The bulk shipping industry’s economic environment is much different from the liner industry. Bulk shipping is much less structured and not organized along schedules but it is, in its own way, very disciplined. The bulk trades, mainly oil, chemicals, and dry raw materials, are structured to follow the cargoes. This means that an operator does not have a fixed schedule of sailings for his vessel and will employ it where and when he can get a cargo. Bulk service is generally not provided on a regularly scheduled basis, but rather as needed, on specialized ships transporting a specific commodity. Cargoes are shipped unpackaged either dry, such as grain and ore, or liquid, such as petroleum products.
The rate structure is not set in deliberations by a group of operators as they are in a liner conference framework. Rather, the rates are set by dictates of market forces of supply/demand for the commodity and for tonnage. Brokers are the key to making contracts and many contracts are executed over the telephone and by telegraph strictly on the verbal agreement of businessmen. In the bulk trades, bulk operators are contract carriers, either time or voyage chartered by the shipper.
Bulk carriers can be divided primarily into two principal types of ownership. The first is the proprietary owner, whose costs may be calculated as part of the corporation’s operating expenses. To minimize those costs the proprietary owner may try to offer his ship for charter on the ballast leg of a voyage. The other type is the privately owned company, which sells its transportation service as the market dictates. Both types are not common carriers but contract carriers which charter ships on a long-term or short-term voyage or other basis. Bulk operations in foreign trade include both dry cargo vessels (grain and coal carriers) and tankers (chemical or petroleum products).
Dry Bulk Fleet
In 2014, there were 3 dry cargo vessels in the privately owned oceangoing active U.S.-flag fleet serving the foreign trades. These ships are specifically designed to transport vast amounts of cargoes such as sugar, grain, ore, coal, etc. Examples of dry bulk vessels include colliers and multipurpose ships or OBOs (capable of carrying ore, heavy dry bulk goods, and oil).
Liquid Bulk Fleet
In 2014, there were 5 liquid bulk vessels (tankers) in the privately owned oceangoing active U.S.-flag fleet serving the foreign trades, operated by the vessel-operating subsidiaries of major oil or other companies, or by independently operated companies. These ships are specifically designed to transport oil and other liquid cargoes. At times, tankers also carry grain. Examples of liquid bulk vessels include tankers, liquid natural gas (LNG), and liquid petroleum gas (LPG) carriers.
All ships must be registered to one of the nations of the world in order that responsibility for violations of international law and convention may be assigned. These ships then fall under the jurisdiction of their nation of registry. There are three categories of flag state registries:
National Registry which can be classified as the traditional flag states, i.e. United States, United Kingdom, Germany, China, Russia, and Japan to name a few. Traditional flag states typically have national restrictions in terms of ownership, shipbuilding, crewing and trading, for example, national cabotage laws.
Open Registries which are known and referred to as Flags of Convenience, i.e., vessels registered under the flags of Honduras, Vanuatu, Marshall Islands, Panama, Liberia, Bahamas, Cyprus, and Malta. Flags of Convenience have few restrictions concerning nationality of crews, where vessels may be financed or constructed, or ownership limitations. Shipping concerns adopted the practice of shopping around for nations under open registry giving them the best deal on taxes, wages and legal restrictions, “conveniently” registering their vessels with these countries.
Second Registries commonly referred to as hybrids, adopting many of the operating characteristics of Open Registries/Flags of Convenience while acting under the appearance of national authority, i.e. Hong Kong or Singapore.