Shiping Trend By Oladokun Sulaiman

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Paper On

Built fleet statistics, trend in fleet development, demands for world fleets and the future of the fleet and shipbuilding industry MMK 2513

By: Oladokun Sulaiman

Supervised by: Dr. Omar

Faculty of mechanical engineering Marine technology department Universiti Teknologi Malaysia Skudai, Johor, Malaysia January 2006

Abstract Human civilization in building things always taken similar path across all aspect of life, industries of yesterday have seen concentration in vertical way of building industries, today is all horizontal building methods some that include merging and strong collaboration. The large-scale nature of shipbuilding has created a pathway for associative manufacturing. Ships as well as other industrial maritime structures and related components are an important industry that requires the best and latest scientific/engineering resources in a multitude of different disciplines. These reports will collect, discuss and analyses of various and historical and statistical data’s of shipbuilding for the last decade and deduce trend in shipbuilding, demand and future direction the industry. The report will touch the serious difficulties the shipbuilding sector is facing and providing information on trend in commercial practices. The paper will also discuss: – The longer term supply and demand analysis for merchant ships; – General remarks on the nature of shipbuilding contracts and on the underlying Study work; – The analysis of the financial sector in South Korea; – Details of certain investigated shipyards; – The description of the applied methodology;

Introduction Shipping is not a primary industry in the sense of agriculture or mining, nor a secondary industry in the sense of steel or chemical production. It is a tertiary or service industry that responds to the needs of the shipping public. As such of that, shipping represents the investment of billions of dollars individual, corporate, commercial and government itself.

From that, the major function of the shipping industry is to close the physical gap between trading nations by allowing the exchange of extra commodities. This activity is performed worldwide and links all parts of the globe in a network of routes, some of which are highly developed and heavily trafficked. Others used occasionally at certain times of the years. So, water borne transport is the cheapest means of moving large quantities of any commodity over long distance although it is in the main far slower than other forms of transport. Owners do more than respond to the signals of the market. They continually assess the future needs of shippers and charterers investing their resources in terms of manpower and capital, in new ship design, technological improvement and additional ship capacity, realizing profits if they a re right and losses if they are wrong. Lowering the cost of transportation since World War II has encouraged the specialization of industrial output by shifts in the comparative price advantage of domestic and foreign produced goods and has opened remote sources of raw material. World economies have never been as integrated as they are now. Trade is the most powerful binding force in a world filled with incompatible political systems.

Trends in shipbuilding According to Lloyd’s Register, the world orderbook for new ships, as measured in gross tons, decreased after June 1998. On June 30, 1999, the world orderbook for merchant vessels 100 gross tons (gt) and over consisted of 2,479 vessels totaling 53.8 million gt. This represents a 7 percent decrease from the 2,668 Vessels on order at the end of June 1998 and a 3 percent decrease in gross tonnage from 55.6 million gt in June 1998. The average size of merchant ships on order increased 4 percent from 20,829 gt at the end of June 1998 to 21,718 gt at the end of June 1999. South Korea jumped ahead of Japan to regain the dominant position in the world merchant shipbuilding market. South Korea accounted for 35 percent of the gross tonnage of merchant ships on order, followed by Japan with 32 percent and the People’s Republic of China with 5 percent of the international commercial shipbuilding orderbook (see Figure 22-1). At the end of June 1999, the United States ranked twelfth among shipbuilding

The world shipbuilding market continues to face serious difficulties, due to an imbalance of supply and demand. Past expansion of shipyards, mainly in Korea, but now increasingly also in China 3, has led to price depression. Year 2000 have been a recovery point due to high level of ordering and increase in price while year 2001 has led to a new reduction in prices.The year 2001 has been very problematic for the maritime industries world-wide: The Recession in the US and the terrorist attacks of 11 September has decreased the demand for sea trade and cruises, respectively. The decline in ordering

affected the sectors of Containerships and cruiseships most, leading to a drop in overall market share for Korea and the EU, which are particularly strong in these segments. The segment Liquified Natural Gas carriers (LNG) saw an increase in absolute order volume, however, this is still a niche market. Korean yards took most of the orders for LNG carriers. They hold 65 % of the relevant world orderbook, and 79 % of the new orders placed in 2001 went to Korean yards, despite the fact that Korea is a relative newcomer in the field and the building yards do not hold patents on the key technologies. Market analysis suggests that Korean yards made inroads in this area due to very low offer prices. Their ability to supply a large number of vessels at an early delivery date may have been important in getting a large amount of orders also.

company in the field and their data is also used by international organizations such as the OECD.

Challenges in technological developments in the shipping and shipbuilding industries over the last few years are summarized here by adding the latest information to what was reported. 1.

Energy Saving Technology for Ships

In 1981, successful attempts to develop ships mainly very large ore/ coal carrier, which would consume 40 to 60 percent less fuel than conventional ships of comparable size were announced in quick succession and construction of such ships was started. At the same time, these techniques serve as stepping stones for further technological development in this direction. 2.

Study on Technological Strategy Expert from universities, the Ministry of Transport and the shipping , shipbuilding and ship machinery industries gathered and discussed a technological strategy for the coming years, based on the environment of the shipbuilding industry and the expected future image of the nation. The conclusion s they reached were: •

Social requirements and constraints to be taken into consideration are boiled down to building up a socioeconomic system harmonized with the environment, realization of secure and hazard-free life of high quality, realization of an advanced IT-oriented society and assurance of steady supply of energy, resource and food.

•

Focus on energy conservation and human labor saving, themes corresponding to the above-cited general objective include conservation of the global and marine environment, pursuit of greater safety and reliability,

application

of

advanced

information

technology

and

enhancement of productivity and reliability and sophistication of shipbuilding technology and creation of new demand to be met by shipbuilders. 3.

