ANATOMY OF SHIPPING DSM 2302 TOPIC Market Cycle

ANATOMY OF SHIPPING -DSM 2302 TOPIC: • Market Cycle/ Mechanics of Demand Supply • Shipping Market

OUR GROUP MEMBER NAME ID Title of presentation IDI NURFAZLI B. RENE 1140501102 Market Cycle RAY MARCO JIPIN 1140501084 Market Cycle NURIN ATIQAH BINTI NORAZHAR 1140501098 Shipping Market NUR SYAFIQHA ADLEEN BINTI MOHD SHAFIE 1140501096 Shipping Market

DEMAND & SUPPLY • A theory explaining the interaction between the supply of a resource and the demand for that resource. The law of supply and demand defines the effect that the availability of a particular product and the desire (or demand) for that product has on price. Generally, if there is a low supply and a high demand, the price will be high. In contrast, the greater the supply and the lower the demand, the lower the price will be. But in shipping marketing, the demand for shipping service will call a derived demand.

DEMAND CURVE SUPPLY CURVE

WHAT IS SHIPPING MARKET CYCLE? • The shipping cycle is an economic concept that explains how shipping companies and freight charges respond to supply and demand. It examines how and why ships build up in sea trading ports. The cycle also seeks to explain what affects the selling price of ship fleets and what types of ships sell during slow business periods. The four stages of the shipping cycle, all based on customer demand, are peak-up, peak, downturn and trough.

THE SHIPPING MARKET CYCLE Peak Downturn Peak up Trough 1. Peak Up - DD > SS - Freight increase - No more slot - Buy Second hands ship or new building 2. Peak - DD = SS - Surplus absorbed - High freight rate - Second hand ship price increase - Order increase 3. Downturn - DD < SS - Overshoot - Freight decrease - Ship have no business 4. Trough - DD = SS - Surplus - Freight very low - Short cash - Active demolition market

SHIPPING MARKET

THE SHIPPING MARKET IS THE WHOLE THAT DETERMINES THE SALES AND PURCHASE OF SHIPS, HOW THE SHIPS ARE CHARTERED AND THE WAY THE PRICE IS ESTABLISHED. THE ACTOR OF MOVING THIS MARKET ARE SHIP OWNER, SHIPBUILDERS, CHARTERERS, AND SHIPPING COMPANIES.

FREIGHT MARKET • IN THIS MARKET, THE PARTY THAT INVOLVED IS A SHIPOWNER. • SHIPOWNER WILL BUY A NEW SHIP, WHICH IS NORMALLY WILL BE FINISHED IN 3 YEARS. • IN THIS MARKET ALSO, THE SHIP OWNER WILL ASK A BROKER TO DEAL WITH CHARTERER TO GET A BUSINESS FOR HIM, SO THAT THE SHIP WILL BE FUNCTIONED. • THIS IS THE TIME WHERE SALES REVENUE WILL BE GENERATED.

SALES AND PURCHASE MARKET • THE PERSON ARE AGAIN SAME AS IN PREVIOUSLY MENTIONED WHICH IS FREIGHT MARKETS. • SHIP BROKERS USUALLY ACT AS A MIDDLE MAN IN THESE SALES, BUT THE INTERNET REPLACES MORE AND MORE OF THEM. THE PRICE OF THE SHIPS DEPENDS ON DERIVED DEMAND FROM CUSTOMER. • AT THIS MOMENT, THE SALES REVENUE WILL NOT FIXED; IT CAN BE WETHER INCREASING OR DECREASING.

NEWBUILDING MARKET • THE SIGNIFICANT DIFFERENCE WITH THE SALE AND PURCHASE MARKET IS THAT THE SHIPS THAT ARE SOLD HERE DOESN’T EXIST ANYMORE. • IT IS BECAUSE THE DERIVED DEMAND ARE GOING HIGHER AND THERE ARE NO MORE SPACE IN THE SHIP FOR THE SHIPPER TO LOAD THEIR CARGOES. • AT THIS MOMENT, THE SALES REVENUE WILL BE DECREASING.

DEMOLITION MARKET • AFTER A SHIP’S LIFESPAN IS EXCEEDED IT WILL BE DEMOLISHED. • IT’S STEEL AND COMPONENTS WILL BE DEMOLISHED AND SOLD. • THE SALES REVENUE WILL BE GENERATE TOO THROUGH THIS MOMENT, BUT NOT AS HIGH AS BEFORE.

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