Dry Bulk Shipping Overview

Dry Bulk Shipping Overview

Bulk Carriers are generally used to transport iron ore, coal, grain, bauxite, phosphate, sugar, steel products and other dry bulk commodities. Handies and Handymax vessels are able to transport bulk commodities to and from most ports in the world, including those found in less developed countries, while Panamax bulk carriers are designed to serve larger ports with more sophisticated cargo handling facilities. The Company believes that, although the market for bulk carriers in general is now depressed, the market is expected to begin improving in the future. There are now outstanding possibilities of acquiring such vessels at low prices (compared to the prices their owners were asking one or two years ago).

Several factors make Handies and Handymax bulk carriers more flexible than other sizes. These ships can carry anywhere from 20.000 to 60.000 tons of cargo which would be unprofitable for large bulk carriers such as Panamax 70.000 to 85.000 dwt ships to carry. Further, if necessary to fill the ships, several different cargoes can be carried economically in the various cargo holds of Handies and Handymax bulk carriers and delivered to various ports. Additionally, some ports in South America have draft restrictions thus precluding full utilization by larger ships.

During the 1970’s, 1980’s and 1990’s, Panamax bulk carriers became the workhorses of the dry bulk fleet, carrying grain and coal on major trade routes such as U.S. Gulf to Japan and Northern Europe, North Pacific to Japan and Hampton Roads to Japan and Northern Europe. These vessels typically carry 65.000 to 85.000 tons of cargo on such voyages. Cargo handling facilities in both the loading and discharging ports of these routes are highly efficient, unlike many of the ports frequented by handy-size bulk carriers. Typically, Panamax bulk carriers do not have cargo gear onboard, unlike the Handies and Handymax bulk carriers. The countries involved in these major Panamax trade routes typically have internal transportation systems (barge, rail and track) which are oriented towards serving the sophisticated ports where Panamax bulk carriers are loaded and discharged.
Ultra-modern fuel-efficient vessels need long voyages to take advantage of their fuel efficient engines. Further, fuel prices are lower now (approximately $35 to $40 per barrel). The Company’s approach on older ships will minimize the risk of the investment but will benefit from a future upturn of the market.

Our company believes that the projected low capital cost of the Company’s ships, combined with the nature of their voyages and the low fuel prices, could make the Company’s vessels competitive with more fuel efficient and higher cost vessels.

Although the Company has no current agreements or understandings to purchase any specific vessels, management believes that there are a sufficient number of satisfactory vessels available to purchase.. Among the factors to be assessed by management in choosing vessels are the vessel’s age, deadweight, draft, cubic capacity, cargo hold configuration, cargo gear, speed, fuel consumption, main and auxiliary engines, and her classification society records. Classification society records reflect the ship’s history, whether it has incurred chronic mechanical failures, her accident history and other pertinent data as to the vessel’s soundness. When possible, the Company will engage independent contractors to physically inspect the vessel to be purchased and its deck and engine logbooks.

Historically, market prices for secondhand Handies/Handymax and Panamax bulk carriers have fluctuated widely. Accordingly, the Company is unable to specify which vessels and how many of each type will be purchased and the amount that will pay for each such vessel. Under certain market conditions, the strategy may defer the purchase of vessels and thus not fully utilize the proceeds immediately or, if relative market prices for Handies/Handymax and Panamax bulk carriers change, alter the mix of vessels to be purchased.

Major Dry Bulk Vessel types


  • Handy-size Bulk Carriers: Bulk Carriers of 25.000 to 40.000 DWT.
  • Handymax Bulk Carriers: Bulk Carriers of 40.000 to 65.000 DWT.
  • Panamax Bulk Carriers: Bulk Carriers of 70.000 to 85.000 DWT.
  • Capesize Bulk Carriers: Bulk Carriers of 100.000 to 182.000 D

