prescribed should avoid security risks. being delivered by ships to ports of countries that are potential targets of terrorist attacks
6
Q
What does the ISPS Code apply to?
A
Ships engaged on international voyages and port facilities serving such ships
7
Q
ISPS on board the ship
A
-International Ship Security Certificate
-Ship Security Assessment
-Ship Security Plan
-Ship Security Officer (SCO)
-Company Security Officer (CSO)
-Security equipment on board
-Continuous synopsis record
-IMO number
-Automated Identification System (AIS)
-Ship Security Alert System (SSAS)
-Long Range Identification and Tracking System (LRI&TS)
8
Q
Requirements for Ports (ISPS)
A
-Port Facility Security Officer (PFSO)
-Port facility security assessments
-Port facility security plan (PFSP)
-Port security equipment
-Port security advisory committee
9
Q
What does the Port Facility Security Officer (PFSO) do?
A
-Monitors security
-Raises awareness of security
-Reviews security plans
-Implements security plans
10
Q
Explain the port security advisory committee
A
-Membership to reflect the range of people involved in port activities
-Must involve workers’ participation
-Works in conjunction with other port committees such as Occupational Health and Safety (OHS) Committee
11
Q
Explain Port Facility Security Assessment
A
A risk analysis of all aspects of a port facility’s operation in order to determine which part(s) of it are more susceptible, and/or more likely, to be the subject of attack
12
Q
Security risk is a function of:
A
-the threat of an attack,
-the vulnerability of the target, and
-the consequences of an attack
13
Q
Explain Port Facility Security Plan
A
PFSP means a plan developed to ensure the application of measures designed to protect the port facility and ships, persons, cargo, cargo transport units and ships stores within the port facility from the risks of a security incident
14
Q
Management of security involves
A
-Security Level Changes
-Personnel with Security Duties
-Port Security Committee
-Response to and Reporting of Security Threats, Incidents and
-Breaches of Security
-Evacuation Procedures
-Document and Information Security
-Dangerous Goods and Hazardous Substances
-Security Training
-Security Drills and Exercises
15
Q
Why is access and ID control important?
A
-Prevents access to the port by persons without a legitimate reason to be there and prevent those persons with legitimate reasons to be in the port from gaining illegal access to ships or other restricted port areas for the purpose of committing unlawful acts
-Prevent introduction of unauthorised weapons, dangerous pr hazardous substances and devices, into the port or vessels using the port
-Prevent personal injury or death, or damage to the port, port facility, ship or port infrastructure by explosive or other devices
-Prevent tampering with cargo, essential equipment, containers, utilities, protection systems, procedures and communication systems affecting the port
-Prevent smuggling of contraband, drugs, narcotics, other illegal substances and prohibited material
-Prevent other criminal activities, such as theft
-Protect against the unauthorised disclosure of classifies material, commercially proprietary information or security sensitive information
16
Q
What are security levels?
A
-There are 3 security levels
-A port facility is required to act upon the security levels set by the Government within whose territory it is located
-Ship security level must match port security levels
17
Q
What is security level 1?
A
Security level 1: Normal: minimum security maintained
-Measures may include random screening of personnel, baggage, material and store and vehicles, and the implementation of access and movement control
18
Q
What is security level 2?
A
Security level 2: Heightened: additional protective security
-Increased frequency of screening, more robust monitoring of the port, extra patrolling, and more stringent movement control measures
19
Q
What is security level 3?
A
Security level 3: Exceptional: further specific protective security measures for a limited time
-100% screening, increased identification checks, temporary cessation (cease) of some port activities and/or ship movements, restricting access to certain areas, deployment of security personnel to key infrastructure
20
Q
What is the weakest link in port security?
A
The weakest link is poor training and awareness in human operators
21
Q
What is Off-Port-Limits (OPL) Operations?
A
-Seaports offer OPL operations services to ships in transit, in need of specific port-related services
-OPL services help ships achieve time efficiency and minimum deviation, low cost, and economies of scale by minimising port calls
-OPL services are common at ports that are situated in major navigation node points, as minimal deviation from the direct route is needed
-E.g. Gibraltar, Cape Town, Falmouth, Suez, Panama City, Singapore, and Malta
22
Q
Agreements for OPL Services
A
-The OPL services are prearranged by the shipping company’s operations department and the ship’s master
-The “rendezvous” position or meeting point is typically within a designated mileage (e.g. 3-5 nautical miles) OR a specific latitude and longitude off port boundaries
-Designated service boats/launches or helicopters are employed by the port authorities
23
Q
What are some examples of OPL services?
