Ship operators will increasingly dominate the shipping market. Discuss
Date of Issue2016
School of Civil and Environmental Engineering
The objective of the research paper is to assess whether ship operators will progressively dominate the shipping market as opposed to ship owners in the next decade. The scope of the paper focuses on the dry bulk market. Aside from the extensive studies on literature review of shipping cycle and ship owner behaviour, surveys were gathered and interviews were conducted with maritime personnel to gain better understanding from the industry’s perspective. The paper first provides an overview of dry bulk shipping market in terms of its demand, supply and freight rate mechanism. The generic theory is that, freight rate is always influenced by the demand for shipping and supply of tonnage. The paper continues to define the shipping players; ship owners and ship operator. One of the distinctive difference to note is that ship owning is a high investment industry whereas ship operating focuses on trading through charter-in vessels. Through analysis of the market characteristics, it is evident that there is generally low barrier to entry to the shipping market which is described as a competitive market, where all players are price taker. The research then analyses the current and future market trends and examine how ship owners and ship operators operate under the specific market condition. In the current market, it is noted that demand for dry bulk is largely affected by China’s import. The oversupply of tonnage is still prevailing due to continuous expansion of fleet. This has resulted in ship owners having to postpone ship delivery and increase scrapping particularly for Capesize vessels. However, some ship owners take advantage of the low price for new and second hand vessels by investing on them. As for ship operators, due to their asset-light business, they have the flexibility to charter in different type of vessels, enter into short-term contract to avoid market and freight risks and still earn margin. The future market is expected to recover gradually. As freight rate improves, although ship owners will continue to order more new vessels, even more ship operators will enter into the market thus making them able to dominate the market to a large extent.
Final Year Project (FYP)
Nanyang Technological University