6 2.THE MAJOR SHIPPING ACTIVITIES This section describes the major shipping activities,with an emphasis on the kinds of decisions facing each of the players in the market. 2.1 SHIP OWNERS Supply of marine transportation services is provided by ship owners,therefore decisions by ship owners play a crucial role in the shipping market.The fact that the spectrum of such decisions and the way they are made are very broad and diverse can be understood from the fact that the spectrum of owners in the market and the services they provide are equally broad and diverse:For instance,one may study (a)an independent tramp operator having only one ship,(b)a major oil company operating a fleet of tankers,(c)an owner operating a general cargo ship,(d)a large liner company such as Sea Land,who is owned by CSX,a railroad,and offers intermodal services,and so on.Since the economic scenario behind a particular case may vary dramatically,it would be a mistake to lump all ship owners into a single category and treat all decisions in a uniform way. A first-level classification that can be made is to divide shipping into two sectors:the charter (or tramp)market (where,as mentioned earlier,conditions of almost pure competition prevail),and the liner market(which is organized on a more or less cartelized basis).The charter market includes the tanker and drybulk markets as major components, and the liner market includes general cargo as well as unitized cargo ships (containerships and roll on/roll off(ro/ro)ships belong to the latter category) Ship ownership in the tanker market (the most significant component of the charter market)is divided between the so-called independent operators (or simply independents) and oil companies. An independent operator has no transport requirements of his own;he is there simply to offer his ships to the market.Decisions facing him can be classified into three lavels: strategic,tactical,and operational. Strategic decisions involve capital acquisition issues,such as the sale or purchase of a particular ship (or ships),including which shipyard to buy it from,when to do so,whether it is new or second-hand,what form of financing should be used,and so on.The planning horizon for such decisions is on the order of 5-20 years. Tactical desisions involve the allocation/utilization of ships owned by the operator, including the issue of which charter should be fixed,whether to offer the ship in the spot market or in the term market,whether the ship should be laid up,how the ship should be "positioned"to be best used in future charters,what should be the ship's operating speed,routine maintenance,and so on.Tactical decisions have a shorter planning horizon,on the order of a few months to 2 years. Finally,operational decisions have a much shorter time horizon (a few days to a few months),and involve issues of the day-to-day operation of the ship,such as management of stores and supplies,bunkering,non-routine maintenance,etc.The line between the tactical and operational decision levels is to some extent arbitrary and depends on the idiosyncrasy of the particular owner. At first glance,an oil company operating a tanker fleet faces similar kinds of decisions. However,the delineation of these decisions among the three levels,as well as the way these decisions are made may be very different from the case of an independent tanker owner.For instance,longer planning horizons are more likely to be used,and strategic6 2. THE MAJOR SHIPPING ACTIVITIES This section describes the major shipping activities, with an emphasis on the kinds of decisions facing each of the players in the market. 2. 1 SHIP OWNERS Supply of marine transportation services is provided by ship owners, therefore decisions by ship owners play a crucial role in the shipping market. The fact that the spectrum of such decisions and the way they are made are very broad and diverse can be understood from the fact that the spectrum of owners in the market and the services they provide are equally broad and diverse: For instance, one may study (a) an independent tramp operator having only one ship, (b) a major oil company operating a fleet of tankers, (c) an owner operating a general cargo ship, (d) a large liner company such as Sea Land, who is owned by CSX, a railroad, and offers intermodal services, and so on. Since the economic scenario behind a particular case may vary dramatically, it would be a mistake to lump all ship owners into a single category and treat all decisions in a uniform way. A first-level classification that can be made is to divide shipping into two sectors: the charter (or tramp) market (where, as mentioned earlier, conditions of almost pure competition prevail), and the liner market (which is organized on a more or less cartelized basis). The charter market includes the tanker and drybulk markets as major components, and the liner market includes general cargo as well as unitized cargo ships (containerships and roll on/roll off (ro/ro) ships belong to the latter category). Ship ownership in the tanker market (the most significant component of the charter market) is divided between the so-called independent operators (or simply independents) and oil companies. An independent operator has no transport requirements of his own; he is there simply to offer his ships to the market. Decisions facing him can be classified into three lavels: strategic, tactical, and operational. Strategic decisions involve capital acquisition issues, such as the sale or purchase of a particular ship (or ships), including which shipyard to buy it from, when to do so, whether it is new or second-hand, what form of financing should be used, and so on. The planning horizon for such decisions is on the order of 5-20 years. Tactical desisions involve the allocation/utilization of ships owned by the operator, including the issue of which charter should be fixed, whether to offer the ship in the spot market or in the term market, whether the ship should be laid up, how the ship should be "positioned" to be best used in future charters, what should be the ship's operating speed, routine maintenance, and so on. Tactical decisions have a shorter planning horizon, on the order of a few months to 2 years. Finally, operational decisions have a much shorter time horizon (a few days to a few months), and involve issues of the day-to-day operation of the ship, such as management of stores and supplies, bunkering, non-routine maintenance, etc. The line between the tactical and operational decision levels is to some extent arbitrary and depends on the idiosyncrasy of the particular owner. At first glance, an oil company operating a tanker fleet faces similar kinds of decisions. However, the delineation of these decisions among the three levels, as well as the way these decisions are made may be very different from the case of an independent tanker owner. For instance, longer planning horizons are more likely to be used, and strategic