Decisions regarding investments in capacity expansion/renewal require taking into account both the operating fitness and the financial performance of the investment. While several operating requirements have been considered in the operations research literature, the corresponding financial aspects have not received as much attention. We introduce a model for the renewal of shipping capacity which maximizes the Average Internal Rate of Return (AIRR). Maximizing the AIRR sets stricter return requirements on money expenditures than classic profit maximization models and may describe more closely shipping investors׳ preferences. The resulting nonlinear model is linearized to ease computation. Based on data from a shipping company we compare a profit maximization model with an AIRR maximization model. Results show that while maximizing profits results in aggressive expansions of the fleet, maximizing the return provides more balanced renewal strategies which may be preferable to most shipping investors.
This scientific study aims to compare the significance of onboard positioning of two different classes of wind propulsion systems for retrofit installations to maximize fuel and emissions savings. The study focuses on comparing the performance a low lift-to-drag ratio wind propulsion system, the Rotor Sail, and a high lift-to-drag ratio one, the DynaRig, installed at different places on a real 84000 DWT bulk carrier ship to identify the most efficient placement of these two distinct systems to achieve maximum fuel efficiency. The investigation involves a comprehensive analysis of available deck spaces, and performance prediction program modeling is employed to estimate potential fuel savings for a typical route followed by the vessel. The results show that placing the WPS far forward, close to the hydrodynamic centre of lateral resistance, results in overall higher savings. Both WPS classes see a penalty when placed far from the hydrodynamic centre of lateral resistance, reducing their overall savings potential. However, Rotor Sails are more adversely affected due to their enhanced side force generation per unit thrust. Consequently, the placement of Rotor Sails becomes crucial, especially under upwind conditions, while DynaRigs prove more versatile for installations in the aft. This research provides valuable insights into enhancing the ship's energy efficiency and reducing its environmental impact in the maritime industry.
As of January 2015, the new maximum limit of fuel sulfur content for ships sailing within emission control areas has been reduced to 0.1%. A critical decision for ship owners in advance of the new limits was the selection of an abatement method that complies with the regulations. Two main options exist: investing in scrubber systems that remove sulfur dioxide emissions from the exhaust and switching to low-sulfur fuel when sailing in regulated waters. The first option would involve significant capital costs, while the latter would lead to operating cost increases because of the higher price of the fuel used. This paper presents a literature review of emissions abatement options and relevant research in the field. A cost–benefit methodology to assess emission reduction investments from ship owners is also presented. A study examined the effects of recent drops in bunker fuel price to the payback period of a potential scrubber investment. The results show that lower prices would significantly delay the payback period of such investments, up to two times in some cases. The case studies present the emissions generation through each option for representative short sea shipping routes. The repercussions of low-sulfur policies on large emission reduction investments including cold ironing are examined, along with implications of slow steaming for their respective payback periods. Recommendations are made for research in anticipation of future regulations and technological improvements.
A multidisciplinary and -national team of Ghanaian and Danish researchers engage in a three year research project financed by the Danish Ministry of Foreign Affairs in order to address the question how communication, gender, and sustainability affect the cluster performance of the Port of Tema in Ghana. We approach the question from different angles ranging from quantitative survey datat to longitudinal anthropological observations and qualitative multilayered interviews with port workers, politicians, port officials, domestic and foreign investors, and representatives from the surrounding communities.
Carriers in liner shipping markets frequently make public announcements of general rate increase (GRI) intentions, based on which EU authorities have concerns as to whether this harms market competition. This paper aims to empirically investigate how well the GRI system works from an industrial competition perspective, which will indirectly indicate whether carriers are able to manipulate spot rates following GRI announcements. Taking the Far East–North Europe trade between 2009 and 2013 as an example, the paper first reveals the gradual increase of GRI frequency and size, which reflects carriers’ attempts to restore profitability against overcapacity. However, out of all the GRI events only 28.6% were observed to be successful. Since these GRI successes must be the results of either price collusion (if any) and/or normal rate change by carriers in response to fundamental market developments, the effective collusion, if it exists, is actually lower than 28.6%. Next, we identify eight factors influencing GRI successes. To further assess their impact, we applied an ordered logit regression analysis, which, based on four of the factors involved, yields good predictability for GRI success. The four factors, in sequence of explanation power, are the total capacity of GRI carriers, the idling fleet size, the spot rate level, and the average ship-loading factor. Clearly the latter three factors are market fundamentals, which are unlikely to be influenced by an individual carrier in the short term. In actual fact, the conclusion reached is that there is little evidence that carriers can manipulate and distort spot rates through GRIs.