A
-Bunkering e.g. Falmouth
-Procurement - victualing (provide food), stores, spare parts, mail
-Passenger drop-off - each launch boat can accommodate about 20 persons, and charge per trip
-Crew changes
-Disembarking persons in need of urgent medical care
-This spares the shipowner a deviation claim on behalf
of the charterers and prevents navigational delays
-Ship-to-ship transfers to reduce the draft prior to port entry or canal transit, or to save port charges
24
Q
How do tankers do ship-to-ship transfers?
A
All tankers are equipped with pumps, which enables them to pump cargoes to the receiving ship. Cargo hoses must be fully supported. Fenders protect ships from damage.
25
Dry bulk ship-to-ship transfers
Note that some dry bulk ship-to-ship transfers can take place, but large dry bulk carriers do not have their own cargo handling equipment so many need floating cranes
26
Regulation of ship-to-ship transfers
-An approved STS operations plan must be in place
-Required by ISM Code for all ships, and MARPOL 78/73 Annex 1, Chapter 8, Regulations 40, 41 and 42, "Prevention of Pollution During Transfer of Oil Cargo Between Oil Tankers at Sea" for oil tankers
-The Merchant Shipping (ship-to-ship transfers) Regulations 2020: UK SI 2020 No. 94
-The regulations prohibit cargo transfers unless they are carried out within harbour authority waters or within the harbour permit area
27
Port arrival services include:
-Navigation aids
-Designated port anchorage
-Pilotage outside the port
-A dredged approach channel
-Locking and unlocking
-Sheltered water
-Pilotage in the port
-Towing
-Mooring and unmooring
-A safe berth
28
What information is required before a ship arrives at a port?
-Berth Request
-Notice of arrival (72 Hours prior to ship's arrival)
-Special provisions for "Cargoes of Particular Hazards"
-Cargo manifest
-Customs manifest
-Payment guarantee
29
What do Berth Requests involve?
Prior to the ship's estimated arrival, its agents or managers (operations department) should submit an online request to the port, providing the following information:
-Vessel's name and previous names
-Ship's main particulars, e.g., flag, ownership/management, charterers, deadweight (DWT), length overall (LOA), net tonnage (NT), gross tonnage (GT), draft, and so on
-Estimated date and time of arrival
-Estimate date and time of departure
-Cargo type and volume
-Cargo operations specified, that is, loading or discharging
30
What does Notice of Arrival involve?
At least 72 hours prior to the ship's arrival at port, the ship's operators, master, or agent should submit to the port a Notice of Arrival, with particulars that pertain to the ship and its managers, cargo type and quantity, any operational information and so on
31
Berth request application process
-Ship agents or operators register as designated users
-This enables efficient, user-friendly online berth request applications
-Allows the agent/operator to verify and monitor current status and amend or cancel their berth request
32
Notice of Arrival for Hazardous Cargoes
Special provisions for "Cargoes of Particular Hazard"
The shipowners or operators or agents should forward an Advance Notice of Arrival
-Ports should install light alarms at designated areas, which, in case of an emergency, are activated by the responsible operator
33
What is Cargo Manifest?
A listing of the goods comprising the cargo or freight carried in a means of transport or in a transport unit.
34
What is included in the Cargo Manifest?
The cargo manifest describes the particulars of the goods, such as transport documents numbers, consignors, consignees, marks and numbers, number and kind of packages, descriptions and quantities of the goods
N.B - The CUSTOMS manifest needs to be sent to customs when arriving in the first port in a country
-The cargo manifest must contain all cargo information
-Should be produces, prepared, and duly approved by the shipowners, master, or agents, in line with the port requirements
-It should be submitted to the port operators prior to the ship's arrival
-After the completion of cargo operations, a statement reflecting any and all modifications of the manifest should be prepared and sent to the port
35
What is the minimum pre-arrival information required?
-Berth Request
-Notice of Arrival - 72 Hours prior to Ship's arrival
-Special provisions for "Cargoes of Particular Hazard"
-Cargo manifest
36
Paying the port - Liner Shipping
The port has a contract with the liner company, which is the ship's owner and manager
Large liner companies typically have a multiple year contract with the port
37
Paying the port - Tramp Shipping
A bank guarantee or other guarantee of the payment of port expenses or disbursements may be required
38
Examples of port costs
-Cargo handling costs - usually by ton of cargo or per TEU
-Ship dues, port dues or docking dues: levied by the port on all ships that enter the port
-Ship dues cover the cost of port infrastructure,
including berths and navigation channels
-Ship handling charges
-Pilotage, boatmen and tugs may be included or
charged separately by contractors
-Agency charges
-Cost of lost time at sea
-Environmental cost - minimised by efficient port operations
39
Why is employee retention important?
-High employee turnover rates increase recruitment costs
-High employee turnover rates weaken the knowledge and skill base of the organisation
-Teamwork, which is important for safety, require a stable workforce
40
What are the benefits of working at sea?
