1. The Shipping Pool Concept
The Applicability of Shipping Pools to various shipping sectors
Teddy H Tsai – Head of Research, Pacific Transport Fund
April 3, 2008
2. Shipping Pools
Aug 7, 2008
3. Defining Shipping Pools
The Shipping Pool Concept is –
A Joint Venture between ship owners of a similar type, with central administration,
which are marketed as a single entity, negotiating voyage/time charterparties and
contracts of affreightment, where the revenues are pooled and distributed to owners.
A pool is a collection of similar vessel types under various ownerships, placed under the
care of an Administration. This Administration markets the vessels as a single,
cohesive unit and collects the earnings which, in due course, are distributed to
individual owners under a pre-arranged weighing system by which each entered vessel
should receive its fair share.
4. Characteristics of a Shipping Pool
Key characteristics of a shipping pool are –
central administration (pool management company),
negotiation of freight rates,
centralization of voyage costs,
Note that there is no specification on ownership (except on weighting) –
Therefore, a pool can be wholly owned by one beneficial owner, bareboat chartered-in
capacity, tonnage owned by multiple owners, or in other forms.
5. Characteristics of a Shipping Pool
Source: H.E. Haralambides, “THE ECONOMICS OF BULK SHIPPING POOLS” (1996)
6. Pros and Cons of a Shipping Pool
The key benefits to a shipping pool are –
The ability to undertake large contracts of affreightment (COA).
Triangulation - higher load factors and minimize ballast legs and idle time.
Economies of scope.
Become visible to charterers by its size and standards.
Diversification and risk spreading.
Semi-industrial carrier model, long-term relationship and fulfillment of COA.
The major negatives to a shipping pool are –
Possible issues with regulatory agencies
No control of tonnage by original ship owner
Reliance on a 3rd party for commercial management.
Technical management and manning is still responsibility of owner.
Risk that good markets will see pool members leave for more speculative activity
Speculative players on S&P markets
7. Varying risk profile of ship owners
Shipping Pools enables a variety of risk profiles for ship owners –
High Risk (Spot Tonnage) – Your vessel is traded in a large pool of similar vessels,
optimizing earnings and reducing risk in the short-term freight market. Your revenue is a
share of the pool’s total income and will be benchmarked against spot market indices.
Moderate Risk (Timecharter) – Your income is fixed as under a timecharter, giving you
protection from a declining spot market. The unique advantage we offer is that
agreements may cover parts of a period, and have exact durations from individual
quarters up to several years. Forward delivery is also an option.
Lower Risk (spot revenue with floor) – Guarantees minimum earnings and full market
upside. You continue to receive spot revenue less an agreed “insurance premium”,
unless the result falls below an agreed floor.
Lower Risk (spot revenue with collar) – Gives protection against sharp market drops.
You receive spot revenue unless the result of a given month falls below an agreed floor
or rises above an agreed ceiling.
8. Role of the Pool Management Company
The Pool Management Company is responsible for –
Commercial Management – Similar to the chartering department of a large shipping
Received gross revenues, including Contract of Affreightment (COA), spot charters,
claims, demurrages, and hire from ships that it may have chartered-out.
Cost payable by the PMC includes – payments for voyage costs including bunkers,
port and canal dues, cargo-handling and agency expenses
Other Services – marketing, contracting, operations, scheduling, bunkering, cargo-
handling, accounting, cash management, cargo insurance and claims, and agencies.
Information – provision of clear, transparent and comprehensive information, at regular
intervals, to the members of the pool.
market analyses for the pool's major trading areas,
freight and ship market forecasts,
pool revenue projections,
pool performance and comparisons with open market developments and, finally,
individual vessels' performance in comparison with the overall performance of the pool.
9. Issues in Pooling Agreements
Freight collected by the pool must be distributed “fairly” –
Accounting differences in technical specifications and commercial characteristics
Points system used in allocating profitability between pooling partners.
Agreements must be made on how disputes will be resolved.
“Triangulation” & efficiency of the pool
Benchmarking of the pool is done through operating metrics, such as average T/C rate
achieved vs. “spot” rates, fleet utilization rates, etc.
10. Points System Formulas
For Tankers, a Pool Point Formula may consist of the following items:
(Example of the Marida Tanker Pool for 10,000 dwt)
Age Cubic (excluding slop tanks) at 98%
+2.000 points – 0 <15 Years +2.500 points – 11,500 m3
+0.000 points – >15 Years +4.500 points – 19,500 m3
Approvals (by major oil companies) NOTE – A pro-rated number of points
+3.500 points – 6-7 approvals will be allocated for dwt between these
+2.750 points – 4-5 approvals figures
+1.250 points – 2-3 approvals Bow Thruster
+0.000 points – 0-1 approvals +0.650 points – Fitted and working
NOTE – A minimum of 4 approvals +0.000 points – Unfitted/ not working
may be specified to join the pool. Coils (and willing to trade dirty) / IGS /
Summer Deadweight Stern Line
+2.500 points – 10,000 dwt +0.150 points for each fitted and
+3.000 points – 15,000 dwt working
+4.500 points – >=18,000 dwt
NOTE – A pro-rated number of points
will be allocated for dwt between these
11. Examples of Pool Structures
Western Bulk Carriers - handysize bulk pool Livanos and Coeclerici Dry Log bulker pool
Stad Seaforth Shipping A/S – Offshore Swift Tankers
Supply pool SeaChem Pool
Star Tanker pool ScanScot - Broströms
Gemini Tanker pool Leonina - Cool Carriers
Jacob- Scorpio Tanker Pool Ltd Atlantic Bulkers – Denholms
Sigma Tanker Pool Gearbulk – Jebsen
Norient Handy Bulker Pool Pacific Basin – Handysize Pool
Klaveness Probo-Caustic Bulker Pool
United Bulk Carriers
Baumarine panamax bulker pool
Bulkhandling handymax/handysize bulker
Torm Long Range Tanker pool
Trampko bulker pool
Lauritzen Bulker Pool
12. Web Resources
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