What Is the Issue?
Sustaining long-term growth requires marine suppliers to define their pricing strategies in a holistic fashion. However, pricing is an under-managed activity in many companies. Especially when moving towards servitization, services or integrated solutions are frequently underpriced or promised at performance levels that cannot be delivered profitably.
Why Is It Important?
Pricing is one of the most important elements for all business and everything in the business works to justify the input value for a price and turn it into a profit. It therefore has a dramatic but frequently underappreciated effort on achieving profitability and keeping business thriving.
What Can Be Done?
The marine supplies industry needs radical change in pricing by thinking about customer’s needs and aligning the incentives between suppliers and customers for long-term relationship. Value-based pricing is the way forward. An intensive discussion has been made with regard to the key challenges of applying value-based pricing in the marine supplies industry. Understanding these challenges is crucial for a move towards value-based pricing and will shed light on how to tackle these challenges.
In this report, the PrimeFish project provides an overview of the European and especially the EU seafood sector in the context of global development; i.e. development in other continents with a focus on large commodity groups for fisheries and aquaculture.
Purpose: In the shipping industry, both sales and purchases of second-hand ships and freight transport services are prevalently tailor-made and traded with intense bilateral negotiations. Price bargaining is the key step of this negotiation process and plays a crucial role in determining mutually agreed prices. Despite its cruciality and applicability, the price bargaining has yet received due conceptual and/or theoretical attention in the shipping literature. This paper attempts to conceptually examine the role of bargaining in shipping transaction prices and subsequently puts forward directions for future research. In doing so, the paper focuses on two types of transactions taking place in shipping markets: asset market trading of second-hand vessels and service market trading shipping freights.
Design/methodology/approach: The paper begins with a systematic literature review of price bargaining in the field of economics and management disciplines from a game-theoretic perspective. This approach does logically lead to the establishment of a conceptual framework for price bargaining in shipping sub-markets as a step toward having taken into consideration a variety of heterogeneities commonly present in trading activities and market dynamics.
Findings: A set of research areas has been consequently identified where price bargaining and mechanisms for the shipping freight and asset markets could be further explored and analyzed in a way to make better pricing decisions under a more tangible framework.
Research limitations/implications: One of the critical challenges when using bargaining mechanisms to make a decision on pricing shipping services and assets is how to operationalize the study for empirical investigation as some of the factors are internal information of the players and are not adequately revealed to externals: that is, an imperfect information sharing case. The current study aims, however, not to conduct an empirical analysis but to initiate a conversation among maritime economists by bringing their attention to this not-yet fully explored and potentially impactful field of research and by asking them to treat bargaining from a perspective for pricing shipping assets and services. It is claimed that, by doing so, one could better understand price differences between individual contracts.
Originality/value: This study would be considered the first in its kind to provide a detailed survey of the bargaining theory and models from a game theoretical perspective as a theoretical lens to understand its importance and relevance in pricing shipping assets and services. It also provides a simplified operational case on utilizing bargaining in practically pricing freight services.
In this paper we extend the state-of-the-art stochastic programming models for the Maritime Fleet Renewal Problem (MFRP) to explicitly limit the risk of insolvency due to negative cash flows when making maritime shipping investments. This is achieved by modeling the payment of ships in a number of periodical installments rather than in a lump sum paid upfront, representing more closely the actual cash flows for a shipping company. Based on this, we propose two alternative risk control measures, where the first imposes that the cash flow in each time period is always higher than a desired threshold, while the second limits the Conditional Value-at-Risk. We test the two models on realistic test instances based on data from a shipping company. The computational study demonstrates how the two models can be used to assess the trade-offs between risk of insolvency and expected profits in the MFRP.
With expanding human uses at sea, the objective of maritime spatial planning (MSP) to promote sustainable coexistence between marine uses becomes an increasingly challenging task. In order to assess coexistence options, both use-use interactions and use-environment interactions are important to explore. Tools for doing cumulative impact assessments (CIA) on the environment provide a means for spatially exploring environmental impacts. Finding inspiration in such ecosystem-based spatial use-environment approaches while drawing on pairwise marine use compatibility knowledge from existing literature, a spatial approach to model potential synergies and conflicts between marine uses through an expert-based scoring system is presented and implemented in SEANERGY, an ArcMap-based opensource toolbox. A test based on Baltic Sea GIS data demonstrates how SEANERGY supplements CIA analyzes with knowledge about potential use-use synergies, potential use-use conflicts, and their spatial extents, useful for optimizing the use of marine space in MSP without putting too much cumulative pressure on the environment.