Trends Shipping Pools (Final)


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Trends Shipping Pools (Final)

  1. 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. 2. Shipping Pools Aug 7, 2008
  3. 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. 3
  4. 4. Characteristics of a Shipping Pool  Key characteristics of a shipping pool are –  similar tonnage,  central administration (pool management company),  joint marketing,  negotiation of freight rates,  centralization of voyage costs,  freight collection,  weighing system,  revenue distribution,  fair share.  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. 4
  5. 5. Characteristics of a Shipping Pool Source: H.E. Haralambides, “THE ECONOMICS OF BULK SHIPPING POOLS” (1996) 5
  6. 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 6
  7. 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. 7
  8. 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 company.  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. 8
  9. 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. 9
  10. 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 figures 10
  11. 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 pool  Torm Long Range Tanker pool  Trampko bulker pool  Lauritzen Bulker Pool 11
  12. 12. Web Resources    12
  13. 13. Disclaimer This is a not a marketing or offering document. Notwithstanding anything contained in this document, this document does not constitute, and no Recipient of this document may treat the same as, an offer, solicitation or invitation for the sale and purchase of any securities, instruments or any other properties AND the information contained in this document shall not form the basis of any offer or contract. None of the CLSA group companies nor any of their respective directors, officers, employees, agents, contractors or advisers makes any representation or warranty as to the truth, accuracy or completeness of this document (including statements of opinion or expectation) or as to the achievement or reasonableness of any future projections, estimates, prospects or returns or any of the assumptions underlying them made nor shall any of them have any liability (whether arising from negligence or otherwise) for any representations (expressed or implied) contained in, or for any omissions from, this document or for any written or oral communications transmitted to the Recipient (or its advisers or representative). No person has been authorised to give any information or make any representations other than that contained herein, and any information or representations not contained herein are not authorised by any CLSA group companies or their affiliates and must not be relied upon. The delivery of this document at any time shall not, under any circumstances, imply that there has been no change in any matters described herein since the date hereof or that the information contained herein is correct as of any time subsequent to the date hereof. In furnishing this document, CLSA group companies do not undertake any obligation to provide the Recipients with access to any additional information or to correct any inaccuracies in or update this document. This document and any information contained herein must be treated in a confidential manner and shall not be copied, disclosed or distributed in whole or in part in any medium to others at any time. This document has been delivered to the Recipients strictly for information purposes only and shall not be used for any other purposes. By accepting delivery of this document, each Recipient agrees to the foregoing and to return this document promptly upon request. 13