Commercial Shipping M08

1
Commercial Shipping (M08)

• Learning objectives
• Describe the various categories of ships costs
• Explain how ships are managed
• Understand ship management sectors
• Explain key instruments of ship management
• Understand various regulations affecting the
  human element.

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Commercial Shipping (M08)

• The costs of running ships
• Ship management
• Technical management
• Crew management
• Commercial management
• Key instruments of ship management
• Management agreement
• Vessel operating budget
• Vessel operating report
• Safety and quality management system
• Regulations affecting human elements
• ISM
• STCW
• Safe manning
• ILO 147 and ILO 180
• Ship registration

3
Commercial Shipping (M08)

• The costs of running ships
• capital costs
• operating costs
• periodic maintenance costs
• voyage costs
• An example (a 10-year capesize bulk carrier at
  1993 price)

4
Commercial Shipping (M08)
5
Commercial Shipping (M08)

• Ship management
• covers various types of management services
  involving all aspects of daily vessel operations
  
• separation of ship management and ship owners
• no common shareholding interest between the ship
  owner and the ship manager
• functions as a separate cost centre and provides
  equitable services to all clients according to
  well defined contracts and detailed budget agreed
  between the two main contracting parties
• is required to ensure that vessels always comply
  with international rules and regulations, are run
  in a safe and cost efficient manner and is
  maintained so as to preserve as far as possible
  its asset value.
• The ship owner is the risk taker.

6
Commercial Shipping (M08)

• Ship management
• The ship owner can select to use either a
  comprehensive range or just one service from a
  number offered by the ship manager. These
  services break down into three main groups
• technical management
• crew management
• commercial management.

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Commercial Shipping (M08)

• Technical management
• The primary objective safe, pollution-free and
  cost-efficient vessel operation in accordance
  with international rules and regulations and
  where due consideration is given to the
  protection of asset value, including following
  elements
• purchasing
• maintenance
• inspection
• performance monitoring
• budgeting
• quality management
• reporting
• dry-docking
• certification
• insurance

8
Commercial Shipping (M08)

• Crew management
• The primary objective the provision of well
  trained and suitably experienced crew of the
  nationality required by the shipowner/charterer
  to ensure safe and efficient operation of a
  vessel according to international regulations
• selection and engagement
• manning levels
• certification control
• performance appraisal
• management of payroll
• provision of training
• provision of insurance
• reporting
• welfare
• drugs and alcohol
• travel

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Commercial Shipping (M08)

• Commercial management
• the provision of various shipbroking services
  relating to the employment of a vessel according
  to instructions laid down by the shipowner. Main
  activities
• marketing/voyage estimating
• chartering
• post fixture
• voyage accounting
• payments
• agency

10
Commercial Shipping (M08)

• Key instruments for the provision of ship
  management services
• management agreement
• vessel operating budget
• vessel operating report
• safety and quality management system

11
Commercial Shipping (M08)

• Management agreement
• governs the relationship between the ship manager
  and the shipowner determine the roles and
  responsibilities of the respective parties.
• are based on the law of agency as interpreted by
  English law and under which the ship manager does
  not conduct business in his own right but acts as
  an agent on behalf of a principal (the
  shipowner).
• are either prepared by the ship management
  company itself, based on its own experience over
  time and in consultation with legal advisors, or
  utilise a standard format, such as BIMCOs
  SHIPMAN.
• differs in the range of services provided, but
  includes two main types a) a comprehensive range
  of technical and crew management, and b) the
  provision and management of crew.

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Commercial Shipping (M08)

• Vessel operating budget
• includes items such as crew costs, insurance,
  purchasing and lubricants, repair and
  maintenance, and administration costs.
• is initially prepared by the ship management
  company on the basis of certain assumptions such
  as condition of the vessel, stores and supplies
  on board etc. and is submitted as a quotation to
  a potential client. The end result of this
  initial budgeting process is the creation of a
  12-month budget forecast which is agreed with the
  shipowner.
• is a forecast when the ship management company
  takes over the vessel, the budget changes as it
  is refined after a pre-takeover inspection that
  determines the actual condition of the vessel and
  factors such as the level of stores and spares on
  board and any outstanding technical and/or
  operational items requiring extraordinary
  expenditure.

