The contracts for iron ore and steel products share a common concept and purpose in long-term ship contracts, namely the longer term. Yet, despite the long-term transportation contracts, differences have emerged between the contract types for iron ore and steel products. In addition, the market structure, which is a mutual oligopoly due to the small number of iron ore shippers and shipowners, influences the types of long-term shipping contracts.
INTRODUCTION
- Research Background
- Literature Review
- Research Focus and Approach
- Dedicated Shipping Contract
- Consecutive Voyage Charter (CVC)
- Contract of Affreightment (COA)
- Comparison of each contract
Focusing on long-term transport contracts, this chapter further explains the characteristics of CVC, COA and dedicated transport contracts. In Korea, long-term shipping contracts were introduced to the industry with the help of the government's aim to promote and develop the shipbuilding industry. It involves a certain vessel, giving the charterer to the shipper the right to operate the vessel.
MARINE TRANSPORTATION IN STEEL INDUSTRY 15
Process of Steelmaking
The molten iron from the blast furnace is transferred to a torpedo car and sent to the steel mill. At this point the molten iron is poured into a converter, after which the pure oxygen is blown into the converter. This step burns off the impurities in the molten iron, such as carbon, phosphorus and sulfur, leaving only pure and clean molten steel in the liquid state.
Status of Korean Steel Industry
As of the year 2019, Korea has ranked 5th based on steel production according to Table 3-1 and it can be referred to that Korea has gradually increased its production annually. In addition, POSCO, although only the number 5 Korean steel company, has been named the 'World's Most Competitive Steel Producer' (see Table 3-2) for the 9th consecutive year in 2018 by World Steel Dynamics.28) (POSCO Newsroom, 2018) Not only POSCO was ranked in the top 10, but also Hyundai Steel has ranked itself as No. 9, and this shows the strength of the Korean steel industry among the influential steel producers. 28) World Steel Dynamics is a strategic information service provider for steel industry developments that regularly analyzes and publishes reports related to the steel industry. World Steel Dynamics rates the 'World's Most Competitive Steel Producer' based on 23 criteria as listed in Table 3-3, and each criterion is based on a 10-point scale.
POSCO has earned full marks in 8 different criteria in 2018, including cost reduction efforts, technology revolution in exploitation, downstream business, skilled and productive workers criteria and high scores in power criteria of prices in the domestic market, profitability, size and capacity expansion, which led POSCO to be named as the first in the ranking. As evidenced by Figure 3-5 and Table 3-1, the Korean steel industry shows high competence in the world steel industry and makes a high contribution to Korea's national competitiveness. In 2000, the cost of production was $40.2 billion, which was about 3.4% of the total, and if the steel demand and related industry figures are included, it is about 31.2% of the total.
3 Location in high growth markets 15 Skilled and productive workers 4 Location close to customers 16 Liabilities for retired workers 5 Pricing power in home market 17 Profitability (EBITDA).
Marine Transportation for Iron Ore
- Characteristics of Shipping
- Market Structure
- Shipping Contract
In addition to the resumption of operations at the Brucutu mine, the lack of iron ore compared to demand in China has helped the increase. The rental rate fell to 8,230 due to the collapse of the dam in Brazil in January and rose up to 31,073 with the help of the resumed operations and China's shortage of iron ore. Not to be specified with iron ore trade, but it certainly gives huge effect to the maritime market.
Although iron ore is not a complicated method of loading cargo or needs special care, but due to the nature of liquid, the clear understanding of its behavior and experience is required by the shipper, ship owner and the crew of the vessel. The market of iron ore transportation in Korea is structured as oligopoly on both sides. As of 2019, the steel companies that import iron ore into Korea are POSCO and Hyundai Steel, so it is assumed that there are only two consumers of the transportation service.
It is also striking that the main transport cargo for Capesize and higher is iron ore. For the transportation of iron ore, H-Line Shipping, Panocean, Korea Line Corp and Polaris have signed a CVC with POSCO. Japan's largest steel producer, Nippon Steel & Sumitomo Metal Corp (NSSMC), imports their iron ore through a special transport contract.
NSSMC imports 70 million tonnes of iron ore annually and all of it is transported under a dedicated shipping contract with companies such as Mitsui O.S.K.
