Chartering practices in liner shipping

Abstract

Chartering rather than owning a vessel is a recurrent question for liner operators. This article aims at identifying the extent of such chartering practices, the characteristics of vessels chartered and if an impact on liner profitability can be found. To do so, an initial data set collected in 2009 on 510 liner operators and 5005 vessels is used. Results from random-effect probit models point out first that chartering rates are not different between small and large operators. Furthermore, findings suggest that chartering of small and young vessels is more common and that chartering rates have increased for companies subject to higher fleet growth from 2007 to 2009. An analysis using a fixed-effect logit model on intrafleet management of 17 selected liner companies further stresses that larger companies have chartered more small vessels during the last 2 years, a result that may be explained by the need to allocate financing to new larger vessels. We then study whether the chartering rate and the size of these 17 liner companies have had an influence on their observed profitability in 2007, 2008 and 2009. Our results suggest that those variables impact profitability, but in variable ways over time.

Notes

1. Similar groupings were done for all operators and owners. The coding is available upon request to the authors.

2. For this category of vessels, a representative rate does not exist due to the limited number of transactions on the chartering market.

3. For instance, broker information reported in Drewry Research (2011) stresses that during the last trimester of 2009, CMA-CGM (46 vessels), Maersk Line (38) and CSAV (24) were the most active companies on the chartering market, these three companies being amongst our 17 selected operators.