What is Worldscale? | What Determines Shipping Price? | Oil Shipping | ibhTraining

International Business House

16 Jan 202012:50

Summary

TLDRThe transcript explains the concept of 'world scale' in shipping, a pricing basis for hypothetical ships, particularly a 75,000-ton vessel. It discusses how world scale prices are calculated using historical bunker prices and are applied across major shipping routes. The speaker emphasizes the need for adjustments based on market conditions, advocating for a multiplicative approach rather than simple additions. The summary highlights the significance of understanding these rates for effective contract negotiation in the shipping industry, where real market prices often differ from the published rates.

Takeaways

😀 World scale provides a pricing basis for a hypothetical 75,000-ton ship.
😀 Calculations use previous year's bunker prices to estimate operating costs.
😀 Prices are published annually but can be adjusted for changes in port fees.
😀 World scale is similar to Platts but does not fluctuate throughout the year.
😀 The world scale price reflects the cost of shipping across major routes.
😀 To adjust prices, shipping uses multiplication rather than simple addition or subtraction.
😀 A world scale rate of 100 represents the cost for a 75,000-ton ship.
😀 Market demand influences the actual price negotiated beyond the world scale rates.
😀 Freight costs may differ based on the actual weight loaded onto the ship.
😀 Traders need to understand their unit costs to evaluate profitability effectively.

Q & A

What is World Scale?
-World Scale is a pricing basis used in shipping that calculates the operational costs for a hypothetical 75,000-ton ship, based on last year's bunker prices.
How does World Scale determine shipping costs?
-It calculates the costs for various shipping routes and publishes these as fixed rates, which generally remain unchanged throughout the year, except for significant adjustments in port fees.
Why is a 75,000-ton ship used as the basis for World Scale?
-The 75,000-ton ship is chosen as it represents a mid-range vessel size, providing a standard benchmark for cost calculations across major shipping routes.
How do adjustments to World Scale rates work?
-Instead of simply adding or subtracting from the flat rates, the World Scale rates are multiplied by a factor that reflects the efficiency and size of the actual vessel being used.
What happens if the market rate differs from the World Scale price?
-The actual charter rate can exceed or fall below the World Scale benchmark, as it's ultimately determined by market supply and demand.
What is the significance of the term 'World Scale 100'?
-'World Scale 100' refers to the calculated cost for a 75,000-ton ship. Values above or below this indicate the relative cost adjustments based on the size and market conditions.
How is the freight cost affected by loading more or less than the contracted amount?
-If a ship is loaded with less than the contracted capacity, the shipper usually pays for the full contracted amount. If more is loaded, the excess typically incurs a reduced rate.
What role do traders play in calculating freight costs?
-Traders need to calculate their dollar-per-ton costs to assess profitability, focusing on the difference between purchase and sale prices rather than total costs.
Can World Scale prices fluctuate throughout the year?
-World Scale prices generally remain stable throughout the year, with occasional modifications for significant changes in operational costs or port fees.
How does World Scale facilitate the contracting process in shipping?
-World Scale provides a standardized reference for pricing, allowing ship owners and charterers to easily calculate and agree upon freight rates based on the established multipliers and benchmarks.