-Excellent wages
-Life skills
-Not your normal 9-5 job
-Travel
-Long Holidays
-Career flexibility and stability
-Fast growth
-Promotion and progression
-Savings
-New friends and connections
41
What are the challenges of working at sea?
-Away from home/land
-Social isolation
-Fatigue
-Danger
-Limited internet access
42
What is done to fight seafarer retention?
To retain seafarers, shipping companies have provided various fringe (extra benefit supplementing an employees salary) benefits:
-Re-joining bonuses
-Seniority bonuses
-Basic salaries while on vacation, medical benefits for the seafarers and their dependants, and educational benefits for children
-Improving working and loving conditions is another strategy, such as providing internet access
43
How are pilotage charges calculated?
Pilotage charges are based on draught, gross tonnage (GT), net tonnage (NT), deadweight (DWT) or a combination of these AND the pilotage area
-Additional services charged per services
-Typical rate for a small commercial ship is £300-£700
-Rate for a deep draft ship is £2000-£20,000 depending on distance and service offered
-Discounts are available for regular port calls
44
About pilotage services
-The use of pilots is mandatory in most ports, terminals, canals, and inland waterways
-Pilots have local knowledge of tidal fluctuations, draft restrictions, heavy traffic, hazardous reefs and shallows etc.
-Port manoeuvres have a high rise of grounding, allision or collision
-Navigators may be unfamiliar with the port or with
operating in confined waters
-Pilotage exemptions may be available for frequent
users
-Ships carry paper and electronic charts, tidal and port entry information that should be updated frequently
-Pilots enhance this information with local knowledge and expertise of frequent ship handling
-Maritime accident statistics show that accidents, human error, claims, and legal cases have occurred when pilots were not mandatory and were not used
-Pilot boarding and departure takes place at the edge of port limits and is a hazardous operation
45
The role of the pilot
-In most ports and waterways, the pilot or pilots ADVISE the Master - In law they do not take command of the ship
-The Master retains legal responsibility
-The main exception is the Panama Canal
-Unlike most ports of the world, Canal pilots do not
act in an advisory capacity but take command over
the vessel
-It is thus possible to hold the Panama Canal commission liable for accidents which occur during Canal transit and which can be attributed to actions of Canal pilots in command of the vessel
46
Berthing/Unberthing, Mooring/Unmooring, and Anchoring Operations
-Safe manoeuvring requires good ship-to-port collaboration and technical proficiency by everyone involved
-Ship navigators, pilots, tugs, mooring teams,
rope-runners
-The ports' policies typically stipulate that the berthing operations are on a first come, first served sequences
-While ports aim for high berth occupancy, routes, delay and traffic congestion are common problems that may lead to rushing.
-Anchoring operations are handled by ship crews
-Towage operations are handled by harbour tugs
-Mooring and unmooring usually requires small boats to take ropes from ship to shore
47
Berthing and mooring is a highly hazardous operation. What are some of the risks?
-Risk to tugs and workboats being sunk by the ship
-Risk of crushing between ship and quay
-Risk of ropes and wires snapping or tightening suddenly, taking off legs and fingers
48
What are port services provided to an arriving ship?
-Pilotage
-Towage
-Mooring
-Services may be voluntary or mandatory
49
What are the risks of not using port services?
Failure to use these services leads to higher accident rates and financial, environmental and reputational costs
50
What are the benefits of efficient port services?
Efficient port arrival/departure services reduce port time and increase operational efficiency of ships
51
What does V.Ships offer their employees to improve retention?
-Training courses
-Seafarers get the in-house training needed for free, in
addition to basic wages for the training days
-Senior Officer Partnership
-Senior Officers sailing within their fleet who meet
specific performance and experience criteria will be
offered long-term V.Ships Senior Officer Partnership
agreements
-Standby Pay
-Senior officers signed to the V.Ships Senior Officer
Partnership agreement receive standby wages while
they are waiting to join or are in the process of joining
a vessel
-Airport Lounge Access
-V.Ships provides free airport lounge access for Masters
and Chief Engineers who have signed the Senior
Officer Partnership agreement. This benefit is
provided by "priority pass", who has a worldwide
network of airport lounges
-Life insurance
-V.Ships provide complementary life insurance cover
during leave periods for our Masters and Chief
Engineers signed up to the Senior Officer Partnership
agreements
-Revalidation Costs
-Senior Officers signed up to the Senior Officer
Partnership agreement will get the cost of national
certificate of competence revalidation covered by
V.Ships, including the cost of any training courses
required to revalidate.
-Healthcare Plan with Marine Benefits
-Senior Officers sailing on the majority of vessels will
receive private healthcare for themselves, their
spouses and dependant children.
52
What does Anglo-Eastern offer their employees to improve retention?
