Glossary

A | B | C | D | E | F | G | I | L | M | O | P | S | T | V

A

ARA

Antwerp/Rotterdam/Amsterdam port range.

B

Backwardation

A condition where spot prices exceed forward prices.

Backhaul

The process of a vessel returning from the original destination point to the point of origin, normally referring to the route from Far East/Pacific Ocean to Europe/Atlantic Ocean.

Ballast

Weight taken on board by a ship other than cargo for stability purposes when empty or for making the ship lower in the water (ballast is usually sea water).

Ballast bonus

A bonus paid to the shipowner as compensation for ballasting to delivery location.

The Baltic Exchange

The Baltic Exchange is a membership organisation based in London and providing independent daily shipping market information in the form of route assessments and indices as well as circulating fixtures conducted in the physical market.

Baltic Dry Index (BDI)

Benchmark index issued daily by the Baltic Exchange which tracks the world-wide price of various dry bulk cargoes. The Index is a composite of the Capesize, Panamax, Supramax and Handysize Timecharter Averages.

Baltic Capesize Index

(BCI) an index calculated from the weighted average rates on four major capesize major routes, both voyage and timecharter, as assessed by a panel of brokers. The Baltic assesses a capesize as 172,000 dwt and the component routes are: C8_03 Gibraltar/Hamburg trans Atlantic round voyage; C9_03 Continent/Mediterranean trip Far East; C10_03 172000mt Pacific round voyage; C11_03 172000mt China/Japan trip Mediterranean/Cont.

Baltic Handysize Index

(BHSI) an index calculated from the weighted average rates on six major handysize major routes, both voyage and timecharter, as assessed by a panel of brokers. The Baltic assesses a handysize as 28,000 dwt and the component routes are:  HS1 Skaw - Passero trip Recalada - Rio de Janeiro; HS2 Skaw - Passero trip Boston – Galveston; HS3 Recalada - Rio de Janeiro trip Skaw – Passero; HS4 US Gulf trip via US Gulf or NCSA to Skaw - Passero; HS5 SE Asia trip via Australia to Singapore – Japan; HS6 S Korea - Japan via NOPAC to Singapore-Japan.

Baltic Panamax Index

(BPI) an index calculated from the weighted average rates on four major panamax routes, both voyage and timecharter, as assessed by a panel of brokers. The Baltic assesses a panamax as 74,000 dwt and the component routes are: P1A_03 Transatlantic RV; P2A_03 SKAW-GIB/Far East; P3A_03 Japan-SK/Pacific/round voyage and P4_03 Far East/NOPAC-AUST/SK-PASS.

Baltic Supramax Index

(BSI) an index calculated from the weighted average rates on six major supramax major routes, both voyage and timecharter, as assessed by a panel of brokers. The Baltic assesses a supramax as 52,454 dwt and the component routes are:  S1A  Antwerp - Skaw Trip Far East; S1B Canakkale Trip Far East; S2 Japan - SK / NOPAC or Australia round voyage; S3 Japan - SK Trip Gib - Skaw range; S4A US Gulf - Skaw-Passero; S4B Skaw-Passero - US Gulf.

Bareboat Charter

A bareboat charter is the hiring of a vessel whereby no administration or technical maintenance is included as part of the agreement. The charterer pays for all operating expenses, including fuel, crew, port expenses and hull insurance. Usually, the charter period ends with the charterer obtaining title in the hull, enabling the owner to finance the purchase of the vessel.

Bill of Lading (B/L)

Shipping document with three functions; receipt for cargo prepared by the shipper and signed by the carrier; a 'document of title' to the cargo during transport and provides evidence of terms and conditions of the contract of carriage of cargo by sea.

Bulk Cargo

Cargo that is unbound for loading and unloading; it is without count in a loose unpackaged form. Examples of bulk cargo include iron ore, coal, grain, and petroleum products.

Bunker Clause

Time charter which stipulates that charterer will accept and pays for all fuel on the vessel at port of delivery. On redelivery, the owner shall pay for any fuel remaining on board.

C

Cash settlement

A derivative instrument has cash settlement if it settles for a cash payment rather than for physical delivery.

Capesize

Generally speaking, a dry bulk carrier larger than 100,000 dwt. Capesize ships are the largest in the sector, mostly carrying iron ore and coal.

Contango

A condition where forward prices exceed spot prices.

Cargo

All articles, goods, materials, merchandise, or wares carried onboard an ship.

Charterer

A charterer is the cargo owner, who employs a shipbroker to find a ship to deliver the cargo for an agreed freight rate. A charterer may also be a party without a cargo who takes a vessel on charter for a specified period from the owner and then trades the ship to carry cargoes at a profit above the hire rate, or re-lets the ship to other sub-charterers.

Charter Party

Document containing details of the fixture of the chartered vessel. Standard forms for common various trades are normally used, though some charterers insist on private forms to reflect specific terms.

Clearing

Procedure through which a clearing house assumes the default risk of a trade in a financial instrument or its derivative, assuring financial integrity of the contract and collecting margin payments and clearing fees for the service.

Cost and Freight (C&F) (also CFR)

Term of sale indicating that the price invoiced or quoted by a seller for a shipment does not include insurance, but includes all expenses up to a named port of destination.

