The document discusses key concepts in maritime economics including scarcity, demand, supply, derived demand, and the factors that influence demand for shipping such as cargo volume, distance traveled, and ton-miles. It also outlines different types of ships, market participants, methods of ship employment including various chartering arrangements, and important shipping documents like bills of lading and how laytime is calculated.

1. Capt. J M Irani

2. Capt. J M Irani
THE ECONOMIST
 There are numerous definitions, all of which agree that the
subject consists of the three main elements
 1. Scarcity
2. Demand
3. Choice
“ Maritime economics is a field of study concerned with
the manner in which scarce productive resources are used
to bridge the spatial separation of international trading
countries most effectively” .

3. Capt. J M Irani
THE ECONOMIST
 THE PRICE MECHANISM
 The law of demand states , “the demand for goods or
services falls when the price increases and rises when
the price decreases all other things being equal.”
 That is demand and price are inversely related

4. Capt. J M Irani
THE ECONOMIST
 The law of supply states “ the higher price the greater
the quantity supplied, the lower the price the smaller
the quantity of supply, all other things being equal.”
 Price and quantity supplied are directly related.

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THE ECONOMIST
 DEMAND
 Demand in shipping is not just need, desire or want
but backed by WILLINGNESS and ability to pay the
price.
 The two factors of primary interest are the price and
quantity demanded.

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THE ECONOMIST
 SUPPLY
 The quantity of a product that will be offered on the
market at a given price during a particular time period.
 More of a commodity will be supplied at a higher price
than at a lower one.

7. Capt. J M Irani
THE ECONOMIST
 Derived Demand
 Shipping is an intermediate part of a process of
production(supply) and the demand for shipping.
 The demand in shipping is derived from the
consumers demand for the final product.

8. Capt. J M Irani
THE ECONOMIST
 The Marshall Rules
 1. There are a few, if any substitutes for shipping , most
products in international trade require transportation
by sea.
2. Although there may be alternative source of the
product supplied, these too will require transportation
by sea.
3. Freight are a small proportion of final cost.

9. Capt. J M Irani
THE ECONOMIST
 DISTANCE AND TONNE /MILES
 The Demand in shipping is mostly determined by the
quantity and nature of commodities.
 This is based on the amount of cargo transported, the
other factor being the distance travelled.
 A satisfactory measure of demand is the weight of
cargo(tones) x distance= tone/miles

10. THE ECONOMIST

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Types of Ship
 1. General Cargo
 2.Bulk Carriers
 3. Container Ships
 4.Specialised
 6. Short Sea

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Market Practi tioners
 Charterers
 Ship Owners
 Operators
 Ship Brokers
 Traders

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Methods of Ship Employment
 Voyage Chartering
 Consecutive Voyages
 Time Chartering
 Bare Boat Chartering
 Contracts of Affreightment
 Joint Ventures
 Shipping Pools
 Parcelling

14. Capt. J M Irani
Methods Of Ship Employment
 Project Cargoes
 Slot Charters
 Voyage Charter : When a vessel is employed for a single
trip, for which freight is paid either as a lump sum or
per ton basis.
 Charterer to specify load and discharge rate “laytime”
if the laytime is exceeded then “Demurrage” is payable,
if completed before time then despatch is payable by
the ship owner.

15. Capt. J M Irani
Methods of Ship Employment
 Consecutive Voyages : At times the parties may have an
agreement which commits the ship to performing a
number of voyages, it could be predetermined or a
fixed number of time.
 Each voyage will be considered seperately for
demurrage and despatch

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Methods of Ship Employment
 Time Chartering: Vessels are hired for a specific
period, the responsibilities of parties differ.
 Charterer is responsible for, vessel employment,
bunkering,port expenses, canal tolls, stevedoring cargo
handling Insurance of cargo, insurance of bunkers.
 Ship Owner is responsible for crewing,
repairs,maintenance, classification, surveys,
lubricating oil, fresh water, Insurance of vessel, stores
and provisions, heating and cooking.

