Shipping Econs (Part 8)

What does the freight market primarily trade in?

• New ships

• Second-hand ships

• Scrap ships

• Sea transport

What is the primary focus of the sale and purchase market?

• New ships

• Second-hand ships

• Scrap ships

• Freight contracts

What is the newbuilding market concerned with?

• Trading existing ships

• Building new ships

• Scrapping old ships

• Purchasing second-hand ships

What is the purpose of the demolition market?

• Buying new ships

• Selling second-hand ships

• Scrapping old ships

• Trading in sea transport

What are the two types of transactions in the freight market?

• Time charter and voyage charter

• Demolition and newbuilding

• Bare boat charter and contract of affreightment

• Freight contract and time charter

Under a voyage charter, what does the shipowner contract to do?

• Hire the ship by the day

• Carry a specific cargo for a negotiated price per ton

• Compensate the charterer for future changes in freight rates

• Scrap the ship after a certain period

What is the purpose of a contract of affreightment?

• To hire a ship for a fee per day, month, or year

• To carry a specific cargo for a negotiated price per ton

• To compensate each other for changes in freight rates

• To hire out a ship without crew or operational responsibilities

What is the key feature of freight derivatives (FFAs)?

• Principal-to-principal contracts

• Physical commitment is involved

• Trades are based on specific terms

• No compensation involved

What is the primary purpose of the freight derivatives market?

• Trading second-hand ships

• Arranging contracts settled against an agreed future value of a freight market index

• Buying new ships

• Negotiating prices for existing ships

What is the difference between hedging and speculating?

• Hedging involves securing the cost of a physical position, while speculating is a bet on the shipping cycle

• Hedging is used for newbuilding contracts, while speculating is used for second-hand ships

• Hedging is a long-term strategy, while speculating is a short-term strategy

• Hedging is used by shipowners, while speculating is used by charterers