Ocean Carriers Case Study Essay

The fragmented shipping industry is one of the most essential industries for ceaseless globalization and growth industry prospects are surprisingly st suitable in contrast to the normal logistics businesses that are highly cyclical. The factors that drive average day-to-day engross range are the age of watercrafts, mart condition, the supply and inquire and the size of the ships.Daily hire order are found by the interaction of the supply and demand of vessels. The supply is influence by market demand for shipping capacity, the efficiency and size of vessels and the rate of scrapping. The demand is influenced by the situation of the world economy, technological changes and trade patterns. There is a soaked positive relationship between spot/time charter hire rates and demand for iron ore vessel shipments (exhibition 5). This is due to the fact that rates are set by current market conditions and expectations that as well as influences investiture decisions in new vessels.Spot hire rates are judge to decrease next year because there is a big bout of vessels order for next year, according to exhibit 3. Compared to exhibit 2, its a big proportion. So the supply will be large, leading therates to decrease. In the next few years, there will be a large supply of new capsize vessels. And also, there will be some vessels that are over 24 years and will be scrapped. But the old vessels just total a small portion. So the influence that brought by the old vessels scrap is minor. Another point is, if Australia and India ore exporting is going well in the next few years, it would be real good for this industry and make the hire rates decrease. According to calculation, the 15 years plan will generate positive NPV as compared to NPV of 25 years plan.The forecast is highly optimistic about the industrys long-term prospects with continuous growth. Real economic growth will represent rise to higher demand for the commodities transported and spot rates will modify w ith the ones from 2000. In fact, in 2002 the iron industry will recover, especially because of an emergence in the trading volumes, thanks to the growth of the Indian and Australian market, also influenced by the efficiency gains due to gradual technological improvements.The choice of fashioning 3 installment payments provides the company with a large non-recurring capital escape cock in 2 short years that will cause expectant liquidity constraints, investing $500,000 in net working capital compensates for this. However, maritime Carriers should try to subjoin the payments period in order to be able to keep working capital at higher levels.Reevaluating the capital organize is strongly recommended since lower costs would decrease the discount rate and increase the NPV. The corporate strategy obviously has to be reevaluated concerning when to decommission the vessel since this makes the visualize not financially supported. The higher costs of operating an older vessel is obvio usly lower that the gains of doing so.There need to be more info to support that the firm is able to lock higher prices which would enable them to ask round higher cash flows and with greater certainty. Extending the years of service for the vessels from 15 to at least a span where NPV is positive is crucial for future projects to be even considered.