-Re-joining bonuses:
to senior officers who re-join the company after shore
leaves
-Loyalty pay:
to senior officers who have been serving on the same
pool of ships for more than three years continuously
-Examination bonus:
to officers when they report back for successive
contracts with a higher level of CoC (Certificate of
Competency)
-Training allowance:
to officers who attend non-mandatory in-house
training.
-Accidental Death Insurance:
for all Indian seafarers after completion of contracts
-Medical Insurance:
for all Indian seafarers and their immediate family
members if the seafarers make themselves available
for joining the next ships at the end of their entitled
shore leave periods
-Contributing Provident Fund for seafarers
(retirement savings plans into which employees
contribute portions of their salary)
-Family get togethers:
and seminars are organised for seafarer employees
and their families in major Indian cities where their
employee are from
-An in-house magazine:
Homeward Bound, consisting of contributions from
their employees and their family, is published and
distributed to create a sense of community
-An online community:
with the same name is created for employees and their
families to share experience and also for the company
to disseminate news and information
-A policy:
to try and take at least 50% of our shore staff from our
own seafarers. All shore jobs are advertised internally
-Free email:
and the cheapest rates for telephones for many years
-Families are allowed to sail on board:
and we make extra efforts to assist our seafarers and
their families in all respects.
-A dedicated welfare officer:
is appointed in all the recruitment centres to assist the
seafarers' families
-They meet their seafarers and their families on a regular basis through company seminars and company sponsored social events.
53
Economic exchange
Economic exchanges focus on short-term exchanges of material or economic goods
54
Social exchange
Social exchanges focus on socio-emotional resources, e.g., feelings of personal obligations, gratitude, and trust, over a lengthy period
55
Retention and Organisational Commitment
In organisations, social exchange relationships go beyond short-term economic transactions, employers tend to look into workers welfare and development and include them in their long-term business plans, and such organisational support is reciprocated by employees with commitment and good work performance
56
Organisational support theory
According to organisational support theory developed by Eisenberger et al,. (1986), when employees believe that the organisation values their contributions and cares about their well-being (which is defined as perceived organisational support or POS), they feel obliged to respond in a kind matter and repay the organisation
For example, they may increase work effort and affective commitment to the organisation, and improve organisational citizenship behaviours.
57
Psychological contract theory
The psychological contract between an employer and employee is the idiosyncratic set of reciprocal expectations held by employees concerning their obligations (what they will do for their employers) and their entitlements (what they expect to receive in return)
58
Psychological contract theory - iceberg
WORK - PAY
Time - Benefits
Effort - Empowerment
Trust. - Security
Creativity. - Recognition
Productivity - Qualifications
Loyalty. - Satisfaction
Mentoring. - Responsibility
Accept change - Development
Sacrifices. - Promotion
Worklife. - Status
Care. - Tools
Services. - Dignity
59
Retention and organisational commitment
-A survey of 214 seafarers conducted by Tsai and Liou (2017) showed that payment, and employee welfare and career development served to foster seafarers loyalty
-However, employee welfare and career development opportunities had a stronger effect than payment
-They also found that better welfare and opportunities, loyalty, and pay also improve work performance
-In another survey carried out by Yuen et al., (2018) with 149 seafarers, the results showed that rewards is the most important driver of, while stress is the most prominent barrier to, job satisfaction.
-Stress includes poor working and living conditions, work intensification, under-manning, and lack of support from colleagues and the management
-Rewards include wage, family benefit, promotion, and training opportunities
60
Herzberg's Motivation-Hygiene Theory
Frederick Herzberg theorized that employee satisfaction has two dimensions: “hygiene” and motivation. Hygiene issues, such as salary and supervision, decrease employees' dissatisfaction with the work environment. Motivators, such as recognition and achievement, make workers more productive, creative and committed.
61
Herzberg Motivation Factors
-Achievement
-Recognition
-The work itself
-Responsibility
-Advancement
-Growth
62
Herzberg Hygiene Factors
-Company policies
-Supervision
-Relationship with supervisors and peers
-Work conditions
-Salary
-Status
-Security
63
The Swiss Cheese Model of Accident Causation
The model states that there are many defensive layers to prevent catastrophic events. These layers, pictured as slices of swiss cheese, rely on people (e.g., proper evacuation of passengers), technology, administrative controls and procedures (e.g., weighting the cargo before departure). However, although there are many layers between hazards and accidents, no defence layer is without error. These errors are visualised by the characteristic holes of Swiss cheese. Errors can either be active failures (human errors) or latent conditions that cause error-provoking circumstances in the local workplace (e.g., time pressure) or long-lasting weaknesses in defence (e.g., untrustworthy equipment). The mere presence of a hole does not necessarily lead to a bad outcome. Still, as soon as holes of different slices line up, there is an opportunity for accidents.
