Sea Transport and International Trade

Running head: SEA TRANSPORT AND INTERNATIONAL TRADE
Sea transport and international trade
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1SEA TRANSPORT AND INTERNATIONAL TRADE
Executive Summary:
The report has intended to analyze various factors that can influence the supply and demand
for ships within the maritime market. After analyzing those factors, the report has determined
the equilibrium freight rate by using the demand and supply functions of this concerned
market. After the entire discussion, the impact of freight rate variation on ship-owners has
shown for ordering or removing ships within the market.

2SEA TRANSPORT AND INTERNATIONAL TRADE
Table of Contents
Introduction:...............................................................................................................................3
Factors affecting sea freight rates:.............................................................................................3
Demand –Supply concepts:........................................................................................................4
Conclusion:................................................................................................................................9
References:...............................................................................................................................10

3SEA TRANSPORT AND INTERNATIONAL TRADE
Introduction:
The freight market, which comprises ship-owners, brokers and charterers, is
considered as a part of shipping markets. Under this specified market, four types of
contractual agreements can be seen, which are, the contract of affreightment, the voyage
charter, the bareboat charter and the time charter (Zhang and Pel 2016). A freight rate, on the
other side, represents a price, which is charged to deliver cargo from one point to another.
The freight rate depends on some factors, viz., type of cargo along with its weight and
distance of destinations. Mode of transport like ship, train or aircraft can also influence this
rate. However, the chief concern of this report is to discuss about the sea freight market and
to analyze the impact of various external factors that can influence freight rates. Hence, this
report has used demand and supply concept for determining the equilibrium freight rate. At
the end, it has provided an overview of this entire discussion.
Factors affecting sea freight rates:
Shippers have demanded ships for sailing. However, this demand can also be
influenced by some external factors. For instance, some basic factors like demand for cargoes
and fleet availability can influence freight prices. Moreover, some other external factors like
intended destination, bunker capacity and container capacity have also played important role
to determine this price (Tseng and Cullinane 2018). For calculating sea freight rates, intended
destination provided a positive relation between distance of journey and shipping rates. These
rates can be high for longer distance while the opposite situation can also be occurred for
small distance. Service charges can be considered as another important factor to influence
this ocean freight rate. An extra amount of charge, implemented by port authority, can affect
this rate inversely (Jugović, Komadina and Perić Hadžić 2015). In addition to this, fines and
fees along with terminal one can also affect this price rate by small amount. For some
specific products like food items, season has also acted significantly to determine the price of