On the pricing of tramp ship freight services

Abstract

‘A deep-sea tramp ship is prepared to carry any cargo between any ports at any time, always providing that the venture is both legal and safe.’¹ The true tramp ship is a general-purpose carrier, a ship which can be switched to carry any form of cargo. There are specialised ships which, because they operate under similar commercial conditions, may conveniently be considered under the general umbrella ‘tramp ships’; these are ore carriers, timber ships and also oil tankers. The analysis of this paper applies to all classes of tramp ships. The statistical data used, however, apply only to dry cargo ships. This means that although the analytical model can be regarded as having general application, it has been validated, in so far as it has been validated, only for dry cargo ships. The oil tanker market is very similar to the dry cargo market, but with two important differences. First, there are relatively few charterers of oil tankers so that the market could be regarded as oligopolistic, although in practice it appears to be as competitive as the dry cargo freighting market. Second, the charterers of oil tankers own approximately one third of their tonnage requirements, take approximately another one third on time charter and enter the voyage charter market only for the remainder. There is thus a strong tendency for the effects of short-term fluctuation in the demand for oil tankers to be concentrated on a narrow part of the total market, whereas in the dry cargo markets the effects of such fluctuations are spread over a wider area of the market.

First delivered as a lecture at the Institute for Shipping Research, Bergen, in March 1965 and published in the series of papers issued by the Institute. The visit was arranged by the British Council. The paper was also issued as number 4 in the Occasional Paper Series of the Department of Economics, University of Lancaster. In the original version there was a fourth section which is not now sufficiently interesting to be worth publishing. This version is published by courtesy of the Institute.