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1.

Types Of Ships
Handy is the name for bulk carriers of less than 60,000 tons deadweight capacity. In
many cases, the carrier itself may be equipped with cranes to handle all sorts of cargo.
The type of handy bulk carrier of 40,000 tons or more of deadweight capacity is
called the "handy-max" type.
Handysize-vessels are up to 30,000 DWT, which carry exclusively minor bulk
cargoes. Since the past, the Handysize drybulk carrier sector was seen as the most
versatile. Increasingly, however, this has become more of a regional trading, niche
sector. The vessels are well suited for small ports with length and draft restrictions and
also lacking infrastructure.
Handymax-vessels range between 30,000 DWT and 60,000 DWT. The Handymax
sector operates in a large number of geographically dispersed global trades, mainly
carrying grains and minor bulks including steel products, forest products and
fertilizers. Vessels less than 60,000 DWT are built with on-board cranes that enable
them to load and discharge cargo in countries and ports with limited infrastructure.
These smaller Handysize and Handymax vessels are general purpose in nature, and
not only comprise 71% of all bulkers, but also have the highest rate of growth. This is
partly due to new regulations coming into effect which put greater constraints on the
building of larger vessels.
Supramax vessels range from 45,000 to 59,000 DWT, A Supramax vessel is typically
150200 meters in length, 52,000 to 58,000 DWT, with five cargo holds and four
cranes.
Panamax refers to the maximum size that can navigate the Panama Canal. This type of
vessel can be up to 32.2 meters wide. Panamax bulk carriers are usually of 60,000 to
80,000 tons of deadweight capacity, determined by the Panama canal's lock chambers,
.26 metres in width, 320.0 metres long, and 25.9 metres deep and they are suitable for
carrying bulk cargo of industrial commodities like as salt, grain, coal and/or iron ore.
Panamax vessels, defined as those with the maximum beam (width) of 32.2 metres
permitted to transit the Panama Canal, carry coal, grain and, to a lesser extent, minor
bulks, including steel products, forest products and fertilizers.
Capesize is the type of large-scale bulk carrier primarily used for transporting raw
materials for making steel (coal and iron ore). This type of vessel is considered to be
at least 100,000 tons of deadweight capacity, and there are currently super-large ships
in excess of 200,000 tons of deadweight capacity. Vessels over 80,000 DWT is the
traditional definition of a Capesize bulk carrier, in terms of deadweight, the sector is
changing. The Capesize sector is focused on long haul iron ore and coal trade routes.
Due to the size of the vessels there are only a comparatively small number of ports
around the world with the infrastructure to accommodate them. Capesize vessels are
too large to traverse the Suez or Panama Canals, therefore they must round the Cape
of Good Hope or Cape Horn to travel between oceans.
VLO (Very Large Ore) or Very Large Bulk Carriers are for ships that range over
200,000 DWT. The Berge Stahl is the world's largest bulker and is

364,768 deadweight metric tons. It is 343 m long, has a beam of 65 m, and a draft of
23 m. Bulk carriers of this size almost always carry iron ore.
2. Main Areas Of Operation
The main trading routes are USA-Far East or South America-Europe.
To meet the increasing market demand for international goods, the Port Authority of
New York and New Jersey is in the process of an extensive port development project
to increase handling capacity.
Examples of other ports of operation include Rotterdam and the Port of New Orleans
where they are both characterized by their strict port state control and Argentina and
Brazil where they are also one of the main areas of operation for trades of wheat and
iron ore between both countries.

3. Major Owners and Charterers


Greece, Japan, and China are the top three owners of bulk carriers, with 1,326, 1,041,
and 979 vessels respectively. These three nations account for 3,346 vessels or over
53% of the world's fleet.
There are number of large private fleets, for example Gearbulk Holdings Ltd., a
multinational, has 78 bulkers.
Fednav in Canada operates a fleet of 70 bulkers, including two that are specially
designed for work in icy environments.
Croatia's Atlantska Plovidba has a fleet of 14 bulkers.
H. Vogemann in Hamburg, Germany operates a fleet of 13 bulkers.
Portline in Portugal, owns 11 bulkers. TORM in Denmark and Elcano in Spain also
own notable bulker fleets.
Another example would be Excel Maritime Carriers Ltd. where the Company is an
owner and operator of dry bulk carriers and a provider of worldwide seaborne
transportation services for dry bulk cargoes, such as iron ore, coal and grains, as well
as bauxite, fertilizers and steel products. The Companys current fleet consists of 18
vessels (ten Panamax, two Supramax and six Handymax vessels) with a total
carrying capacity of 1,074,022 deadweight tons.
DryShips Inc. is also another company where it is headquartered in Athens, Greece.
This company currently owns and operates a fleet of 35 drybulk carriers comprising 5
Capesize, 27 Panamax, 1 Handymax and 2 newbuilding Panamax vessels, with a
combined deadweight tonnage of approximately 3 million tons.
Some companies specialize in Mini-bulker operations.
Examples are England's Stephenson Clarke Shipping Limited owns a fleet of eight
Mini-bulkers and five small Handysize bulkers.

