Ship transportation cost (2.000 words in 1,5 spacing)
A Belgian food company is currently chartering a bulk carrier to import cocoa from Ivory
Coast. The companys executives hope that a vertical integration (i.e. transporting the
goods using their own vessel) will reduce the overall cost of their products by eliminating
the middleman.
The vessel is expected to operate on the Abidjan-Antwerp route.
The executives are currently debating between purchasing 1 Handymax vs 2 Handysize. Your
task is to produce a preliminary report in order to help the company executives decide which
option is the most favourable.
The S&P broker you contacted is proposing vessels similar in specification (and price!) to
IMO Number 9370006 (55k DWT) and IMO Number 9379674 (31k DWT).
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June 2015
Your report is expected to employ appropriate management accounting methods: to help
the executives make an informed decision you are expected to appropriately classify
shipping costs, do the necessary calculations and then to summarize everything in a table
spanning a single page, for easy and comprehensive comparison.
Based on this cost comparison, as well as the capacity and speed of each ship, you should
determine the cost per ton of cargo transported for each option and provide a
recommendation to the executives of the company. Additional discussion and conclusions
are welcome (provided adequate relevance/referencing/justification).
The main categories of shipping costs are available in Stopfords Maritime Economics 3e
(chapter 6); some of these costs can be quantified using Drewrys Ship Operating Costs
Annual Review and Forecast; both references are available from the university library.
Other costs will have to be researched (e.g. port fees) or calculated (e.g. bunkering); when
information is not available it must be forecast. Again, you must provide adequate
references and justify your calculations, particularly when data is not directly available.
