The international shipping

Shipping

Shipping has multiple meanings. It can be a physical process of transporting commodities and merchandise goods and cargo, by land, air, and sea. It also can describe the movement of objects by ship.Land or "ground" shipping can be by train or by truck...

 industry can be divided into four closely related shipping markets, each trading in a different commodity: the freight market

Freight market

The freight market is the market in the shipping industry which covers the transport of cargo. The first official freight market was the Baltic shipping exchange in the nineteenth century. However before that time there were already several places which could be seen as centres of freight market,...

, the sale and purchase market, the newbuilding market and the demolition market

Ship breaking

Ship breaking or ship demolition is a type of ship disposal involving the breaking up of ships for scrap recycling. Most ships have a lifespan of a few decades before there is so much wear that refitting and repair becomes uneconomical. Ship breaking allows materials from the ship, especially...

. These four markets are linked by cash flow

Cash flow

Cash flow is the movement of money into or out of a business, project, or financial product. It is usually measured during a specified, finite period of time. Measurement of cash flow can be used for calculating other parameters that give information on a company's value and situation.Cash flow...

 and push the market traders in the direction they want.

The freight market

The freight market consists of shipowners

Ship-owner

A shipowner is the owner of a merchant vessel . In the commercial sense of the term, a shipowner is someone who equips and exploits a ship, usually for delivering cargo at a certain freight rate, either as a per freight rate or based on hire...

, charterers

Chartering (shipping)

Chartering is an activity within the shipping industry. In some cases a charterer may own cargo and employ a shipbroker to find a ship to deliver the cargo for a certain price, called freight rate. Freight rates may be on a per-ton basis over a certain route or alternatively may be expressed in...

 and brokers

Shipbroking

Shipbroking is a financial service, which forms part of the global shipping industry. Shipbrokers are specialist intermediaries/negotiators between shipowners and charterers who use ships to transport cargo, or between buyers and sellers of ships.Some brokerage firms have developed into large...

. They use four types of contractual arrangements: the voyage charter, the contract of affreightment, the time charter

Time Charter

Time Charter was an Irish-bred, British-trained thoroughbred racehorse who won several important races between 1982 and 1984.-Background:...

 and the bareboat charter

Bareboat charter

A bareboat charter is an arrangement for the chartering or hiring of a ship or boat, whereby no crew or provisions are included as part of the agreement; instead, the people who rent the vessel from the owner are responsible for taking care of such things....

. Shipowners contract to carry cargo

Cargo

Cargo is goods or produce transported, generally for commercial gain, by ship, aircraft, train, van or truck. In modern times, containers are used in most intermodal long-haul cargo transport.-Marine:...

 for an agreed price per tonne while the charter market hires out ships for a certain period. A charter is legally agreed upon in a charter-party

Charter-party

Charter Party , a written, or partly written and partly printed, contract between a shipowner and a merchant, by which a ship is let or hired for the conveyance of goods on a specified voyage, or for a defined period...

 in which the terms of the deal are clearly set out.

The sale and purchase market

In the sale and purchase market, second-hand ships are traded between shipowners. The administrative procedures used are roughly the same as in the real-estate business, using a standard contract

Contract

A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...

. Trading ships is an important source of revenue for shipowners, as the prices are very volatile. The second hand value of ships depends on freight rates, age, inflation

Inflation

In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...

 and expectations.

The newbuilding market

The newbuilding market deals with transactions between shipowners and shipbuilders

Shipbuilding

Shipbuilding is the construction of ships and floating vessels. It normally takes place in a specialized facility known as a shipyard. Shipbuilders, also called shipwrights, follow a specialized occupation that traces its roots to before recorded history.Shipbuilding and ship repairs, both...

. Contract negotiation can be very complex and extend beyond price. They also cover ship specifications, delivery date, stage payments and finance. The prices on the newbuilding market are very volatile and sometimes follow the prices on the sale and purchase market.

The demolition market

On the demolition market ships are sold for scrap

Ship breaking

Ship breaking or ship demolition is a type of ship disposal involving the breaking up of ships for scrap recycling. Most ships have a lifespan of a few decades before there is so much wear that refitting and repair becomes uneconomical. Ship breaking allows materials from the ship, especially...

. The transactions happen between shipowners and demolition merchants, often with speculators acting as intermediaries.