FREIGHT TRADING FUNDAMENTALS
September 2025
Learning Objectives
By the end of this module, you will be able to:
OCEAN TRANSPORT
DRY BULK MARKET
FREIGHT CALCULATION
FREIGHT IN LDC
Explain what tariffs are and how they affect LDC’s global trade operations.
OCEAN TRANSPORT
DRY BULK MARKET
FREIGHT CALCULATION
FREIGHT IN LDC
A MYRIAD OF SHIP TYPES
Dry – Bulkers
Wet – Tankers
Liner – Boxships
Others
Dry Bulkers – Various Sub Types
OCEAN TRANSPORT
DRY BULK MARKET
FREIGHT CALCULATION
FREIGHT IN LDC
Requirements for trading opportunities to arise in the first place
Macro analysis - freight balance sheet
Geographic dry bulk flows
There are 4 major trade flows (Transpacific, Transatlantic and the flows in between them)
Origination2019
Destination2019
North America
Europe
East Asia
Transpacific flow
2,630 m MT
Transatlantic
1,390 mMT
Indian Subcontinent
Central America
Africa
South America
Australia
Huge imbalance of cargo flow out of Atlantic Basin vs Inbound. Hence the regional price differences exist to draw tonnage to where it is needed. Ballasting
Fronthaul(2)
740 mMT
Backhaul(1)
80 mMT
Differences & similarities vs commodity markets
Title
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Subtitle
Shipping contracts usually fairly simple in terms of interdependent obligations BUT extremely complex with regards to risk / responsibility allocation
Unlike other commodities, demand for freight is derived – a challenge and an opportunity
Positive working capital utilization – addressing credit risk a challenge
Contracts impossible to standardize given the underlying object of the contract (a service)
Very macro oriented often referred to as the “pulse” of the world economy
Demand much more “shifty” than supply – marginal supply dynamics
No real alternative to seaborne transportation (inelastic demand) BUT different sizes within the dry bulk market often behave like “commodity substitutes” (through cross size substitution)
Accuracy of supply & demand analysis respectively shifts drastically from the spot to the deferred and vice-versa
Tonne-mile concept, as the “output” of shipping, unique feature of the freight market
No “cost of carry” model, no conversion to the spot
OCEAN TRANSPORT
DRY BULK MARKET
FREIGHT CALCULATION
FREIGHT IN LDC
Freight Calculation
( Daily Hire ($/day) x Duration (days) )
( Bunker Fuel ($/mt) x Consumption Quantity (mt) )
( Port Charges/DA ($) + Canal Charges ($) )
Misc (Insurance, Pilotages, Crew bonus etc…)
Total Cargo Quantity
The intake of the vessel
4 main factors
Daily Hire ($/day)
FACTORS
FFA
Delivery Point
Inter-Regional ‘Basis’
vessel design
There are often several places that could feasibly supply vessels to a deficit area (drawing arc)
Flat price – like other commodities, give insight into the likely behavior of participants
Shape of the forward curve
Underpinning our basis assumptions
There are many vessel designs all with particular strengths and weaknesses
What are the chances of you finding the optimal design willing to competitively price your biz?
Relative strength of one region from another
Ballast cost a notable determinant
Many other considerations:
- What competing business will they be seeing? What does that pay?
- Exoticness – characteristics of this business that will shrink our available tonnage pool?
- When to fix / most liquid (2 – 10 – 20 days prior)
Draft
Available sailing draft (not the same as available water depth).
- Salinity
- Clearance (distance between keel and bottom)
- Tidal
- NAABSA
- TPC/TPI
Deadweight (Dwt)
- Vessel TC description
- Winter marks/summer marks (Pilmsol lines)
- Constants/Fresh water/bunkers
Physical Restriction
- LOA (Length Overall)
- Beam (width)
- Airdraft (waterline top of hatch coaming)
- Gear (cranes/grabs)
- Stem Size / Contractual Restriction
Cubic
FREIGHT TRADING FUNDAMENTALS
LDC
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Transcript
FREIGHT TRADING FUNDAMENTALS
September 2025
Learning Objectives
By the end of this module, you will be able to:
OCEAN TRANSPORT
DRY BULK MARKET
FREIGHT CALCULATION
FREIGHT IN LDC
Explain what tariffs are and how they affect LDC’s global trade operations.
OCEAN TRANSPORT
DRY BULK MARKET
FREIGHT CALCULATION
FREIGHT IN LDC
A MYRIAD OF SHIP TYPES
Dry – Bulkers
Wet – Tankers
Liner – Boxships
Others
Dry Bulkers – Various Sub Types
OCEAN TRANSPORT
DRY BULK MARKET
FREIGHT CALCULATION
FREIGHT IN LDC
Requirements for trading opportunities to arise in the first place
Macro analysis - freight balance sheet
Geographic dry bulk flows
There are 4 major trade flows (Transpacific, Transatlantic and the flows in between them)
Origination2019
Destination2019
North America
Europe
East Asia
Transpacific flow 2,630 m MT
Transatlantic 1,390 mMT
Indian Subcontinent
Central America
Africa
South America
Australia
Huge imbalance of cargo flow out of Atlantic Basin vs Inbound. Hence the regional price differences exist to draw tonnage to where it is needed. Ballasting
Fronthaul(2) 740 mMT
Backhaul(1) 80 mMT
Differences & similarities vs commodity markets
Title
Use this side to give more information about a topic.
Use this side to give more information about a topic.
Use this side to give more information about a topic.
Use this side to give more information about a topic.
Use this side to give more information about a topic.
Use this side to give more information about a topic.
Use this side to give more information about a topic.
Use this side to give more information about a topic.
Use this side to give more information about a topic.
Use this side to give more information about a topic.
Use this side to give more information about a topic.
Subtitle
Shipping contracts usually fairly simple in terms of interdependent obligations BUT extremely complex with regards to risk / responsibility allocation
Unlike other commodities, demand for freight is derived – a challenge and an opportunity
Positive working capital utilization – addressing credit risk a challenge
Contracts impossible to standardize given the underlying object of the contract (a service)
Very macro oriented often referred to as the “pulse” of the world economy
Demand much more “shifty” than supply – marginal supply dynamics
No real alternative to seaborne transportation (inelastic demand) BUT different sizes within the dry bulk market often behave like “commodity substitutes” (through cross size substitution)
Accuracy of supply & demand analysis respectively shifts drastically from the spot to the deferred and vice-versa
Tonne-mile concept, as the “output” of shipping, unique feature of the freight market
No “cost of carry” model, no conversion to the spot
OCEAN TRANSPORT
DRY BULK MARKET
FREIGHT CALCULATION
FREIGHT IN LDC
Freight Calculation
( Daily Hire ($/day) x Duration (days) )
( Bunker Fuel ($/mt) x Consumption Quantity (mt) )
( Port Charges/DA ($) + Canal Charges ($) )
Misc (Insurance, Pilotages, Crew bonus etc…)
Total Cargo Quantity
The intake of the vessel
4 main factors
Daily Hire ($/day)
FACTORS
FFA
Delivery Point
Inter-Regional ‘Basis’
vessel design
There are often several places that could feasibly supply vessels to a deficit area (drawing arc)
Flat price – like other commodities, give insight into the likely behavior of participants Shape of the forward curve Underpinning our basis assumptions
There are many vessel designs all with particular strengths and weaknesses What are the chances of you finding the optimal design willing to competitively price your biz?
Relative strength of one region from another Ballast cost a notable determinant
Many other considerations:
Draft
Available sailing draft (not the same as available water depth).
Deadweight (Dwt)
Physical Restriction
Cubic