The Market

Seaborne transportation is generally the most efficient method of carrying out large scale international trade. The differences in the nature of the commodities shipped between different ports impose limitations on the type of vessels that can be used in each voyage, classifying seaborne transportation in 3 major categories: tankers, containerships and dry bulk vessels. Tankers are used to transport liquids or gases such as crude oil, refined oil products, chemicals, LNG etc. Containerships are primarily used to transport dry cargo that can not be carried in bulk e.g. containerized products and breakbulk. Dry bulk vessels are used to carry cargo that can be stowed loose in its holds, e.g. coal.


Dry bulk cargo can be separated in two categories, as Major Bulks and Minor Bulks. Major bulks, which represent the largest segment of dry bulk cargoes (above 60%), include iron ore, coal and grains. Minor bulks include various steel products, forest products, non-grains agricultural products, sugar, construction materials such as bauxite / alumina and cement, fertilisers and sundry minerals including phosphate rock.

Global trading activity is closely correlated with global GDP (Gross Domestic Product) levels. The growth in the GDP of a country requires more raw materials and commodities to be imported in order to satisfy demand and production requirements thus generating demand for seaborne transportation. Historically the economies of North America, Europe and Japan have acted as the primary drivers of dry bulk trade, although in the most recent years the contribution of China and India is becoming more important as their GDP growth rate is significantly higher than the growth of the developed countries 


Depending on the volume of commodities to be transported and the geographical limitations of the ports of call seaborne trade utilises vessels of various carrying capacities. In particular, the dry bulk fleet is generally divided into four major vessel categories, Capesize (the largest vessels, with carrying capacity of 100 – 200 thousand dead weight tonnes -dwt), Panamax (60 – 99 thousand dwt), Handymax (40 – 59 thousand dwt) and Handysize (10 – 39 thousand dwt).

Approximately one third (34%) of the carrying capacity of the world’s dry bulk fleet consists of Capesize vessels, whereas Panamax vessels account for about one quarter (27%). However, the combined fleet of Handymax and Handysize vessels is the largest segment of the dry bulk fleet, representing approximately 39% of the global fleet.

The age of a vessel is an important factor defining its earning capacity, by affecting its demand for services, freight rate and maintenance costs. Generally, dry bulk vessels are expected to have a useful economic life of between 28 and 30 years, after which they are usually being sold for their light weight as scrap steel. As per recent data, the Handysize fleet is considerably aged, with 6 every 10 vessels being more than 20 years old. The Capesize fleet has the most recent deliveries, with approximately 30% of the vessels being less than 5 years old. The remaining vessel categories are more evenly split age wise.


Dry bulk vessels are chartered out through a number of different contract options, the most common of which are bareboat charters, time charters and spot charters.

Under a bareboat charter, the charterer has the use of a vessel typically over a long period of time (years) and may even have the right to extend the period further. All voyage related costs, including bunkers (fuel & oils) and port dues as well as all vessel operating expenses, such as crew payroll and provisions, insurance, day-to-day and periodic maintenance are usually borne by the charterer. The owner of the vessel receives monthly charter hire payments (calculated on a per day basis).

Under a time charter, the charterer has the use of a vessel either for a number of months (usually more than 4 months) or years. All voyage related costs are borne by the charterer whereas all vessel operating expenses are borne by the owner of the vessel. The owner of the vessel receives usually semi-monthly charter hire payments (calculated on a per day basis). Because vessel operating expenses are paid by the owner of the vessel the charter hire is generally higher than a corresponding bareboat charter.

Under a spot charter the owner of the vessel undertakes to carry out the shipment of a specific volume and type of cargo on a load-port to discharge-port basis, subject to various cargo handling terms. Most spot charters relate to a single voyage, whereas time charters usually relate to round-trip trading. All voyage related costs and vessel operating expenses are borne by the owner of the vessel. The charterer is responsible to pay the hire rate, which is usually calculated by multiplying the tonnes of cargo loaded on board by the agreed upon freight rate expressed on a per cargo ton basis.


In the time charter market, rates vary depending on the length of the charter period and vessel specific factors such as age, speed, size and fuel consumption. In the spot charter market, rates are influenced by cargo size, commodity type, port dues and canal transit fees, as well as transportation distance and delivery and redelivery regions.

In order to sustain the demand for the large bulkers a continuous flow of large shipment quantities is required, therefore in periods of global economic slowdown and boom the charter hire rates of large vessels tend to be more volatile. In contrast, Handymax and Handysize vessels are subject to less volatility as the demand for minor bulks is more normalised than the demand for major bulks.

The Baltic Exchange is an organisation that provides independent daily shipping market information. The chartering rates indices (BCI for Capesize, BPI for Panamax, BSI for Handymax, BHSI for Handysize vessels) provide an indication of the daily chartering rates and reflect the status of the market.