Cornships Management and Agency Inc. in Turkey owns a fleet of seven Mini-bulkers
which specialize in markets in Europe, the Mediterranean, the Black Sea, and West
Africa.
4. Types Of Charter Parties Used
The charter market is central to the functioning of the shipping industry, it is here that
ships and cargoes get 'paired'. The effort to combine cargo with a particular ship
seems like an easy task to accomplish, but the cargoes vary as much as the ships do.
Drybulk carriers are employed in the market via a number of different chartering
options such as bareboat, time and voyage charters.
Bareboat charter involves the use of a vessel usually over longer periods of time
ranging over several years. In this case all voyage related costs, including vessel fuel
and port dues as well as all vessel-operating expenses such as day-to-day operations,
maintenance, crewing and insurance, transfer to the charterer's account. The owner of
the vessel receives monthly charter hire payments on a per-day basis and is
responsible only for the payment of capital costs related to the vessel.
Time charter" involves the use of the vessel, either for a number of months or years
or for a trip between specific delivery and redelivery positions, known as a trip
charter. The charterer pays all voyage-related costs. The owner of the vessel receives
semi-monthly charter hire payments on a per-day basis and is responsible for the
payment of all vessel operating expenses and capital costs of the vessel.
Voyage charter" or "spot charter" involves the carriage of a specific amount and type
of cargo on a load-port to discharge-port basis, subject to various cargo handling
terms. Most of these charters are of a single voyage nature, as trading patterns do not
encourage round voyage trading. The owner of the vessel receives one payment
derived by multiplying the tons of cargo loaded on board times the agreed upon
freight rate expressed on a per-ton basis. The owner is responsible for the payment of
all expenses including voyage, operating and capital costs of the vessel. Chartering on
a single voyage or a trip charter basis may be referred to as spot chartering activity.
The main differences between them is the degree of owner involvement in the
operation, the division of the costs and the extent to which the cargo to be transported
is specified in the contract.

5. State of Freight Market


The Freight market is governed by the relationship between supply and demand. The
contrasting speed in which supply and demand adjust is the factor which sets the
freight market. While demand is mercurial due to its relationship to the world
economy, supply is lethargic mainly due to the fact that ships take anywhere from one
to two years to be built and delivered to their owners. Therefore, time is a major factor
in reaching equilibrium in the freight market.
Short run equilibrium occurs when there is time to adjust supply by short-term
measures such as layup, reactivation, or operating ships at a faster speed; while long
run equilibrium occurs when shipowners have time to take delivery of new ships and
shippers have time to rearrange their supply sources.
On the supply side function of sea transport, whenever there is a shortage of transport
capacity, freight rates rise. This has a two fold effect. First, the older and less efficient
ships become profitable to operate and are brought out of layup until the whole
existing stock of tonnage is either actively trading or seeking employment. The
second effect this has on the world fleet is that in order to earn the maximum possible
revenue, shipowners operate at increased speeds, fuller space utilization, and perform
fewer and shorter trips in ballast. A greater utilization of operational capacity occurs.
When there is an oversupply of ships, freight rates fall and the least efficient ships in
the fleet are unable to cover their operating costs and move into lay-up. Gradually the
operational fleet falls towards the level of demand and laid up tonnage grows. The
operational capacity of the fleet decreases as shipowners reduce their operating speeds
to conserve fuel, and are willing to perform extensive ballast trips to ensure cargo.
The freight rate that is paid at any given moment will depend on the supply and
demand ratio, i.e. the amount of cargo available, and the number of suitable ships
available and willing to carry it. The shipping market, as all free markets, is subject to
the basic laws governing supply and demand. If the number of cargoes available is
higher than the number of ships available, freight rates will be high. This is also
known as an 'owners' market'. Conversely, if there are few cargoes and a surplus of
ships, rates will be low, becoming what is known as a 'charterers' market'
Short period daily hire rates for Panamax vessels in the Pacific have reach an historic
high at $45,861/day(equal to about $51.00 per tonne on the U.S. Gulf to Japan route).
At the beginning of 2007, rates were $35,000/day ($39.50 per tonne); so thats 29% in
the Pacific since the beginning of the year, up 103% over the same period in 2006 and
now $2.00/tonne or 4% above the 2004 pervious all time high for freight on the Asian
route.
Short period daily hire rates in the Gulf/Atlantic rates are now $51,660 per day (equal
to about $71.50 per tonne on the U.S. Gulf to Japan route). At the beginning of 2007,
rates were $34,400/day ($53.50 per tonne) and the all time high for this route was
$75.00/tonne back in March of 2001.

