Create a 8 pages page paper that discusses the dry bulk freight market. The industry has also over the years witnessed some technical changes. Due to the ever-increasing level of world trade from the 1960’s, it became abundantly clear to the industry observers that the traditional “break bulk” shipping will not be able to carry around the world the increasing cargo. This, therefore, led to the palletization and containerization was introduced to resolve these problems.
Another revolution that took place was the increasing use of bigger ships. Over a period from 1945 to 1995, oil tankers increased by the size of almost twenty times while dry bulk vessels became almost some fifteen times bigger. This increase in ship sizes led to a great reduction of shipping costs that industries increasingly preferred using ships than to the old railroad methods. The reduction in cost was of great advantage to industries to carry around their raw materials (e.g. this led to the cost of transporting coal by sea from Virginia to Jacksonville, Florida almost three times cheaper than by rail) (Chrzanowski, 1985).
.The dry bulk freight market participants are in the most part price takers in that they accept the ruling freight rate as axiomatic. The market is an open market comprising of numerous individual firms of shippers and similarly large numbers of shipowners offering common carrier bulk transport services. The following assumptions hold true for this kind of market:
The market consists mostly of a large number of small firms of both shippers and shipowners. This means that each firm or player in the market produces or consumes a level of output which is extremely small in relation to the total quantity of the industry’s production, thereby leaving no one player with the power to be able to influence the level of freight rates on the market since no one individual firm is capable of affecting the freight rate by varying their own output levels or their demand for tonnage, since what the individual supplies or demands is insignificant in terms of the industry as a whole.