64
Herald of Free Enterprise
-UK Ferry Herald of Free Enterprise operated by Townsend Thoresen sailed from Zeeburg
-Soon after capsized at around 19:00 GMT on 6th March 1987 in the English Channel
-Loss of 188 lives including passengers
-The ferry left port with her bow doors open. Water began flowing into the car deck and the vessel quickly became unstable
-Time pressure
-Unsafe working conditions
-MAID (UK) investigation report located serious lapses on the part of the shore-based managers of the organisation
-Board of Directors did not show responsibility towards the safe management of their ships
65
ISM Code
-Introduced in 1998/2002 to all ships >500 GRT
Require companies to:
-Assess all risks to its ships, personnel and the environment, and establish safeguards
-Continuously improve the safety management skills of all employees
-Provide for safe practices and a safe working environment
-Have commitment (especially from top to provide adequate resources), competence, attitude and motivation
66
5 Steps of Risk Analysis Process
5. Review the risk
4. Treat the risk
3. Evaluating the risk
2. Analysing the risk
1. Identification of risk
67
ISM Code - Safety Management Systems (SMS)
Every company should develop, implement and maintain a safety management system (SMS) which includes the following functional requirements:
-A safety and environmental protection policy
-Instructions and procedures to ensure safe operation of ships and protection of the environment in compliance with legislation
-Procedures to prepare for and respond to emergency situations
-Procedures for reporting accidents and non-conformities
-Defined levels of authority and lines of communication between, and amongst, shore and shipboard personnel
-Procedures for internal audits and management reviews
68
The ISM Code - difference from previous safety regulations
-Prescriptive -> goal directed, self-regulation according to the regulatory framework
-Self-regulation is the process in which companies set their own goals, plan measures to reach progress, check outcomes, and redirect unsuccessful efforts, according to the regulatory framework
-Reactive -> proactive
69
Shipboard operations (safety)
The company should establish procedures, plans and instructions, including checklist as appropriate, for key shipboard operations concerning the safety personnel, ship and protection of the environment. The various tasks should be defined and assigned to qualified personnel.
70
Positive evidence from ISM Implementation
-Raised safety awareness among seafarers
-Forced companies to develop SMSs which set up clear safety policies, procedures and communication channels
-Well-defined roles and responsibilities
-Development of emergency response plans
-Tzannatos and Kokotos (2009) examined all the 268 accidents involving Greek-flagged ships between 1993 and 2006. They found that the rate of incidents induced by "human errors" fropped from around 64% to 52%
-Kokotos (2013) extended the examination to include the accidents involving Greek-flagged ships between 1995 to 2011. The examination found a continuous and statistically significant decrease in the rates of accidents induced by "human errors"
71
Problems with ISM Implementation
-Mounting paperwork
-Under-reporting of incidents and near misses due to fear of being blamed
72
Incident reporting pattern
A graph shows that 50% of reported accidents were due to machine failure (Not due to individual failing), 25% from Incidents involving 3rd parties, 20% from trivial near misses, and only 5% for individual failings.
73
What is the reason for this incident reporting pattern?
Less reporting for individuals failing because people are scared that they will be punished if they report their own mistakes.
74
ISM implementation - safety culture
-Commitment to safety from senior management
-Realistic procedures and shared ownership among workforce
-Continuous organisational learning
75
Voyage estimating objective
-The objective of voyage estimating is to calculate the net return a ship will make from a particular voyage.
-Once that net return is known the shipowner will decide if they wish to take that charter
-If they do decide they want to take that charter, the shipbroker, acting on behalf of the shipowner, will negotiate the terms and conditions
-The shipowner needs to decide if a voyage will be profitable before fixing a charter, but the owner will also be considering other factors that will influence the decision
-Sometimes that will mean taking a poorly returning charter to anticipate better conditions on the subsequent charter
-The charterer needs to decide if the cargo will be transported at the lowest possible cost at the time. A shipbroker will negotiate on behalf of the charterer to improve the deal.
76
Basic rules of estimating
-Traditionally, estimating was worked out manually on a form. Today a wide variety of software is available
-Software speeds up the calculation, but the estimator (you) must still understand the principles
-When working, be accurate and check all details in a consistent and careful manner
-Double check everything
-Keep good records of past estimates - they will help for future deals
77
Tools for voyage estimating
-Standard form or software
-Marine Atlas
-Marine distance tables
-Maps indicating load-line zones, International Navigation Limits and sulphur Emission Control Areas (SECA)
-Details of areas requiring ballast water management plans or banning ballast water discharge
-Port information
-Cargo stowage information
78
Cargo stowage information
-Remember a ship may be able to load its full deadweight (carrying capacity in tonnes) but not physically accommodate that particular cargo type because it is too bulky. In this case it is referred to as "cubic cargo", or a cargo with high cubic; think of it as the density of the cargo
-Some cargoes will be heavy enough to sink the ship down to its loadline while there is still space remaining in the hold. Others will be less dense such that, for example, a 60,000 DWT ship may only be able to load 55,000 tonnes because the holds are physically full.