17. Capt. J M Irani
Methods of Ship Employment
 Bareboat Chartering: Charterer who virtually runs the
ship, as if he is the owner, including giving on time
charter and takes on all the responsibilities of ship
owner.
 Contract of Affreightment: When an operatr agrees to
carry a given quantity of cargo between named ports,
on voyage charter for an agreed freight.

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Methods of Ship Employment
 Joint Ventures: Those controlling cargoes negotiate
and come to terms under ajoint venture. Profits and
losses are shared between both the parties.
 This are normally of short duration.
 Shipping pools: Where a group of ship owners band
together to make shipping pooltheir vessels and
market their vessels, to form a combined fleet

19. Capt. J M Irani
Methods of Ship Employment
 Parcelling: Operators specializing in transporting
smaller parcels by grouping together in a vessel sailing
from a particular region to another area.
 Project Cargo: Where a turnkey project has to be
shipped from the maufacturing country to the projects
eventual location. This is best suited for heavy lifts
ODC cargoes.

20. Capt. J M Irani
Methods of Ship Employment
 Slot Charters: Liner vessels most of the time have
difficulties in filling up their vessels. Operators merely
contracting with the line operator, a set amount of
slots or space on each voyage.

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Maritime Commerce
Cargo Seller Cargo
Buyer
Ship Owner
(MASTER)
Broker
BANK BANK
Shipper
Stevedores
Broker
Broker
L.C.
AGENT

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Documents
 Tally Sheets: The quantity of cargo loaded, if in bulk
the raft survey report to be referred.
 Mates receipt: They are merely receipts and not
documents of title that can be exchanged
commercially.
 They are released to the shipper in return of cargo
loaded and tendered to the master in return of a set of
Bill of Lading.

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Documents
 Bill Of Lading: B/L can be drawn up in a variety of
ways but it is almost always prepared on a pre-printed
form. But whatever the format, a Bill of lading fulfills
three basic functions.
1. A receipt of cargo signed by the Master with remarks
as to the condition of the cargo.
2. A document of title to the cargo, by which means the
property may be transferred to another party.

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Documents
3. Evidence of a contract governing terms and condition
of contract.
Bill of lading as A Receipt: Shows the quantity and
description of cargo loaded, it will also include the
“weight measurement, quality and contents unknown,
all particulars as described by the shipper”.

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Documents
 It will also show the names of the shipper and
consignees, the name of the ship, the loadport and
destination, a reference will also be made to freight
payment deal.
 Of course the Master signature and the date of issue
as, it will affect the trading deal.
 Bill of lading as Document of title: The B/L becomes
vital as its other role as security for payment.

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Docements
 Bill of lading as Evidence of Contract: As for liner
cargo or parcelling the actual contract may well be no
more than a tele phone call or an email, booking note,
but the actual contract is thru the B/L where in the
terms and condition of carriage, normally printed on
the reverse side of the B/L, provide the eveidence of
contract.

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Documents
 The main elements of the Bill of Lading
 Quantity of cargo
 Accurate cargo description and condition
 Date of the Bill of lading
 Names of Shipper and Consignee
 Ports of loading and discharge
 Ships name
 Terms and conditions of Carriage
 Payment of freight

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Documents
 Time Sheets: It is a document showing laytime
utilized, taking into account all the factors mentioned
in the Charter party.
 Time sheet is based on the information supplied by
the Statement of Facts.
 It is imperative from above the Master checks and
signs the statement of facts as regards to the time used
for cargo work.

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Documents
 Laytime: Is the time permitted in a contract (charter
party) for loading /discharging a voyage chartered
ship.
 If the time is exceeded the the owner/ charterer is
entitled to demurrage.
 If the vessel finishes loading /discharging before the
time stipulated then the charterer is entitled to a
reward in the form of despatch which is normally half
the demurrage.

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Documents
 Calculation of laytime can be divided in seven stages.
 Check the relevant clauses in the governing contract.
 Obtain the statement of facts.
 Determine how much laytime is available.
 Time of commencement of laytime and its cessation.

