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Ocean Carriers Q&a

In: Business and Management

Submitted By StephenIp
Words 838
Pages 4
Question 1
Assume that Ocean Carriers uses a 9% discount rate. Do you expect daily spot hire rates to increase or decrease next year? Daily hire rates were determined by supply and demand, the expected number of ships available percentage increase (supply side) more than the percentage increase of demand for bulk capsizes ( demand side) , therefore daily spot hire rates is expected decrease in next year ( year 2002). For demand side:
As per Exhibit 6, forecasted demand in year 2002 is 445 tons.

For the supply side:
Supply in 2002: The number of ships available equaled the number of vessels in service the previous year plus any new ships delivered minus any scrapping and sinking, assuming that at or over 15 years vessels would be scrapping and sinkings. [612+ 63-25 = 650]

The above analysis is in line with Linn’s comments, she has optimistic view of the long term marker demand for capsizes. However, she also considered that 63 new vessels were scheduled for delivery in 2001 and those imports of iron ore and coal would probably remain stagnant over the next two years. She therefore anticipated that spot rates would fall in 2001 and 2002.

Question 2
What factors drive daily hire rates? The following factors would drive daily hire rates: * The daily hire rates were determined by supply and demand. (1) Demand for dry bulk capsizes was determined by the for the world economy. With Strong economy, demand for iron and coal increase and the demand increase for capsize fleets, and then the daily hire rates would increase, vice versa.(2) Supply for dry bulk capsizes was affected by the increase in size and efficiency the newer ships offered. With ships in bigger size and more fuel efficient, few ships were needed to carry the same amount of cargo. * Changes in trade patterns would affect daily hire rates. If the changes in…...

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