Cost, Insurance and Freight (CIF)

Term of sale indicating that the cost of goods, marine insurance and ocean transportation (freight) charges are paid to the point of delivery by the seller.

COA

Contract of Affreightment. A charter party covering more than one voyage.

D

Deadweight tonnage

Abbreviated to DWT, deadweight is a measure of how much weight a ship can safely carry. It is the sum of the weights of cargo, fuel, fresh water, ballast water, provisions, passengers, and crew.

Demise charter

A contract under which the charterer takes full control of the vessel along with the legal and financial responsibility.

Demurrage

Charges and fees applied by the owner when ships are retained beyond a specific loading or unloading time.

Dry Bulk Carrier

A vessel used to carry bulk cargoes, such as iron ore, grain, coal, cement and other powders and free-flowing solids.

E

Exchange for physical

An alternative to physical contract settlement offered by many futures exchanges.

Exchange traded

Contracts traded on a formal exchange such as the New York Stock Exchange or Chicago Board of Trade.

F

Force Majeure

A legal term for circumstances beyond the reasonable control of parties to a contract.

Forward Freight Agreements (FFAs)

FFAs are cash-settled swaps which offer shipowners, operators, charterers and traders a means of protecting themselves against the volatility of freight rates. Broadly defined, using an FFA means taking a position in a futures (paper) market as a substitute for a forward cash (physical) transaction. They are 'over the counter' products made on a principal-to-principal basis normally using a broker, with the option of clearing on most contracts.

Free On Board (FOB)

Term of sale indicating that the cost of the delivery of goods is the seller’s responsibility only up to the port of loading. The ocean freight and marine insurance is paid for by the buyer of the goods.

Freight

Term used in several different manners, which can refer to the actual cargo or to the charges levied on a shipper by a carrier for hauling that cargo.

Fronthaul

Opposite to backhaul, it usually refers to the vessel departures from Europe/Atlantic Ocean to Far East/Pacific Ocean.

Handymax

Dry bulk carrier of between approximately 40,000 and 48,000 dwt.

Handysize

Dry bulk carrier of between approximately 15,000 and 40,000 dwt.

G

GRT

Gross Register tonnage, represents the total internal volume of a vessel, with some exemptions for non-productive spaces such as crew quarters.

I

Implied volatility

Volatility inferred from an option price.

Initial Margin

Amount of deposit required by a clearing house and brokerage to be deposited before buying on margin, also known as original margin.

L

Laycan

Laydays Commencement and Cancelling. The earliest and latest dates on which the vessel must be ready to load at the port or be delivered to the time charterer.

Laydays

Specific time period in days during which the vessel must arrive at the loading port ready for loading.

Laytime

Time allowed for the vessel's cargo to be loaded/discharged without incurring demurrage.

Liquidity

Term used to describe an asset's ability to be sold without causing a significant movement in the price and with minimum loss of value.

Long position

A position that is long an asset or otherwise has positive exposure to a financial market.

M

Maintenance Margin

The required amount of collateral needed to maintain a margin account with clearing house. The minimum must be met at all times, but the particular amount required can vary.

Mark to Market

Recording the price or value of a commodity on a daily basis, to calculate profits and losses or to confirm that margin requirements are being met.

O

OBO

Ore/Bulk/Oil – a multi-purpose ship capable of carrying both wet and dry bulk cargoes.

OTC Clearing

Clearing mechanism for OTC commodity derivatives which allows the transfer of  a trade to a Clearing House, thus eliminating credit and performance risk of the initial OTC transaction.

Over-the-counter (OTC)

Bilateral trading of financial instruments such as stocks, bonds, commodities or derivatives directly between two parties.

P

Panamax

Dry bulk carrier with the maximum dimensions for passing through the Panama Canal (prior to its expansion). Ship width should be 32.21 metres and length 289.5 metres,  cargo size would be approximately 60,000-100,000 dwt.

Physical delivery

A derivative instrument which settles with actual delivery of the underlying asset rather than for cash.

S

Settlement Price

The closing price after a trading session, used to calculate gains and losses, margin calls, and invoice prices for deliveries in futures market accounts. In the FFA market, the settlement price is calculated by taking the arithmetic average of the daily index prices in a month.

Spot market

The spot market or cash market is a commodities market in which goods are sold for cash and delivered immediately. Contracts bought and sold on these markets are immediately effective.

Supramax

Dry bulk carrier of between approximately 48,000 and 60,000 dwt.

Short position

A position that is short an asset or otherwise has negative exposure to a market.

T

Time charter

A contract whereby a vessel is let to a charterer who pays a daily rate in dollars for a stipulated period of time or voyages. The owner retains management control of the vessel but the charterer selects the voyage and ports. The charterer.

Trip Time Charter

A contract whereby the charterer hires vessel for single voyage or round trip under terms and conditions similar to a time charter.

V

Value-at-risk

A measure of the risk of loss on a specific portfolio of financial assets, being the probability that the mark-to-market loss on the portfolio exceeds the value of the assets.

Variation Margin

Additional margin required to bring an account up to the required level due to market fluctuations.

Voyage Charter

A contract under which the shipowner agrees to carry an agreed quantity of cargo from a specified port or ports to another port or ports for a remuneration called freight, which is calculated according to the quantity of cargo loaded, or sometimes at a lumpsum freight.