-"Heavy", or dense cargoes, include iron ore and other metallic ores; Light, or cubic cargoes, include paper rolls, light grains, cotton, etc. In the former case the hold will have empty space available (but unusable) whereas in the latter, the ship will not be down to its loadline but physically full.
-Coal is one of the few dry bulk cargoes that can be fully loaded and the hold is full.
79
Emission Control Areas
-MARPOL Annex VI introduced limits to SOx, PM (particulate matter) and NOx (0.5%) worldwide which came into force on 1st January 2020, with more stringent controls (0.1% sulphur) in certain designated areas (ECAs)
-The simplest way to control SOx is by switching to a low sulphur fuel - but these are more expensive and often less widely available
80
Voyage expenses - variable
Just apply to the voyage under consideration and include:
-Port charges
-Bunkers for the voyage
-Extra insurance (if needed e.g., a war zone)
81
Running expenses - fixed
Will be incurred every day and include:
-Crew costs
-Stores
-Insurance
-Finance costs
-Maintenance and machinery (including scheduled dry docking - every five years)
82
Where to start the voyage (voyage estimate)
From the loading port
-best for owner because ship is already at the port (but
this rarely happens in practice)
Previous discharge port to discharge port (via the load port)
-best for the charterer because cost of ballasting to
load port is covered by shipowner
Voyage averaging
-adding together a high value leg one way and a low
value return, or a triangular voyage
-For the shipowner the objective always is to "minimise
the ballast leg" - because the ship is only earning
money when it is carrying cargo (unless of course it is
on time charter where the charterer is simply paying a
daily rate whether the ship is full or empty)
83
An important consideration for an owner
-What cargo will the owner load after the discharge of the current voyage proposed? This one point can often be considered as the single most important factor. When the discharge port is favourable to the shipowner in terms of finding the next cargo then naturally other considerations will apply (type of cargo, freight rate etc.)
-So the proposed discharge port can often deter an owner from taking a cargo if they then face great difficulty in obtaining a subsequent cargo.
-This is usually caused by the location of the discharge port for dry bulk e.g., Japan where there are very few return cargoes and an empty ballast leg is required to reach the next load port
-Dry bulk cargoes going into Japan include: Coal, iron ore, grain, steel, metallic ores; but dry bulk coming out from Japan: some limestone, - so a huge imbalance with most bulk carriers leaving "in ballast" i.e., empty
84
Starting information for voyage estimating
-Speed and consumption when ship loaded
-Speed and consumption when ship is "in ballast" (empty)
-Load port, discharge port, bunker ports: canal transits, route choices
-will you need to take on low sulphur bunkers?
-Weather prevailing (hurricanes, fog, ice?), time waiting (congestion?)
-Quantity and stowage of cargo, loading and discharging rates
-Running costs, fuel costs, port/canal costs
-Port information - any special restrictions: draft, tide, low bridges, etc.
-Proposed freight rates - a key component
-Brokerage and address commission
85
What are the objectives for the principals? (voyage estimates)
-For the shipowner: to maximise $ per day
-For the charterer: to minimise $ per tonne
-Nb., The calculation of the voyage estimate is normally carried out at the shipowner's head office
-Multiple voyage estimates are calculated to find the optimum one for the ship
-The calculation - once information is gathered - takes only a minute or two
86
Usual method for voyage estimating
-The owner will commence assessing voyage estimates before the current voyage is completed - why? Because it is the owner's responsibility (and cost) to get to the next load port
-Thus - usually a ballast leg (empty) usually followed by a laden leg
-If the owner is fortunate the ship could be loaded (after discharge) in the same port (at a different berth) with a different cargo e.g., Grain from New Orleans to Shanghai followed immediately by Steel from Shanghai to somewhere else; however, in the real world this is not so common
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Voyage estimating - method of calculation
1) Details of the ship
2) Estimate the total length of the voyage
-Laycan (dates between which the vessel has to be in
the load port and ready to load e.g., 15/23 March) -
can the ship get there in time?
-Distances
-Laytime allowed (time for loading and discharging)
-Waiting time
-Any Canal transit (Panama, Suez, Kiel, etc) cost and
time
3) Calculate the costs
4) Calculate the income
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Panama Canal Transit
A ship takes an average of 12 hours to transit the Panama Canal. However there is usually a waiting time to enter the canal - this can be a few hours to two or three days. Two pilots are on board and the cost will vary by ship size, type, whether loaded or not, and also by direction of transit (north to south or south to north). Cost for a 170,000 DWT bulk carrier empty is $176,250; when loaded $252,156 (costs are revised anually)
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Voyage Estimating - Voyage costs
-Port charges
-Canal dues
-Bunkers
-Any additional "charter party" costs
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Voyage estimating - Running costs
-Crewing
-Victualing
-Hull and P&I insurance
-Repairs, maintenance and dry-docking
-Spares, stores, water, lubricants
-Shore management charges
-Capital financing
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The calculation - Calculating Freight
-How much can the vessel load?
