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General


Shipping Companies

GENERAL

The days that the merchant accompanied his goods at sea, are gone since the turn of the eighteenth to the nineteenth century.

Because of the growing complexity of international commerce, the trader's commercial and business transactions could no longer be linked to the operation of the ship.  Therefore in the interest of efficiency, the functions had to be separated.

 Independent shipping companies were created who offered their services solely as carriers to all those who had to transport goods by sea. These service providers have shown continuous growth over the years and have become the center of the shipping enterprise. Although shipping companies are commercial enterprises, they are in fact different from other commercial enterprises such as manufacturing, selling and buying, etc. Industrial fleets that belong to the large oil companies or steel companies, are also managed as independent shipping companies, who sell their services to the parent enterprise. To operate a shipping enterprise efficiently and successfully, it is necessary to give that enterprise its own economical, organizational and legal structure, which are not always compatible with other economic sectors. Shipping enterprises have adopted this structure to forge their own economic identity. They have not wavered in over two hundred years in faithfully maintaining this structure.

The structure of the shipping industry depends mainly on the structure of the goods that are carried. According to their means of transportation, goods may be classified in two main categories: general cargoes and bulk cargoes. Bulk cargoes are in turn divided in dry bulks and in liquid bulks. It is safe to say that general cargoes are carried by liners and the bulk cargoes by trampers.  Within the shipping industry three main categories of shipping companies are widely accepted: the liner companies for the carriage of general cargoes, the tramp companies for the carriage of dry bulk cargoes and the tanker companies for the carriage off liquid bulk cargoes.

Some shipping companies may specialize further and carry goods or passengers exclusively, or be only active in coastal navigation.

Dependent upon their specialization, each shipping company uses special types of ships, which are consistent with the type of cargoes that they carry.  Distinguishing features of each company are.;

a. In the liner shipping:

  • the traditional general cargo ships (freighters);
  • the container ships;
  • the Ro/Ro ships;
  • the polyvalent ships;
  • the refrigerated ships.

b. In the tramping

  • the bulk carriers;<:
  • the tankers;
  • the VLCC's;<:
  • the ULCC's;
  • the OBO ships;
  • the PROBO ships;
  • the LNG ships;
  • the LPG ships;
  • the lighter ships (LASH-, Seabee-, Bacat-types);
  • ships for the carriage of special cargoes and/or heavy lifts.

Note

It is sometimes difficult to categorize a particular type of ship in the liner trade or in the tramping. Therefore a detailed description and explanation of the different ship types is given in the paragraph "Types of Ships".

Because the way liner companies work (regular lines between several harbors, faster ships, fixed tariffs, etc.) is different to the way tramp companies work (no fixed loading and discharging harbors, unpackaged and loose bulk cargoes, mainly a full cargo, slower ships, no fixed freights, etc.), the structure of the liner company is different to the structure of the tramping company.  As a rule, liner companies need a larger and more structured organization than tramping companies.

There are between 8,000 and 10,000 shipping companies in the world, who all differ greatly from one another by size and structure. The criteria for determining the size of a shipping company are: the number of ships (owned or chartered) or the total tonnage they have at their disposal. Shipping companies with 1,000,000 tons DWCC are considered large companies and hold, without any doubt, an authoritative position in the shipping industry. Usually the larger shipping companies will be more successful because they do business on a larger scale. Larger enterprises can usually keep down their unit costs, so that, under equal circumstances they can generate better results. This is a general rule, but in practice, it has been difficult to prove that the larger enterprise necessarily obtain better results. Shipping is a highly risky business and the economic rules that govern it are not infallible.

Specialization in shipping (e.g. the carriage of only passengers, or freight, or bulk cargoes, or refrigerated goods, etc.) is determined by economic or political considerations and can have a number of advantages or disadvantages. Specialized shipping companies can easier acquire a position in the freight market, while companies who diversify more can take advantage of the versatility of the freight markets, especially during crisis periods.

The operation of a shipping company will, independent of its size or specialization, depend on two basic elements: capital and labor.

The enterprise's capital includes the means of production such as: the ships, the buildings, the workshops, the vehicles, eventually warehouses, etc. as well as the financial means such as cash flow, which are necessary to run the company. The capital goods or real capital of the shipping company are therefore the principal part of her assets.

The capital of the shipping company can consist of own capital or borrowed capital. Nowadays, few shipping companies can be self-financing so there is usually a broad bond between shipping companies and the banks. The financial concerns are in fact the real owners of the (large) shipping companies. In some countries, shipping companies are under the direct supervision of the government that allows them to obtain some government finance.

Labor or employment is composed of two different categories of employees namely, seagoing personnel and shore personnel.  Both must be highly specialized because the operation of a shipping enterprise is based on a high degree of professionalism. The relationship between the crew members on board and the amount of administrative personnel ashore, varies from country to country and from company to company and depends mainly on the type of company (liner company or tramping), the number of ships and their technical specifications and of the geographical extent of the company such as coastal navigation, deep sea navigation, thus small or larger ships, etc.

The sphere of activity of the ship operator or shipowner is very large. He has to comply with numerous law texts, regulations, conventions and the like, nationally but mainly internationally. He also has to reckon with the customs and uses of the shipping trade, and with the commercial uses and customs of the place, also on a national and international basis.

Due to the complexity and the own nature of the shipping trade, shipowners have since long felt the need to unite themselves in professional associations, on the one hand to arrive to uniform uses and practices, on the other hand to protect their common interests against other groups and/or administrations. (See also Associations)

So, in the course of the years, numerous national and international (private as well as public) organizations were created, who codified the rights and obligations of shipowners and helped tot introduce uniform rules of conduct.