Thursday, October 8, 2009

TIME CHARTER ASSESSMENTS AND PROJECT PROPOSALS

TIME CHARTER ASSESSMENTS AND PROJECT PROPOSALS

The Shipping industry's supposed transparency and very competitive market structure depends almost entirely on the broking houses both large and small publishing reports and data from a whole range of fixtures concluded or reported on the market. The quantity of data available is enormous whilst the quality is not as easy to assess.

Typically shipbrokers report that a vessel was fixed for a certain period for a certain rate on a spot basis . Other factors that ought to be assessed by the market in evaluating the fixture are

· Commissions including address commission

· Repositioning or ballast included to point of delivery into service

· Idle time between fixtures

· Special terms and conditions negotiated as part of the charter arrangement.

The net result of insufficient information is that the reported levels typically overstate the time charter value of a particular vessel.

If the typical values generated by market reports are used it is likely that the earnings potential of vessels is overstated and consequently preparedness to pay for second hand prompt tonnage.

More recently a few researchers have published studies that do some multivariate analysis to understand the nature of the market better – however at this stage the use of more sophisticated tools than time series analysis remains academic than normal business practice.

Newbuilding and financing projects too use static variables and a basic assumptions level not in our opinion reflective of the level of risk and volatility in the industry.

Consequently shippers at large have no option but to deal with a unpredictable and volatile freight solution. Industrial shipper reluctance to take a longer view results in opportunistic rather than planned investment in shipping – perpetuating the lead and lag of capacity and demand in the market.

There is a definte need for Shippers and Shipping Comapnies to work in collaboration to ensure that their longer term aspriations are met - Varenco works with shippers and shipping companies to produce robust long term outcomes which take advantage of the current state of the market.

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