Marine Transportation for Steel Product
- Characteristics of Shipping
- Market Structure
- Shipping Contract
Therefore, the cargo, when loaded, shall be packed and allowed to be loaded up to four (4) levels49) if the strength of the ship's pan can withstand it. Shipping routes vary each shipment and each port's volume varies each shipment. It varies with each shipment and Figure 3-10 is one of the cases to help readers understand.
Since it is a product that must be shipped to the customer, the quality of the cargo upon delivery is important. Therefore, the shipping company's supercargo is usually present at the loading site to protect the shipping company's interests regarding the quality of the cargo. However, the limitation of levels when loading products often prevents it from going beyond the strength of the tank top.
The maximum weight the ship can carry at one time is not important for loading steel products as the layer is limited, but the bottom space of the cargo hold is essential. Even when the cargo is loaded in winter, attention to the cargo during the crew's sea voyage is essential. Depending on the routes, sufficient ventilation of the cargo hold is necessary or, as a countermeasure, install a fan heater50) in the cargo hold.
However, the shipping company must have experience with shipping in the region applied for.
INTERVIEW AND ANALYSIS OF SHIPPING
- Outline of the Interview
- Research Model
- Selection of Interviewees
- Implementation of the Interview
- Case of Iron Ore Shipping Contract
- Influence of Characteristics of Shipping
- Influence of Market Structure
- Case of Steel Product Shipping Contract
- Influence of Characteristics of Shipping
- Influence of Market Structure
- Findings from the Interview
- Major Findings
- Issues of Contrasting Perspectives
The interview data indicated that the characteristics of iron ore shipping and the market structure of the iron ore have significant effects on the type of shipping contract applied. The nature of the shipment of iron ore appears to influence the form of the shipment contract. Iron ore is essential for steelmaking procedures, and the steel industry requires that a certain amount, approximately 50%, of the annual iron ore volume be secured for a.
Although the dry cargo sector of the maritime industry is a free competitive market that all shipping companies can enter, a similar relationship is unlikely in the maritime transport of iron ore. Based on the interview data, two factors—iron ore shipping and the iron ore market structure—have a significant effect on the type of shipping contract used. Furthermore, the market structure of the iron ore trade is a reciprocal oligopoly, making the contract CVC.
Therefore, for iron ore trading, the contract characteristics and terms of CVC contract are preferred and more applicable than COA or spot contracts. Furthermore, the structure of the steel products trade market is maintained as a shipper oligopoly, giving shippers an advantage over shipowners. Shippers indicated that CVC contracts are used for 70% of annual iron ore import volume, compared to 15% for COA and 15% for spot contracts.
However, the CVC contract plays an essential role in maintaining mill operations and strengthening prime cost competitiveness due to the shipping characteristics of iron ore. The shipowners were not satisfied with the time frame of the current COA, which contrasts with the perspective of the shippers. Finally, shipowners complained that, due to the excessive number of suitable vessels for steel products in the market, the shippers were abusing the superiority of the market structure to reduce the prime cost.
CONCLUSION
Summary
귀사에서 철광석을 수입할 때 장기 운송 계약의 비율은 얼마나 됩니까? 장기 계약은 얼마나 되나요? 철강제품 운송 시 RISK(화물 파손, 클램핑, 결로 등에 대한 배상 청구)가 장기 계약에 어떤 영향을 미치나요?귀사가 철광석을 수입할 때 장기 운송 계약 비율은 얼마나 됩니까?
장기계약은 얼마인가요? 귀사에서 철강제품을 수출할 때 장기운송계약의 비율은 얼마나 됩니까? RISK(화물 손상, 좌굴, 결로 등에 대한 청구)가 장기 계약에 따른 철강 제품 운송에 어떤 영향을 미치나요?
철강제품 운송에 따른 RISK(화물손상배상청구, 고박, 결로 등)는 단기계약에 어떤 영향을 미치나요? 선사 입장에서 선호하는 철강제품 운송계약은 무엇입니까? 철강제품 운송에 따른 위험(화물파손, 고박, 결로 등)이 장기계약 유형에 어떤 영향을 미친다고 생각하시나요?
철강제품 운송에 따른 위험(화물 파손, 경추 손상, 결로 등)이 단기 계약 유형에 어떤 영향을 미친다고 생각하시나요?
Implications & Further Studies
