MARITIME TRANSPORTATION MANAGEMENT PRICING & RATES

PRICING The main facilities and services provided by ports include: 1) Ship Arrival/Departure : Navigation aids; Approach channel; Pilotage from outside the port; Lock (if any); Protected water; Port pilotage; Towage; Berthing/Unberthing. 2) Quayside : Opening/Closing of hatches; Breaking out/Stowage; Cargo handling on board. 3) Cargo/Container transfer to/from quay 4) Cargo Arrival/Departure : Cargo handling on quay; Transport to/from storage; Storage; Delivery/Receiving.

OBJECTIVES OF PORT PRICING For promoting sustainable development, port pricing system should have three main objectives: 1) to recover the costs incurred in providing the services; 2) to promote economically-efficient utilization of port assets; 3) to ensure that a fair share of benefits derived by customers can actually be captured by the national economy.

OBJECTIVES OF PORT PRICING Specifically, port pricing can support these requirements in three ways: 1) By measuring the aggregate demand for each service and its social profitability. This will determine whether effective demand warrants the continuation, expansion or contraction of port services and facilities. 2) By encouraging the use of excess capacity and rationing capacity when excess demand exists. 3) By providing information to support the coordination of long-run and short-run decisions so that total system costs are minimized and the surplus of value over cost is maximized.

PORT PRICING SYSTEM Port Dues; charges for the use of the port facilities as a whole. Comprise dues on cargo and on ships. Cargo; calculated on the basis of the volume or weight of the cargo. Ships; calculated on the basis of gross registered tonnage, net registered tonnage, or length of ship.

PORT PRICING SYSTEM Specific port tariffs which are charges payable either by shipowners or cargo owners for specific services. Berth Occupancy – may be charged on the basis of tonnage or ship and quay length. Normally, the charge is on a time basis, such as per day. Aids to Navigation – are normally charged on the basis of ship’s size and are made for a given period of time or number of visits. Berthing/Unberthing – are normally charged on the basis of ship’s size or per operation. Pilotage – may be charged on the basis of ship size; per operation; draught;distance piloted; or, a combination of these.

PORT PRICING SYSTEM Towage – may be charged on the basis of the characteristics of the ship, such as its size, or that of the tug, such as its power. The charge may be defined either per operation or per unit of time (e.g. per hour). Storage and Warehousing – most ports offer a free period for cargo or container storage awaiting transit. Thereafter, the charge is normally derived on the basis of length of stay combined with either the characteristics of the cargo or area occupied. Cargo-handling - most cargo handling firms charge on the basis of weight or,occasionally, by volume. In addition, the tariff is often classified by cargo type.

COST BASED PORT TARIFF Two major problems of cost-based port tariff. to determine which expenses are to be covered by prices ship type, gross registered tonnage (GRT), net registered tonnage (NRT), freight tons handled to decide how these should be covered.

OPERATION Maritime transport comprises three principal forms of operation: Industrial transport Oil companies Energy firms Charter (non-liner) shipping Charter rates (amount of cargo) Fixed prices (per day / dwt) Liner services Tariff based on volume, weight or value of cargo

Maritime transport costs comprise;  company overheads,  vessel depreciation,  vessel operating costs,  Crew costs  M&R  voyage costs,  Fuel costs  Port dues  Agency fees  cargo costs.  Loading/unloading  Storage COST STRUCTURE

Freight Rates and Tariffs Charter markets the shipowner aim to obtain rates > cover all costs, incl. opportunity cost of capital tied-up in ships,and yield maximum profits. In the short run, while a ship is still operable, the shipowner has considerable fixed costs: depreciation, company overheads and operating costs. MR=MC

CHARTER MARKETS In charter shipping, the prices are equal to short-run marginal cost (SRMC) and may lie above or below long-run marginal cost (LRMC), depending on the forces of supply and demand. The charter markets are characterized by near-perfect competition; hence are highly efficient. Attempts to regulate the market through protectionism and cargo reservation would lead to reduction in social welfare.

LINER MARKETS In liner shipping, the freight rates are based on the principle of ‘what the traffic will bear’. Since there are widely differing values to the cargoes shipped, MC associated with individual cargoes can vary and, in some cases, may even be below the AMC. The liner operators, therefore, practise price discrimination, whereby the same service may be sold to different shippers at different rates, the aim being to recover total cost.

LINER MARKETS Recent years have witnessed decline of conferences and emergence of carrier alliances on a global basis. Besides, mergers and acquisitions have led to a greater degree of consolidation. All these developments have the potential to adversely impact competitive impulses. This underscores the need for bringing the liner shipping services within the purview of regulatory and anti-trust legislation.

LINER TARIFF RATES Based on; Cargo weight (W) Measurement (M) Value

LINER TARIFF RATES W/M Too much heavy cargo > lower vessel to permitted draft; hold space unfilled Too many light cargo > fill cargo compartments vessel above her permitted draft; wasting earning capacity Ideal > full and down

LINER TARIFF RATES W/M Goods < 40 cubic feet (1.133 cubic metres) per tonne (1.000 kilos) charged on weight basis (in US) 1 TON=1M3 If W>M; calculation based on W (vice versa) Value If goods are valuable > charged on an ad valorem basis At a percentage of the declared value.

Rate Calculation for FCL OFT:700 usd /20’ BAF 60 usd /20’ PRM: 38 usd /20’ Calculated based on OFT+BAF on %5 Collected by agent ISPS: 6 usd / cntr (Internatıonal Safety of Ship and Port) THC: 270 usd / cntr

Rate Calculation for LCL 15 tonnes (20m3) at USD 50 W/M = USD BAF 5% = USD 50 USD Surcharges; Hazardous goods at USD 10/tonne War risk at 5% Rebate 10% on tariff rate THC

FOB LCL RATE CHENNAI – AMBARLI Freight : usd150.-w/m Thc : usd50.-w/m Doc. fee : usd40.-+VAT 1 cbm all in : usd (incl. VAT)

EX-WORKS LCL RATE Customs Clearance : $ 175 / Shipment Pick Up Charges : $ 400 / Shipment CFS : $ 5 / Cbm or Subject to minimum $ 75 shipment B/L : $ 45 / Shipment THC : $ 7 / Cbm CHENNAI – AMBARLI Freight : usd150.-w/m Thc : usd50.-w/m Ordino : usd40.+ VAT 1 cbm all in : usd (incl. VAT)