13
Commercial Shipping (M08)

• Vessel operation report
• is provided on a quarterly basis in the form of a
  vessel operating report
• presented in a standardised format so that the
  ship owner can monitor the performance of his
  ship in a consistent way over a period of time
• Contains up-to-date information on all technical,
  financial and operational aspects of the vessels
  under management.

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Commercial Shipping (M08)

• Vessel operation report
• shall contain following sections
• Executive summary main budget items, explanation
  of variances and estimated expenditure
• Condition report equipment, gears, hull, deck
  and fittings, piping, values, main engine and
  generators, boiler and any major works in
  progress
• Operational performance port and sea time,
  average speed and consumption, and off hire
  report applicable
• Personnel report planned and actual crew
  changes, performance of master and senior
  officers
• Insurance report accidents and incidents leading
  to H M or P I Claims

15
Commercial Shipping (M08)

• Safety and quality management
• This concern with safety especially followed the
  IMOs adoption of the International Safety
  Management (ISM) Code in 1994 as a mandatory
  requirement from 1998 onwards for ship operating
  companies.
• Safety and quality management systems are more
  recent provisions, different from management
  agreements, vessel operating budgets and vessel
  operating reports that are long-established
  instruments which have been refined by ship
  management companies over many years of usage.

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Commercial Shipping (M08)

• Regulations affecting the human element
• Four very substantial and important sets of
  regulations which have a direct relevance on
  people
• The International Safety Management Code (ISM
  Code)
• The International Convention on Standards of
  Training, Certification and Watchkeeping as
  amended (STCW)
• Safe manning
• The ILO Convention, Number 147 Merchant
  Shipping (Minimum Standards) and the ILO
  Convention, Number 180 Seafarers Hours of Work
  and the Manning of Ships

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Commercial Shipping (M08)

• ISM Code
• The International Safety Management (ISM) Code
  became international law on 1 July 1998 and has
  been made mandatory by incorporating it into the
  International Convention for the Safety of Life
  at Sea (SOLAS) 1974 as a new chapter IX.
• The ISM Code establishes safety management
  objectives
• to provide for safe practices in ship operation
  and a safe working environment
• to establish safeguards against all identified
  risks
• to continuously improve safety management skills
  of personnel, including preparing for
  emergencies.
• The ISM Code has had a major impact on ship
  management

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Commercial Shipping (M08)

• STCW Convention
• The revised STCW Convention is based on three
  important elements
• new uniform standards of competence for
  seafarers.
• new measures to ensure that governments actually
  fulfil their obligations under the Convention.
• new responsibilities on shipping companies to
  ensure that seafarers employed on board ships are
  properly trained and are carrying properly
  documented certificates.
• The convention required governments to advise IMO
  of the steps taken to implement its regulations,
  and this has meant a need for openness on the
  standards of training.

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Commercial Shipping (M08)

• Safe manning
• Ocean-going vessels are required to specify on a
  minimum safe manning certificate a minimum number
  of persons on board the ship.
• The Minimum Safe Manning Certificate is issued by
  the Flag State administration upon request by the
  ship operator. The minimum number of seafarers
  included in the certificate will be determined by
  the Flag State after taking into account the
  size, operational profile and technical equipment
  of the vessel.

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Commercial Shipping (M08)

• International Labour Organisation (ILO)
• The ILO 147 convention covers accommodation
  standards, hospitals and medical scales and
  working and living conditions, as a means of
  enforcing minimum standards.
• The second ILO convention, No 180, is intended to
  regulate both hours of rest and hours of work on
  board ship.

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Commercial Shipping (M08)

• Ship registration
• The principles of the freedom of the high sea
  with two basic rules
• Jurisdiction over a vessel on the high seas
  resides solely with the state to which the vessel
  belongs and that
• All vessels using the high seas must possess a
  national character.
• Opposition to flags of convenience (FOC)
• Low wages
• Manning level and competencies of crew
• Vessels seaworthiness
• Compliance with international conventions