INTERNATIONAL SHIPBROKING AND CHARTERING Netherlands Maritime Institute Technology

INTERNATIONAL SHIPBROKING AND CHARTERING Netherlands Maritime Institute Technology By Dr. Mansor Abdul Rahman 1

INTRODUCTION OF SHIP SALE AND PURCHASE 6 2

Module Content 1. Introduction to Ship Sale and Purchase 2. Ship Broking Management and Administration 3. Cargo Broking and Operation 4. Tanker Broking 5. Ship Damage Claim 6. Chartering 7. Development of Business Strategies Through Business Game 8. Financing in Specilized Sector 3

Ship Sale and Purchase 1. 1 S&P Broker Management 1. 2 Principle of Buying and Selling of Liner Ships 1. 3 Liner Trade Management 1. 4 Understanding Opportunities and Market Trends of Asia’s Ship Owner 1. 5 Brokers’ Negotiation Skills on Buyers and Sellers Deals, Price Negotiation, Trade and Route Dispute 4

Ship Broking Management � One of the critical activities in shipping industry � Includes sale and purchase of new building, second hand, and demolition /scrapping � Cargo/freight, tanker, container broking and chartering � In return for brokerage commission � Buying ships vs buying shipping company (stock and barrel) � “As is where is” sale � Shanghai, Hong Kong, Singapore, New York, London, Paris, Tokyo, Geneva, Montreal…. 5

Ship Sale Management �Sale and Purchase Broker acting on behalf of the buyer or seller of ships and bringing the two parties together �Other parties involved –charterers, ship breakers, bankers, other financiers, lawyers, classification society �The markets for new building, second-hand demolition sales and purchases and their inter-relationships. 6

Contract and Document �The necessary content of a contract for the sale and purchase of a ship whether for new building, second hand or demolition, including detailed understanding of fundamental clauses. �Drafting summaries of agreements and Memoranda of Agreement. �All standard forms currently in use as a base for a contract and necessary or desirable additional extra clauses or alterations. 7

Contract and Document �Procedures, reasons for and form of documentation produced by buyers, sellers and other parties in connection with completion of a sale and delivery and legal transfer of a ship. �The different certificates and compliances that might be relevant the time of sale of a ship. Issuing authorities and validities including compliance with international and national authorities. 8

Negotiation �The conduct, etiquette, ethics and procedures of a negotiation. Translating a principal’s requirements into suitable clauses. �Drafting offers with the correct sequence of clauses, counter offers, specific clauses, recapitulations, completion agenda and understanding their implications. �The importance of information given 9

Finance and Insurance �The information needed by a financier when considering a project. �Providers and different methods of financing including mortgages, leasing and bareboats �Means of providing security for loan. �Currencies, interest and exchange rates. �The role and function of insurance in sale and purchase transactions including P & I insurance. 10

Legal Aspect of S&P �Law relating to sale and purchase. Areas of dispute including: Validity of agreement; �Entitlement to commission; Rejection of the vessel by buyer; Condition of the ship on delivery; Validity of Notice of Readiness; Description of vessel in the preamble; ramifications and significance; �The effect of legislation on both existing vessels and new buildings or construction. 11

Liner Trade Management �Offer a regular service for many small cargo �Charge individual consignments on a fixed tariff basis �Load the cargo/container into the ship in a way that ensures that it is accessible for discharge (bearing in mind that the ship will call at many ports) and that the ship is ‘stable’ and ‘in trim’; �Run the service to a fixed schedule �Plan tonnage availability to service the trades of existing vessels, the construction of new vessels and the chartering of additional vessels to meet cyclical requirement 12

Liner Trade Management �Currently facing a series of financial difficulties created by subdued growth demand. �Europe and US economy still not encouraging. �Little prospect of demand matching supply growth. �Ships are running under their capacity. �Charter rates have plummeted, as well as box rates. �Capacity cuts and even lay-ups have been proposed. 13

Liner Trade Management �Look for increased consolidation and value added service (service restructuring, continuing cost reduction) �The trend for bigger tonnage (15, 000/18, 000 TEU range) �All eyes are on the promise of China/Asia �Greater security measures 14

Broker’s skills �Price negotiation, and trade disputes �Decisive, complex Problem Solving - Identifying complex problems and reviewing related information to develop and evaluate options and implement solutions �Effective communication, both written & spoken �Time Management - Managing one's own time and the time of others/prioritizing. 15

Broker’s skills �Active Listening - Giving full attention to what other people are saying, taking time to understand the points being made, asking questions as appropriate, and not interrupting at inappropriate times. �Critical Thinking - Using logic and reasoning to identify the strengths and weaknesses of alternative solutions, conclusions or approaches to problems. 16

Broker’s skills � Ability to influence and persuade - Persuading others to change their minds or behavior. � Social Perceptiveness - Being aware of others' reactions and understanding why they react as they do. � Service Orientation - Actively looking for ways to help people. � Computer proficiency…. . databanks � Multitasking abilities � Highly organized 17

Understanding Opportunities and Market Trends of Asia’s SO �Geopolitics, finance, economic, technology, and demography trends �US hegemony/ foreign policy role in shaping future geopolitical events-fight against terrorism, political hotspots… Afghanistan/Pakistan, North Korea/China/Japan territorial claims, Malaysia, Philippines/China/Vietnam on Spratly Islands, Middle East/North Africa, Piracy. . Somalia �Currently, ASIA is the engine of growth, triggered by export and robust domestic consumption 18

Understanding Opportunities and Market Trends of Asia’s SO �Access to new markets and strategic assets opportunity challenge by slow progress and stiff competition…. Nafta, Doha round, US power play… US FTAs �Asean buyers leads acquisition of upstream oil assets (E&P) in Asia, Middle East and Africa…. power hungry, coal, O&G �Different player, different strategy 19

THANK YOU 20

�Why shipbroker s have to understand the global geopolitics, shipping market, economic and finance, and technology? �What it takes to be a shipbroker…. . 21