Business
5. Feasibility of Combining Bulk Trades
may be no way to eradicate this problem, but the next section of the chapter explores possible strategies by independent ship operators to ameliorate it.
grain trading companies have huge shipping influence and often have had large proprietary fleets of vessels under their ownership or firm control.
Understandably, these companies have been primarily interested in the transport of their own basic raw materials or energy resources. Tying together diverse commodity trades has not been their first priority, although the flexibility inherent in the combined carrier may have had some appeal when their own trade was in the doldrums. In normal times, however, the industrial carrier, controlling and securing the transport requirements for the firm, serves the production and marketing divisions of the larger corporation and tries to provide an efficient, reliable, timely, transportation service. Routeing efficiency and low fuel consumption are not likely to be ruling considerations, although annual work capacity of the fleet is a significant long-term concern.
Proprietary carriers, especially in the oil trades, have been wooed by the dramatic economies of scale derived from megaship transport despite the inflexibility in routeing that large size adds to the inherent inflexibility of specialised single-purpose vessels. Extremely low costs per tonne-mile seem to magnify the advantages of the supertanker, for example, and assuage the disadvantages of longer-distance voyages. (One sometimes forgets that the cost per tonne of carrying a bulk commodity in a ship of given size and specifications is always going to be higher on a long voyage than on a short voyage). The costs per deadweight tonne of capacity of building a combined carrier are, to be sure, considerably higher – some estimate 25% higher – than the costs of building a single purpose vessel of the same cargo carrying capacity. Admittedly, also, scheduling ships on back-and-forth shuttle service between the company’s own terminal facilities, as is the case on many of the oil company trade routes, is less complicated than arranging more elaborate and time-consuming itineraries that combine different trades and different commodities. Moreover, there are “time economies” that come from ballasting straight home for the next outbound voyage.
When governments or government agencies develop industrial or shipping policies that allow them to intrude in the development of shipping networks and merchant fleets, the complexion of the issues, objectives and priorities, with respect to the transport function, may change. The careful bulk commodity- routeing strategies of BISCORE when British Steel was a nationalised venture,
and in the 1960s the use of combined carriers by SIDERMAR, the shipping wing of Finsider, the Italian state-owned steel combine, are cases in point. Perhaps there was less attention to the immediate “bottom line” of the bulk commodity shipping operation, but more attention to longer-term planning of voyages and voyage combinations, usually resulting in a more efficient and productive use of the fleet. SIDERMAR, for a while, combined coking coal cargoes eastbound from the US to Italian steelworks with iron ore cargoes westbound from West Africa to the US, the westbound shipments for the account of an American steel company (Fleming, 1968, p. 31). Of course, this sort of tramp-like service was easier in those days when multiple-purpose “10,000 tonners” were still being used. The government agencies in such cases had a proprietary interest in the transport function. One supposes that, beyond their transportation service to the national steel company, certain general principles of fuel conservation, environmental safety and even the implementation of national political objectives could have come into play.
There is another major component in bulk commodity ocean trading and that is the independent shipowner, or the modern version of the tramp shipping operator. Some of these shipowners, whose names have become legendary in shipping circles, built enormous fleets of tankers or dry bulk carriers. Also, many of the owners were serious students of the patterns and trends of the bulk commodity trades. Most of their vessels were “ships for hire”. Their fleets were fixed on charters of various durations, from spot voyage charters to long-term bareboat charters. Quite often the long term charterers were “big oil” or “big steel” or “big mining” concerns and, for all intents and purposes, the ships became part of the proprietary carrier fleet.
One of the most successful steamship operators of the twentieth century was Erling Naess, a Norwegian who pioneered the financing, building and operating, under charter contracts, of fleets of OBOs and other versatile bulk carriers. In Naess’ own words: “For owners of large bulk carriers the secret of operating a profitable shipping business is to a large extent one of arranging trading patterns in such a way that the time at sea in loaded condition exceeds the time at sea in ballast condition.” Later, “I spent much of my time dreaming up ‘combination trades’ in which the individual market rates might appear uneconomic but in combination with return trades a satisfactory return might be secured.” And, still
later, “I was strongly in favour of ‘combination carriers’, later known as OBOs, which could carry liquid or alternatively dry cargo.” (Naess, 1973, p. 191). By clever choices of trading patterns Naess was able to reduce ballast steaming dramatically. On an 89-day voyage, for instance, loading coal at Norfolk for Japan via the Panama Canal, ballasting to the Persian Gulf, loading crude oil for Portland, Maine and ballasting back to Norfolk he calculated only 19 days in ballast or 25% of the total steaming days (Naess, 1977, p.150).10
One concludes that it is not necessary to have official government collaboration in the shipping programs or even official agreements between the different commodity trades to make combination trades work. The independent steamship operator with a fleet of combined carriers should be able to discover the efficient geographic patterns, latch on to them for as long as the commodity flows last and the transport service is providing mutual benefit to carrier and shipper, and retain the flexibility to move all or part of the fleet elsewhere when contracts expire. Theoretically, it’s appealing.
To be realistic, contemporary evidence suggests that neither combined carriers nor combined bulk commodity trades have caught on with the big shippers or with proprietary carrier fleets. Nevertheless, there are many independent ship operators today who combine bulk and break-bulk cargoes on smaller, versatile, multipurpose vessels that still make combinations work, serving parts of the world that may not yet generate huge cargo volumes and often do not yet have harbours and port facilities that can handle megaships. There are a multitude of smaller bulk trades and trade routes that do not appear on Figures 2 through 6.
There are many possible combinations and there are many tramp operations of modest size that involve much more than one bulk commodity trade on one trade route. It is not unrealistic to suppose that combinations of trades do more than accommodate “demand for spot transit of bulk commodities” and go beyond the
“derived and marginal character of the demand for tramp shipping services”, therefore beyond some of the usual theoretical explanations of the rationale for these services (Metaxas, 1971, pp. 4, 41, 230).
One could hardly expect the tramp operator to adopt highly idealistic policies of ballast reduction to help the world in an energy crisis, or of combining trades for the sake of international good will. However, more efficient patterns of movement can be more profitable patterns of movement and that should appeal
to most tramp operators and independent shipowners.
The trade-offs between ship size and ship versatility have been a constant concern for commercial shipping lines whether in tramp or liner service and whether they carry bulk or break-bulk commodities, containers, roll on/roll off items, reefer cargoes, or passengers. There are physical geographic limitations for megaships – shallow waters, harbours without sufficient maneuvering room, restrictive canal dimensions, etc. And there are market limitations – insufficient or irregular cargo flows, etc. One remembers the disastrously low passenger complement on the first eastbound transatlantic voyage of the Great Eastern, a
“ship before its time”; and one recalls the bankrupting experience of an American container line unable to achieve break-even load factors in their round-the-world service in the 1980s.