Therefore this means that the rates are $18.00/tonne or 34 % in this range since the
beginning of 2007 and up 108 % fromm April 200 (April 2007 = $34.17 verses April
2007 at $71.50).
The freight market is inverted and everyone is wondering how sustainable these rates
are. With current Panamax rates from the Gulf to Japan at about $71.50 and PNW
rates at near $51.00; the Panamax freight spread to Japan close to $ 20.50/mt or
$.52/bushel for corn and .56/bushel for Wheat and Soybeans
Today, bulkers represent 40% of the world fleet in terms of tonnage and 39.4% in
terms of vessels.
The current rates of different bulk carriers are as follows:
For a new Supramax vessel, the price will be $75,000,000 [sic] in 2007 and for a 5year-old Supramax in 2007, it will cost $60,000,000 [sic].
The cost of a large new Panamax is $100,000,000 [sic] and the cost for a compatable
five-year-old Panamax in 2007 is $85,000,000 [sic].
A new 170,000 DWT Capesize vessel costs $165,000,000 and $115,000,000 for a
comparable five-year-old in 2007.

6. The Ship Owners Making A Profit or Loss


Shares of the dry bulk shippers have all been beaten down as the Baltic Dry Index has
taken a fall. The fundamentals for the dry bulk industry remain very positive for the
next few years.
An example would be DryShips (DRYS), the $2.3 billion company where it operates a
fleet of 35 dry bulk shipping vessels. Shares are currently trading at just 9 times
current earnings, and very cheap 4.4 times future earnings. The company has
exceeded the analyst estimates for the past four quarters, and future estimates may be
just as conservative. DryShips stock still has 70% to go to return to its peak of $131 a
share set in November amidst the rally in the Baltic Dry Index. The company's return
on equity stands at a whopping 57%, signaling that management has a history of
making effective investments.

7. Future Forecast of Supply and Demand


The demand for drybulk carrier capacity is determined by the underlying demand for
commodities transported in drybulk carriers, which in turn is influenced by trends in
the global economy. Seaborne drybulk trade increased by slightly more than 2% on an
average annual basis during the 1980s and 1990s. However, this rate of growth has
increased dramatically in recent years. Between 1999 and 2006, trade in all drybulk
commodities increased from 2.0 billion tons to 2.5 billion tons, an increase of 35%
overall.
Generally, growth in gross domestic product and industrial production correlates with
peaks in demand for seaborne transportation. Certain economies will act from time to
time as the "primary driver" of the drybulk carrier market. In the 1990s, Japan acted
as the primary driver due to increased demand for seaborne trade and growth in
Japanese industrial production. China has been the main driving force behind the
recent increase in seaborne drybulk trades and the demand for drybulk carriers.
The demand for sea transport originates from the world economy's need to import raw
material for the manufacturing industries and the trade of manufactured products. The
relationship between sea trade and world industry is not linear however. There are
several factors that affect world trade which in turn reflect in the shipping market.
The dominant feature of the shipping market supply/demand model is that demand is
highly volatile and unpredictable, while supply is lethargic to respond to changes.
The shipping industry is highly cyclical, experiencing volatility in profitability, vessel
values and charter rates resulting from changes in the supply of and demand for
shipping capacity. Fluctuations result from the interaction of various factors between
demand and supply. The demand for vessels is influenced by global and regional
economic conditions, international trade developments, port congestion, trading routes
and weather pattern changes, crop yields, armed conflicts, political developments,
embargoes and strikes, demand for consumer goods, dry bulk commodities, and crude
oil and oil products.
Supply of shipping capacity is mainly a function of the delivery of new vessels and
the number of older vessels scrapped and is also affected among other by port
congestion and regulation of maritime transportation practices by governmental and
international authorities.
A major increase in demand only pushes freight rates up slightly because vessels in
lay-up immediately enter the market to meet the increasing demand. An additional
increase in demand is what triggers the highest hike in freight rates, as the market rate
is being set by older vessels which require higher freight rates in order to be
profitable. The market's sensitivity to the balance between supply and demand
explains why freight rates tend to follow a long trough periods which are sporadically
reverted by short periods of very high rates.
There will probably be an increase in supply and demand in ships due to changing
trade patterns because of longer voyages. There will also be an increase in ship
productivity down the years due to bigger demands in trade, however port congestion

will be an issue to be taken into consideration. It is a major issue for the market and
there will be delays at many dry bulk loading ports.
8. Other Information that may be of interest to Ship owners
Charter rates for Supramax and Handymax vessels may continue to weaken in 2008
until the extra supply is made up with returning demand and expected in the first half
of next year. 2008 may be the end of the line for the drybulk market - with rates
falling off in 2009 and 2010 as a number of new vessels are expected to flood the
market. Just a few months ago, it was widely speculated that the market could sustain
itself through 2009 or 2010, but Boyden noted that new ship building has caught up
with demand at a faster rate than expected.