Rebuilding of Europe and Japan after World War 2
Huge volumes of construction materials were required to rebuild the cities, towns and infrastructure that had been badly damaged during the war.
Huge volumes of grain and other food needed to be moved to Europe and Japan where people were starving as many farmlands and animals had been destroyed, and farming operations had been badly disrupted by the war.
To bring the construction materials and food (largely from North America, South America, southern Africa and Australia) many ships were required. Sadly thousands of ships had been destroyed during the war, and there was a severe shortage of vessels. The demand for ships to move these cargoes and the shortage of ships combined to bring high freight & charter rates.
Seasonal Cargoes
This is particularly of note during the South African fruit season when reefer ships are needed to load bulk fruit cargoes, but out of the fruit season, they are not required in South Africa and have to find cargoes elsewhere. Another example of the seasonal demand for ships is during the northern hemisphere’s long, cold and dark winter when extra electricity is needed for heating and lighting and when heating oil is needed for domestic heating systems. Therefore, there is a demand for Capesize bulkers to move coal for northern hemisphere powerstations from about September to February, and for tankers to move oil for refining for to produce heating oil for various heating systems. For the rest of the year, there is not such a demand for Capesize bulk carriers or for tankers to move cargoes to Europe and northern Asia.
Drought in some regions
Drought in a region means that food (especially grain) needs to be imported. This in turn means that ships need to be chartered to carry these extra grain cargoes. Because of the demand for ships, freight rates and charter rates increase.
Test yourself
Country X experiences a severe drought and its grain harvest is 4 200 000 tons lower than expected. It needs to import this shortage of grain from countries Y (2 400 000 tons) and Z (1 800 000 tons).
- How many Panamax shiploads (cargo capacity about 60 000 tons) will need to be chartered to move the grain from Country Y to Country X?
- Because of draught limitations in ports in Country Z, Handysize ships (cargo capacity about 30 000 tons) will need to bring the grain from Country Z to Country X.
2.1 How many shiploads will be needed to move this amount of grain?
2.3 If one ship is to leave Country Z each week, how many weeks will it take to move the cargo to Country X?
- Each ship will take 3 days to load the cargo (including pre-loading surveys, etc), 11 days to steam from Country Z to Country X, 6 days to discharge the cargo in Country X, and another 11 days to return to Country Z where the ship will spend about 4 days at anchor during the voyage. (A round voyage is calculated by adding the time loading at Country Z, steaming time to Country X, discharging time at Country X, steaming time back to Country Z and time at anchor.)
3.1 How long will one round voyage take?
3.2 How many ships will need to be chartered to move this cargo from Country Z to Country X? (You must bear in mind that the grain shipments from Country Z are weekly and that some ships can make more than one voyage.)
- What effect will this demand for Handysize ships have on the charter rates for Handysize ships in that region?
- A Handysize ship (on a time charter at $9 000 per day) will make three round voyages from Country Z to Country X, and then will load in Country Z for a one-way voyage to Country X.
5.1 How many days will she be on charter?
5.2 How much will she earn during this charter?
5.3 Who is responsible for crewing the ship while she is on this time charter?
5.4 Who is responsible for the fuel costs during this time on charter?
Economic Growth of China (about 1995 to 2007)
Rapid urbanisation of the Chinese people (i.e. the movement of thousands of people form the rural areas to the Chinese cities) meant that large-scale construction projects began in the cities. Houses, dams, powerstations, powerlines, pipelines, schools, roads, railways, canals and bridges were built, creating an unprecedented demand for construction materials (millions of tons of steel, cement, timber, machinery, etc.) To make the steel, China began to import millions of tons of iron ore, coal and other minerals, as well as importing steel.
Commercial and private vehicles began to be built in China as never before, creating a secondary demand for steel that either had to be imported or made in China. The Chinese shipbuilding industry as expanded, requiring more steel or the raw materials for steel to be imported. To supply the increased demand for electricity, powerstations had to be built, and more coal and oil imported.
To import all this material, there was a massive demand for ships that increased freight rates and charter rates to levels not experienced before. Rates soared – some Capesizes were chartered at over $200 000 per day (from around $40 000 a day); most other bulkers’ and tanker rates were also much higher than usual.
Because the offshore oil industry had an expanding market for its product, the industry expanded, creating a demand for rigs, drilling ships, offshore supply vessels, pipelayers, survey vessels and tugs. The charter rates for all these vessels increased to extremely high levels. Some anchor handling tugs were on charter for around $100 000 per day!
Because Chinese industry developed quickly during this time, containerships also benefited as there was a lot of demand for container space to move Chinese electronic goods, textiles, clothing and other commodities to Europe, North America and elsewhere. More money available in China also meant that Chinese people were able to buy more goods from Europe, North America and elsewhere. Therefore containerships trading to China were carrying full or nearly full loads of containers in both directions. This meant that the rates to move containers increased as well.
This gave rise to the development of really big containerships – for example, Maersk Line built their E Class ships. (Emma Maersk came out in 2006 with a capacity of around 13 000 teu.) Then they developed their Triple-E Class ships. (McKinney Moller Maersk and her 19 sisterships with a capacity of around 18 000 teu entered service from 2013.)
The 18000-teu Maribo Maersk, one of the world’s largest container ships with 15000-teu aboard. Photograph : Captain Stuart MacAllister
Looking aft from the Bridge of Maribo Maersk. Photograph : Captain Stuart MacAllister
The abnormal demand for bulk carriers during the Chinese growth period led to a cascade effect on charter rates. This occurs when an abnormal demand for Capesize ships exceeds the supply of those vessels, causing a large increase in the charter rates for these ships.
In addition, because the available Capesize ships cannot carry all the cargo that is available, Panamax ships are used to carry some of the Capesize ships’ cargoes. This creates a demand for Panamax ships, and raises their charter rates.
Because there are too few Panamax bulkers available to carry this cargo, Handysize bulkers are then used to move cargoes that Panamaxes should have carried. Handysize charter rates then begin to increase.
If there is an abnormal demand for ships to carry a vast amount of cargo (as happened during the Chinese economic boom), all types of ships benefit.