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Documents
 Duration of laytime is divided into three categories.
 Definite
 Calculable
 Indefinite
 Definite Laytime: it specifies how many days and
hours are allowed, at the load port and discharge port,
or BENDS.

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DOCUMENTS
 Calculable Laytime: this can be based on Tonnage
basis usually for Bulk cargoes.
 For a ship loading 40,000 ts at a rate of 10,000 ts daily,
there will be four days available, however Master has
the options of loading 5% more or less therefore if the
ship eventually loaded41,258 ts of cargo available
laytime will be 4.1258 days.

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Documents
 Hatch wise calculations:where in rate of discharge will
be mentioned per hatch as per hatch 125ts/day and to
be calculatd pro rata basis.
 Indefinite laytime:Most of the time it will be agreed as
Custom of the port(cop),Customary despatch(cd),
Customary Quick despatch(cqd) or as fast as can(fac).
 The common factor with these terms is that they all
provide a shipper or receiver with an indefinite period
to perform cargo operations, although they must act
reasonably.

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Documents
 Indefinite laytime: COP,CD,CQD with this terms the
shipper or receiver is provided with an indefinite period to
load /discharge,though they must act reasonably, but it is
unreasonable for cargo not to be made available or
discharged upon vessel arrival within laydays.
 In such cases the owner is entitles to damages for
detention,but risk of bad weather,port congestion and any
other problems are all for the ship owner/operator to bear.
 FAC applies to ships with their own gear without use of
shore equipment, further stipulating that the shipper
receiver must be able to deliver/take away cargo at a
particular daily tonnage rate.

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Documents
 Averaging Laytime: Normal, reversible and Average
laytime
 Normal or irreversible laytime in this the load port will
have a different laytime and discharge port will have a
different laytime and each area assessed seperately i.e
one cannot carry forward or tale a total of l/d laytime
and arrive at a demuurage /despatch figures.

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Documents
 Commencement: laytime to commence the vessel
should arrive at the place where the cargo operations
are to be performed.
 Arrival ship must be physically present to commence
cargo work.
 It should be ready to undergo cargo operations.
 Conformed with all contractual commitments.

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Documents
 Simply to arrive at a port, a vessel must have reached
either a loading or discharging place or a normal
waiting place.
 Ship master should tender a Notice of readiness(NOR)
in a written form, The port agent should assist the
master in tendering the NOR and also ensure that
shippers or receivers officially accept the vessel’s NOR.

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Documents
 Readiness A ship must be physically capable of
performing cargo operations.
 Cessation: Normally laytime ceases simultaneously
with the termination of cargo operation, however a
reasonable extra laytime may be added for trimming,
lashing and or draught survey unless other wise stated.

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Documents
 Calculations: these can be sub divided into the
following categories
 Damage or detentions
 Demurrage
 Averaging Laytime
 At this stage we need to look at the time sheet, which
we need to prepare from the SOF.

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Documents
 Damages for detention if the charterers fail to abide by the
provisions of a contract, wherein permitted laydays are exceeded.
 This could be in the form per day charter hire or demurrage for
the time used in excess of laytime.
 Demurrage it is usual that a governing contract will provide for
demurrage to be paid to ship owners.
 Demurrage is intended to reflect daily running cost of the vessel
with a reasonable profit, once laytime are fully utilized
demurrage should continuously with no interruptions till cargo
work is completed ,however depending on the Owner may
excuse interruptions which affect cargo work. For break down of
vessel, time for shifting , as other wise a vessel on demurrage
always on demurrage.

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Documents
 Despatch if avessel completes cargo work before
laytime ,the ship owner rewards by despatch money
which is normally half of demurrage, however no
brokerage or add comm is payable on despatch.

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Documents
 Averaging laytime where separate calculations are
performed for the loading and discharging ports, with
the final results for each being combined in order to
asses whats due. This may seem like reversible laydays.
 In such cases it is upto the owner and the charterer to
come to an understanding and resolve to their mutual
consent.

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