So here is the first of a new series dedictaed to the world of bulk carrier shipowning. Beneath the docile, lumbering appearance of a super huge cargo carriers is a world of surprising color and complexity.
Lets start with calrifying some major concepts.
Its easy to imagine that as a cargo owner that needs his/her goods to be moved, there is out there a series of pure shipowners ready to offer you a service. By pure shipowners i mean someone who has bought a ship and now manages the ship in every transaction that takes place.
Truth: As a cargo owner (charterer) the likelyhood that you will have as your direct counterparty the pure shipowner is very small.
Here is a more likely scenario....
- Shipyard received an order to build a particlar ship.
- Shipyard agrees to build said ship for USD 100 million dollars
- For delivery in 3 years
- The buyer (company A) at this moment is the potential shipowner
- The buyer could be any large organisation with access to funds and an interest in shipping.
- Once the ship is finished and delivered this buyer is now a shipowner.
However
- 1 year prior to delivery, the buyer (company A) decides he has no interest in managing and operating the ship. Campany A also recognises that the book price of the ship (as yet undelivered) has risen quite alot (120 million) due to demand from china and india for raw Materials
- Company A sells the ship to Company B for 120 million - one year prior to the vessel being delivered.
- Company B is happy to pay the price because they are a hedge fund who would like to have some hard assets that will generate an income
- Company B however does not have any interest in operating the ship. they are a hedge fund and have no shipping expertise.
- Company B then enters into a 10 year lease relationship with Company C and thus locks in charter income for ten years.
- Company C are a large shipmangement company who have 60 other ships on their books with similar lease relationships. Company C do not like investing millions in purchasing ships outright and prefer to enter into these long term lease arrangement instead.
- Company C insists on a 'purchase option' on completion of 10 years service at an agreed price. Company B is happy to agree as they can now lock in their entire exposure.
- 3 years gone and vessel finally delivers - Grand opening and there is a cast of thousands to break the bottle of champaign on the hull of 'MV make me millions'.
- For the vessels first employment Company C takes the opportunity of a high long period market to charter the vessel to Company D for 3 years. Company C locks in a nice 3 year profit and Company D now has a nice ship to complement thier burgeoining fleet...
- and it goes on and on and on....
As a charterer there are occassions when you think you give your cargo to a 'shipowner' and infact you are merely giving the cargo to a 'disponent shipowner' and the real (head) owner is a long way down the chain. This is both necessary (for the wider industry) but problematic for charterers as the longer the chain is, getting important documentational, legal and operational matters sorted in a timely manner becomes increasingly hard.
Hopefully after reading the above a few times the world of shipowning, and its structures, start to make a little more sense.
I will elaborate and open a few more ideas over the coming weeks. If anyone has any specific question feel free to drop me an email.
Yours
VS
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