-Bunkers and constants
-Cubic capacity
-Draft
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The calculation - The Charter Party Margins
Example:
-Charter party says: 48,000 Mt 5% more or less in owners' option (MOLOO)
-In other words, it is the shipowner's choice to load anywhere between these limits
-It is in the shipowner's interest to load as much as possible, but the choice is the owner's
-5% of 48,000 = 2,400 Mt
-48,000 - 2,400 = 45,600 Mt minimum
-48,000 + 2,400 = 50,400 Mt maximum
-Or, if in charterer's option (MOLCHOP)
-Alternatively, perhaps 48,000 Mt minmax or
-LUMPSUM freight - "Lumpsum freight is the money paid to shipper for a charter of a ship (or portion) up to stated limit irrespective of quantity of cargo."
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The calculation
-DWCargoCapacity = DWAIITold - (constants + bunkers)
-To calculate quantity of bunkers required, consider the actual voyage
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The calculation - bunkers & constants
-Constants - 200Mt (includes things like fresh water stores, food, the crew, etc.) It is usually just a nominal estimated figure
-Vessel requires enough fuel to reach Los Angeles
-14 days steaming
-Daily consumption - 32Mt fuel/no diesel
-Bunkers required - 14x32 = 448Mt plus 50Mt for Canal and safety margin (say) 100Mt
= 598Mt
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What is important to note for voyage costs for ships trading in ice or beyond certain latitude limits?
There can be additional insurance costs for a ship trading in ice or beyond certain latitude limits
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Panama Canal water density
Panama Canal is tropical fresh water. This means that the water is less dense than ordinary tap water and therefore the ship will sink deeper into the water
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Voyage estimates alternatives
It will then be for the owner to decide if there are any better choices available - often 5 or more alternatives are calculated. Remember that once all costs are obtained the calculation itself is very simple and that these costs can usually be used over and over again.
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Final word voyage estimates
-As you will have realised the actual calculation of a voyage estimate is simple arithmetic
-However, as has been emphasised throughout this module, the shipowner is also concerned about what happens after this voyage and the one after that is finished
-So the more that the various factors that have been covered: the role of the shipbroker, world seaborne trade, sale and purchase, the level of freight rates and the freight market then the more likely it is that the owner will choose the best long term voyage(s) for their ships.
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Does shipbroking have a future in a digitally connected AI world?
Yes. Shipbrokers implement new technology to improve their services, but they cannot be replaced as they add the element of trust, which AI cannot. Moreover, by having someone specialise in the area, this improves services compared to if e.g., the shipowner would act as a broker themselves.
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The role of the shipbroker
Owner's ideas:
-To obtain the highest freight rate which will cover all costs (operating and financial) on the vessel and give a "healthy profit" - not always possible of course
Charterer's ideas:
-To obtain the lowest freight rate which will safely deliver the cargo at the correct port on time and undamaged
Broker's ideas:
-To bring both principals together to conclude the deal - reward is commission on the value of the deal (or "fixture")
-It might be thought that is is in a brokers own interest to talk the market "up" as this means more commission but if an owner or charterer discovers that the broker is not acting in their best interest, they are unlikely to se that broker again
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Shipbroker intervenes
-The shipbroker is a free agent to the extent that any charterer, or owner, or other interested party can work with the shipbroker
-So if a shipbroker knows of a counterparty that might be interested in buying or selling the ship or, if a charter, fixing the cargo, then the shipbroker contacts them and tries to bring the two sides together
-It frequently happens that the shipbroker does not know of a counterparty so the broker will, in return, put the deal out to other trusted brokers (the market) that it considers may be able to help
-But each extra broker involved will, of course, want their commission - normally 1.25%, which never changed irrespective of the strength of the market i.e., whether it is high or low.
-As the shipowner or charterer has to pay commission a deal with, say, 7.5% commission attached could well be rejected by the principal (i.e., the shipowner or charterer)
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Why should principals use a shipbroker?
-This is a question which is frequently asked as the principal (charterer or shipowner) resents paying commission albeit that they accept it is part of the deal
-Remember the greater the value of the deal the more the brokers commission so there is often a (false) suspicion by the party that has to pay it (the buyer in the case of a ship or the shipowner in the case of a cargo fixture) that a broker wants a higher priced deal - then the broker earns more commission
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Shipbroking payment process
Buyer sends money to broker -> broker deducts commission(s) -> seller receives price less commission
In reality this is done via the bank so the broker actually only receives the commission not the full price of the ship.
