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CHAPTER 2 Charter rates and state of the freight market

Shipbroking and Chartering Practice

Page 43


Charter rates and state of the freight market

Charter rates and state of the freight market

Freight is considered to be the most crucial part of a charter agreement. This chapter completes the charter market analysis, focusing on the freight rates perspective. Firstly, it shows how the general state of freight rates is determined in the open market. This is compared with liner pricing aspects for which a short reference is made. Then, factors affecting the fixture rate of an individual charter are discussed. Analysis goes further to examine the fundamentals of the four major freight markets; dry bulk, tanker, gas and containerships. In order to show an overall view of the charter market, for each market segment some interesting chartering topics are considered, such as the preferred types of vessel fixtures, the indicative voyage/trade routes, the major cargo exporting and importing areas, the typical cargo shiploads, the expression and reporting of spot and time charter rates, the key indicators of ships’ demand and supply, together with examples of real charter fixtures (spot and time charter). The state of each freight market is discussed and the long-term historical evolution of time charter rates is illustrated for all the representative types of vessels, ranging from 1980 up to 2015. In the last section of this chapter, freight indices are described to show how the state of the market is measured and expressed, while freight derivatives are introduced to present how the freight market risk may be managed. Finally, it is worth noting that freight markets are dynamic, thus an updated market data coverage is beyond the scope of this book. Therefore, freight rates have been intentionally omitted from the respective tables.