Glossary of Shipping Industry Terms

The following are definitions of certain terms that are commonly used in the shipping industry:
Annual survey. The inspection of a vessel pursuant to international conventions, by a classification society surveyor, on behalf of the flag state, that takes place every year.
Available days. The total days that a vessel is available for employment, net of off-hire days associated with major repairs, upgrades, drydockings or special or intermediate surveys.
Ballast Voyage. A voyage during which the vessel is not laden with cargo.
Bareboat charter. A bareboat charter involves the use of a vessel usually over longer periods of time ranging over several years. In this case, all voyage related costs, mainly vessel fuel and port dues, as well as all vessel-operating expenses, such as day-to-day operations, maintenance, crewing and insurance, are for the charterer’s account. The owner of the vessel receives monthly charter hire payments on a U.S. dollar per day basis and is responsible only for the payment of capital costs related to the vessel. A bareboat charter is also known as a “demise charter” or a “time charter by demise.”
Beam. The width of a vessel at its widest point; breadth.
Brokerage commission. Commission payable by the shipowner to the broker, expressed as a percentage of the freight or hire. It is part of the charterparty.
Bunkers. Fuel burned in a vessel’s engines.
Charter. The hire of a vessel for the transportation of a cargo. The contract for a charter is commonly called a “charterparty.”
Charterer. The party that hires a vessel under the charterparty.
Charterhire. A sum of money paid to the shipowner by a charterer for the use of a vessel. Charterhire paid under a voyage charter is also known as “freight.”
Classification society. An independent society that certifies that a vessel has been built and maintained according to the society’s rules for that type of vessel and complies with the applicable rules and regulations of the country of the vessel’s registry and the international conventions of which that country is a signatory. A vessel that receives its certification is referred to as being “in-class.”
Commercial Management or Commercially Managed. The management of the employment, or chartering, of a vessel and associated functions, including seeking and negotiating employment for vessels, billing and collecting revenues, issuing voyage instructions, purchasing fuel, and appointing port agents.
Commercial Pool. A commercial pool is a group of similar size and quality vessels with different shipowners that are placed under one administrator or manager. Pools allow for scheduling and other operating efficiencies such as multi-legged charters and Contracts of Affreightment and other operating efficiencies.
Contract of Affreightment: A contract between a cargo shipper and carrier for the transport of multiple cargoes over a period of time. Contracts are individually negotiated and usually

include cargo description, quantities per shipment and in total, load and discharge ports, freight rates and duration of the contract.

Daily Operating Costs. The costs of a vessel’s technical operation, crewing and insurance (ex-costs of financing).
Draft. The depth of a vessel, loaded to full dwt capacity, between the waterline and the keel.
Drybulk. Non-liquid cargoes of commodities shipped in an unpackaged state.
Drydocking. The removal of a vessel from the water for inspection and repair of those parts of a vessel which are below the water line. During drydockings, which are required to be performed periodically, certain mandatory classification society inspections are carried out and relevant certifications are issued. Drydockings are generally required once every 30 months or twice every five years, one of which must be a special survey.
Dwt. Deadweight ton, which is a unit of a vessel’s carrying capacity, including cargo, fuel, oil, water, stores and crew measured in metric tons of 1,000 kilograms.
Fix. A shipping industry term for arranging the charter of a vessel.
Flag state. The country where a vessel is registered.
Freight. A sum of money paid to the shipowner by the charterer under a voyage charter, usually calculated either per ton loaded or as a lump-sum amount.
Gear. On-board equipment used to load and unload vessels.
Geared. A vessel outfitted with equipment to load and unload its cargo.
Gearless. A vessel that lacks its own equipment to load and unload cargo.
General Cargo Ship. This older type of cargo ship generally has tween decks for mixed general cargo, tanks for liquid cargo, and maybe some refrigerated capacity. It also has deep holds for bulk cargo. Usually, the hatch openings are too small for below-deck container stowage, but containers can be stacked on deck. General cargo ships often have their own cranes and derricks for loading and discharging
General and administrative expenses. General and administrative expenses consist of employment costs of shoreside staff and cost of facilities, as well as legal, audit and other administrative costs.
Gross ton. A unit of the volume of a ship’s enclosed spaces measured to the outside of the hull framing.
H&M. Hull and machinery insurance.
Hire rate. The agreed sum or rate to be paid by the charterer for the use of the vessel; usually paid in $/day.
Hull. Shell or body of a ship.

