Freight Market Equilibrium Theory :: essays research papers fc

Freight Market Equilibrium Theory An amazing assortment of goods be move over the worlds oceanic trade routes. Of necessity, the carriers charge for the service they render. These charges vary almost as widely as do the cargoes, for they mirror both the transmitowners costs and the special conditions preponderant on the trade routes traversed by the ships. Ocean freight rates may be described as the prices charged for the services of water carriers. Each ship operator develops its own rates, usually without consultation with the shippers. The charges reflect the cost of providing the carriage, the value of this service to the owner of the goods, the ability of the merchandise to support the expense of transportation, and economic conditions in general. Freight rates truly reflect the working of the laws of supply and demand. In tramp shipping, particularly, it is possible to observe how these factors influence the rise or finalize of freight rates from day to day and from carg o to cargo. Tramp ships transport, in shipload (or full cargo) lots, commodities which, like coal, grain, ore, and phosphate rock, can be moved in bulk. The fact that usually only one shipper and one commodity are involved simplifies the establishment of a freight rate for this particular movement. To the groovy charges of ownership and the expense of administration and overhead must be added the cost of running the ship, handling the cargo, and paying port fees and harbor dues. Against this total is set the get along of tons to be hauled, and the resultant figure is what the tramp must charge, per ton of cargo loaded, to break even on the contemplated voyage. If competitive conditions permit, a margin for usefulness will form part of the quoted rate. If however the prevailing economic climate is unfavorable, the owner has the privilege of retiring the ship to a quit backwater, there to bide until the financial skies are brighter. The tramp operator does not depend upon the long term goodwill of the shippers, but is free to accept those offers which appear profitable at the moment. When adversity threatens, those charters are accepted which minimize anticipated losses. If there is a choice, the cost of temporary lay-up is contrasted with the loss which continued operation might produce, and the less expensive substitute is selected in a bow to the inevitable made with whatever grace that can be mustered.