Also if a principal feels cheated on a deal he will never do business with that broker again
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Is 1.25% a justified reward for a broker?
-Certainly a broker deserves to be paid for reasonable services undertaken
-As this will include finding interested parties* for the offered deal this can take a considerable time - perhaps as long as six months in the case of the sale and purchase of a ship.
-In addition the broker will engage in negotiation with interested parties, prepare research reports, and give support and advice on many aspects which sometimes are not related to the actual deal on the table.
*If a broker brings a new party to the negotiating table then it is the broker's responsibility "to obtain the background and reputation of the principal concerned"
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But the shipbroker has one more important role
-In shipping the principals: shipowners, charterers and operators have often been in the shipping business for a long time
-They wish to remain in this business in the sense that an exporter such as BHP-Billiton has an ongoing requirement to export its iron ore from Australia
-Over the years it will have worked numerous deals with particular shipowners
-Relations and business practices are built up and both sides wish for that to continue for years ahead.
-So if on one particular deal there is a dispute on some aspects - perhaps a delay or a disagreement about quantity loaded, then neither side wants it to escalate into a position where they both principals fall out with each other - that is in neither party's interests.
-So the role of the shipbroker is to understand the issue from both sides and calm the situation to a point where (hopefully) it is peacefully settled
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Shipbroking - The New Baltic Code 2020
Principals
-Trade on their own account
-Can act as brokers
Brokers
-"Owner's brokers" represent shipowners
-"Charter's agents" represent charterers (cargo)
-"Competitive brokers" represent either the shipowner or the charterer on a non-exclusive basis
Non-Market members
-Include lawyers, arbitrators, financiers etc.
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A FEW of the things that a broker must NOT do
-Acting without authorisation by a principal in respect of any transaction, such as offering named tonnage against tenders without the authority of owners or disponent owners
-Misrepresentation of any intentions, capabilities or commercial situations
-Knowingly dealing with counterparts and clients in respect of which there is certainty or reasonable expectation to know that they engage in unethical or unlawful practices
-Attempting to fix or co-ordinate with competitor(s) the prices or terms on which goods or services are being supplied.
-Exchanging with competitors, confidential information which is competitively sensitive, such as price information, business plans or cost figures
-Solely relying on oral agreements as the basis for contractual agreements with counterparties and/or using vague or unclear drafting to express written contract provisions
-Knowingly or recklessly violating compliance with the relevant environmental, health and safety or employment laws and regulations
Breaking these rules can lead to censure, suspension or expulsion
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Commission (payments)
-Charters: Normal total commission is 1.25% each for owner's and charterer's brokers i.e., 2.50% total
-Sales (S&P) and newbuilding brokers get 1% of the price of the ship - same for demolition
-Coastal shipping may involve only one broker - smaller commission for low-value cargoes.
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Vessel Costs (Basis Baltic Code 2020)
The cost of running a vessel can broadly be divided into two parts. There are routine costs which accrue on a daily basis and which are not affected by the specific voyage on which the vessel is engaged. Then there are costs which are specific to the individual voyage
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Routine costs (shipbroking)
1. Capital cost of the ship, which will normally be expressed as a depreciation cost (the capital cost divided by the number of years the ship is expected to trade, minus its expected demolition value at the end of its working life) plus the funding cost of the capital, which may in part be in the form of a bank loan (mortgage).
2. Crew wages, overtime, pension contributions, insurance, travelling costs
3. Victualling (food)
4. Insurance (Hull and Machinery and Protection and Indemnity)
5. Tonnage tax and management fees
6. Deck and engine room stores and spares, lubricating oil
7. A suitable daily allowance to cover periodic costs such as drydocking, special surveys, running repairs.
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Voyage costs (shipbroking)
The following may be considered to be the main costs which are specific to a voyage:
-Bunkers (fuel)
-Port disbursements
-Stevedoring, load and discharge costs if payable by shipowner
-Canal dues
Additionally, there may be other expenses, such as:
-War risk insurance premium
-Over-age insurance
-Freight tax
-Local taxes and/or dues, income tax and despatch money etc.
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The EXXON VALDEZ accident
The EXXON VALDEZ, the U.S. flagged oil tanker, ran aground on Bligh reef, Prince William Sound, Alaska in the U.S. at 00:09 on 24 March 1989. The resulting spill of an estimated 42 million litres of crude oil covered more than 26,000 km^2 of water in Prince William Sound and the Gulf of Alaska, and polluted more than 1,900 Km of coastline. The accident extensive investigation conducted by the National Transportation Safety Board (NTSB) revealed, among other contributing factors, the importance of human factors, especially, effect of fatigue caused by overwork and lack of sleep.