IMO. International Maritime Organization, a U.N. agency that establishes international standards for shipping.
Intermediate survey. The inspection of a vessel by a classification society surveyor that takes place 24 to 36 months after each special survey.
ISM Code. International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention, which, among other things, requires vessel owners to obtain a safety management certification for each vessel they manage.
Knot. A measure of the speed of a vessel. 1 knot = 1 nautical mile per hour, = 1.85 km/h = 1.15 miles per hour.
LOA. Length overall.
Lay-up. Mooring a ship at a protected anchorage, shutting down substantially all of its operating systems and taking measures to protect against corrosion and other deterioration.
MARPOL. The International Convention for the Prevention of Pollution from Ships.
Newbuilding. A new vessel under construction or just completed.
Off-hire. The period in which a vessel is unable to perform the services for which it is

immediately required under a time charter. Off-hire periods can include days spent on repairs, drydocking and surveys, whether or not scheduled. Charterhire is generally not paid during off-hire periods. This is usually agreed in the charterparty. If the off-hire period is subject to dispute then resolutions are usually met through arbitration panels.
Operating costs. The costs of operating the vessels, including crewing costs, insurance, repairs and maintenance, stores, spares, lubricants and miscellaneous expenses (but excluding capital costs, interest and voyage costs).
Operating days. The days a vessel is in operation for a period, measured by subtracting idle days from available days.

Protection and indemnity (P&I) insurance. Insurance obtained through a mutual association formed by shipowners to provide liability indemnification protection from various liabilities to which they are exposed in the course of their business, such as oil pollution, cargo damage, crew injury or loss of life, and which spreads the liability costs of each member by requiring contribution by all members in the event of a loss.
Scrapping. The sale of a vessel as scrap metal.
Short-term charter. A charter for a term less than two years.
SOLAS. International Convention for Safety of Life at Sea, which provides, among other things, rules for the construction and equipment of commercial vessels.
Special survey. The inspection of a vessel by a classification society surveyor that takes place every four to five years, as part of the recertification of the vessel by the classification society.
Spot charter. Generally refers to a voyage charter or a trip charter (see separate definitions), which generally last from 10 days to three months. Under both types of spot charters, the shipowner would pay for vessel operating expenses, which include crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs, and for commissions on gross revenues. The shipowner would also be responsible for each vessel’s intermediate and special survey costs. Under a timecharter agreement the charterer is responsible for the payment of voyage and operating expenses.
Spot market. The market for a vessel for single voyages.
Time Charter Equivalent Rate (“TCE”). Shipping industry performance measure used primarily to compare daily earnings generated by vessels on time charters with daily earnings generated by vessels on voyage charters, because charter hire rates for vessels on voyage charters are generally not expressed in per day amounts while charter hire rates for vessels on time charters generally are expressed in such amounts. TCE is expressed as U.S. dollars per day rate and is calculated as voyage revenues less voyage expenses divided by the number of voyage days.
Time charter. A charter under which the vessel owner is paid charterhire on a per-day basis for a specified period of time. Typically, the shipowner receives semi-monthly charterhire payments on a U.S. Dollar-per-day basis and is responsible for providing the crew and paying vessel operating expenses while the charterer is responsible for paying the voyage expenses and additional voyage insurance. Under time charters, including trip time charters, the charterer pays voyage expenses such as port and canal costs and bunkers.
Trip charter or short time charter. A time charter for a trip to carry a specific cargo from a delivery point via load and discharge ports to a redelivery point.
Vessel operating expenses. The costs of operating a vessel, primarily consisting of crew wages and associated costs, insurance premiums, management fees, lube oil and spare part costs, and repair and maintenance costs. Vessel operating expenses exclude fuel costs, port expenses, agents’ fees, canal dues and extra war risk insurance premiums, as well as commissions, which are included in “voyage expenses.”
Vessel utilization. The percentage of time that vessels are available for revenue generating days, determined by dividing operating days by available days for the relevant period.

Voyage charter. A voyage charter involves the carriage of a specific amount and type of cargo on a load port-to-discharge port basis, subject to various cargo handling terms. Owners are also responsible for any positioning movement costs. Most of these charters are of a single voyage nature, as trading patterns do not encourage round voyage trading. The owner of the vessel receives one payment derived by multiplying the tonnage of cargo loaded on board by the agreed upon freight rate expressed on a U.S. dollar-per-ton basis. The owner is responsible for the payment of all voyage and operating expenses, as well as the capital costs of the vessel.

Voyage expenses. Expenses incurred due to a vessel’s traveling from a loading port to a discharging port, such as fuel (bunkers) costs, port expenses, agents’ fees, canal dues and extra war risk insurance, as well as commissions.


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