Tramp trade

A boat or ship engaged in the tramp trade is one which does not have a fixed schedule or published ports of call. As opposed to freight liners, tramp ships trade on the spot market with no fixed schedule or itinerary/ports-of-call(s). A steamship engaged in the tramp trade is sometimes called a tramp steamer; the similar terms tramp freighter and tramper are also used. Chartering is done chiefly on London, New York, Singapore shipbroking exchanges. The Baltic Exchange serves as a type of stock market index for the trade.

The term tramper is derived from the British meaning of "tramp" as itinerant beggar or vagrant; in this context it is first documented in the 1880s, along with "ocean tramp" (at the time many sailing vessels engaged in irregular trade as well).

History

The tramp trade first took off in Britain around the mid 19th century. The dependability and timeliness of steam ships was found to be more cost-effective than sail. Coal was needed for ships' boilers, and the demand created a business opportunity for moving large amounts of best Welsh coal[1] to various seaports in Britain. Within a few years tramp ships became the workhorses of trade, transporting coal and finished products from British cities to the rest of the world.

The size of tramp ships remained relatively constant from 1900 to 1940, at about 7,000 to 10,000 deadweight tons (dwt.). During the Second World War, the United States created the Liberty Ship; a single design that could be used to carry just about anything, which weighed in at 10,500 dwt.[1] The U.S. produced 2,708 Liberty Ships and they were used on every international trade route.[1][2] After the Second World War, economies of scale took over and the size of tramp ships exploded to keep up with a booming supply and demand cycle. During this time the bulk carrier became the tramp of choice for many owners and operators. The bulk carrier was designed to carry coal, grain and ore, which gave it more flexibility and could service more ports than some of its ancestors, which only carried a single commodity.

Today the tramp trade includes all types of vessels, from bulk carriers to tankers. Each can be used for a specific market, or ships can be combined like the oil, bulk, ore carriers to accommodate many different markets depending where the ship is located and the supply and demand of the area. Tramp ships often carry with them their own gear (booms, cranes, derricks) in case the next port lacks the proper equipment for loading or discharging cargo.[3]

Tramp charters

The tramp ship is a contract carrier. Unlike a liner, often called a common carrier, which has a fixed schedule and a published tariff, the ideal tramp can carry anything to anywhere, and freight rates are influenced by supply and demand.[3] To generate business, a contract to lease the vessel known as a charter party is drawn up between the ship owner and the charterer. There are three types of charters, voyage, time and demise.

Voyage charter

Voyage charter: The voyage charter is the most common charter in tramp shipping.[3] The owner of the tramp is obligated to provide a seaworthy ship while the charterer is obligated to provide a full load of cargo.[1] This type of charter is the most lucrative, but can be the riskiest due to lack of new charterers. During a voyage charter a part or all of a vessel is leased to the charterer for a voyage to a port or a set of different ports. There are two types of voyage charter – net form and gross form.[1] Under the net form, the cargo a tramp ship carries is loaded, discharged, and trimmed at the charterer's expense. Under the gross form the expense of cargo loading, discharging and trimming is on the owner. The charterer is only responsible to provide the cargo at a specified port and to accept it at the destination port. Time becomes an issue in the voyage charter if the tramp ship is late in her schedule or loading or discharging are delayed. If a tramp ship is delayed the charterer pays demurrage, which is a penalty, to the ship owner. The number of days a tramp ship is chartered for is called lay days.

Time charter

Time charter: In a time charter the owner provides a vessel that is fully manned and equipped. The owner provides the crew, but the crew takes orders from the charterer. The owner is also responsible for insuring the vessel, repairs the vessel may need, engine parts and food for the ship's personnel. The charterer is responsible for everything else. The main advantage of the time charter is that it diverts the costs of running a ship to the charterer.[1]

Demise charter

Demise charter: The demise charter is the least used in the tramp trade because it heavily favors the owner.[1] The ship owner only provides a ship devoid of any crew, stores, or fuel. It is the Charterer's responsibility to provide everything the ship will need. The ship owner must provide a seaworthy vessel, but once the charterer accepts the vessel, the responsibility of seaworthiness is the charterer's. The charterer crews the vessel, but the owner can make recommendations. There are no standardized forms in a demise charter, contracts can vary greatly, and are written up to meet the needs of the charterer.

Brokerage

Tramp ship owners and tramp ship charterers rely on brokers to find cargoes for their ships to carry.[1] A broker understands international trade conditions, the movements of goods, market prices and the availability of the owner's ships.

The Baltic Exchange, in London, is the physical headquarters for tramp ship brokerage.[1] The Baltic Exchange works like an organised market and provides a meeting place for ship owners, brokers and charterers. It also provides easy access to information on market fluctuations and commodity prices to all the parties involved. Brokers can use it to quickly match a cargo to a ship or ship to a cargo depending on whom they are working for. A committee of owners, brokers and charterers are elected to manage the exchange to ensure everyone's interests are represented.[4] With the speed of today's communications the floor of the Baltic Exchange is not nearly as populated as it once was, but the information and networking the exchange provides is still an asset to the tramp trade.

Tramps today

Due to the explosion of liner services, and in large part, due to containerisation since the 1960s, the tramp trade has decreased, but is by no means ended. A contemporary trend in the shipping business has resulted in renewed interest in tramp shipping.[5] To increase profits, liner companies are looking at investing into tramp ships to create a buffer when the market is down. For example, Mitsui OSK Lines possesses a large fleet with tramp ships and liners. With both types of shipping covered they are able to service a world economy even in a down market.[5] The advantage of tramp ships is they are relied upon at a moment's notice to service any type of market. Even in a down economy there will be a market for some type of commodity somewhere and the company with the ships able to exploit that market will do better than the company relying on liner services alone.

Tramp ship companies

Further reading

References

  1. 1 2 3 4 5 6 7 8 9 Buckley, J. (2008.) The Business of Shipping. Centreville, MD: Cornell Maritime Press. ISBN 978-0-87033-580-8
  2. ↑ Gripanios, H. (1959). Tramp Shipping. London: Thomas Nelson and Sons.
  3. 1 2 3 Schiels, K. (1994) Ship Agency: A guide to tramp ship agency. Surrey, UK. Fair Play Publications. ISBN 1-870093-75-5
  4. ↑ Gripanios 1959
  5. 1 2 Plomaritou, E. (2008). A proposed application of the marketing mix concept to tramp & liner shipping companies. Journal of Contemporary Management Issues, 13(1) 59–71.
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