Conservation of the Global and Marine Environment Among the themes concerning the conservation of the global environment taken up by the United Nation Environmental Program (UNEP), those having direct relevance to the shipping and shipbuilding industries are the prevention of the

marine pollution, the prevention of air pollution and the prevention of global warming. 4.

Ship Safety and Reliability From the second half of the 1980s, bulk carriers were wrecked consecutively, tolling many human lives and large amounts of resources. Safety problems of bulkers have been discussed mainly at the IMO and the International Association of Classification Societies (ICAS) and legislation for greater safety is in the process of development. Therefore, they create some solution for them to follow it, the solution covered;

5.

•

Enhanced Hull Inspection and Maintenance

•

Fatigue and Corrosion of Hulls

•

Monitoring of Hull Strength

•

Modernization of Ship and Establishment of Management Systems

Application of Advanced Information Technology and Enhancement of Productivity and Reliability A computer integrated manufacturing system (CIMS) for shipbuilding has been studied as a joint project of the academic community and private industry since year 1987. Realization of the system is an urgent necessity in order to transform the traditional labor intensive shipbuilding sector into a modern industry and eventually solve the immediate problem of labor shortage, especially of skilled worker. Because the reduced physical capacity of shipyards and the double hull requirement for tanker will inevitably reduce the numbers of vessels that can be built annually further improvement in productivity are required. From this CIMS, it introduces; •

Design stage

6.

•

Production planning and production management

•

Mechanization and automation

Advancement of Shipbuilding Technology and Creation of New Demand Studies are under way focusing on the development of ultra-high speed cargo ships, and on infrastructure improvements including faster and more efficient cargo handling to match the speed of fast marine transport, all with an eye to a modal shift in the key aspect of logistic. The volume of cargo traffic increase annually and basic physical distribution requirements for ever faster, cheaper and safer transport remain. Overland transport in particular, is beset by problems of congestion, labor shortage an air pollution from exhaust gas, giving rise to demands by society for a modal shift to marine transport. Research efforts are also made for practical application of gigantic floating structures intended for greater utilization of oceanic space. It is hoped that shipbuilding technology be further advanced so as to create new demand to be met by shipbuilders.

Summary of market share –all ships type According ships data’s collected from clackson research report, Japan, china (including Hong Kong ) , the republic of Korea , Denmark and Sweden are outstanding among the nations with maritime services for cross trades.

Other major trading nations are major importers or users of shipping services while maintaining a relevant ownership position and to lesser extent a national flags – for example the united stares come into this group. According to UNCTAD report the United States account for 13% of world trade while owned 5.9 % of world tonnage with only about 1/4th of such tonnage flying the national flag. Similarly France account for .5% of world trade and .0 % of tonnage ownership with flag having a share of ½ of this percentage. Korean yards continue to price ships below cost while others are trying to improve their bottom line. Most major Korean yards managed to show a profit for 2001, due to high sales volume at expense of price. The source mostly referred to in this report is H. Clarkson Ltd. 11 and its various subsidiaries (in particular Clarkson Research). While Clarkson is a well-recognized

Demands for shipbuilding Research and development Forecast under analysis of cargo volume and correlation with fleet ownership generated has allows have also been a useful tool for various decision making process to meet market and demands call in maritime industry a swell as increased productivity and cost reduction in the construction of ships. So far, because of the complexity of the maritime industry- maritime structures and maritime transport services are largely interrelated, therefore, demands to meet productivities, efficiency of

the construction of ships, Technology and Improvement of competitiveness depends on the following components • •

Organization Human factor

In particular, in order to achieve substantial cost reduction, productivity gains, production process simulation under technological and organizational, this along side with other factors of labor and incorporation of new ICT tools for interconnectivity between different systems will be taking into account and incorporated as necessarily. In addition to this the following factors has also influence the market of sea transport: •

World Economy: the world economy with its output and trade is the most important single factor to generate demand for shipping and any crisis in the world economy reflects in the demand for shipping. Ups and downs of shipping demand are also proportionate to world trade. The world economy that may bring about change in the demand for sea transport through:

•

The Business Cycle: The business cycle lays the foundation for freight cycles. Fluctuation in the rate of economic growth work through in to the sea borne trade, creating a cycle pattern of demand for ships. For example, two major recessions in shipping business in 1975 and 1981-1983, which co-incited with the recession of the world economy. These economic cycles arise from a combination of external and internal factors. The external factors include events such as wars or sudden changes in commodity prices such as crude oil, which cause a sudden change in demand. Internal factors refer to the dynamic structure of the world economy itself, which it is argued, leads naturally to a cyclical rather than linear growth path. Five of the most common business cycles are-

Concurrently, this make the designing and building of highly complex maritime systems, be it ships, floating factories or fixed structures, requires the best possible multidisciplinary approach that focus on • • • •

Simplicity (in lay-out and operation) Robustness and reliability Ease of maintenance Low manning requirements

Inline with contemporary issue of sustainable safe and environmentally friendly ship operation, using • • • •

Design Tools. Design Methods Production Processes Production Technologies

Commodities that have share of commodity for sea trade are raw material of agricultural industry, Metal Industry, Forest Product, Other Industrial Material, Other Manufactures. The most important technical development was the unitization of the liner shipping business. The shipping industry has been so successful at exploiting this technical development that the cost of sea transport has hardly increased- Coal and Oil cost little more to transport. It is generally considered that maritime capabilities, specifically of the ownership of substantial tonnage are essential for a county trade support and promotion. This report will highlight data’s of major trading countries, the relationships and impact between cargo and tonnage and the flag of registry in the mid 1990s than in 1940s. Market trend According to UNCTAD maritime review Japan, Korea’s china has made more than dramatic change that revolutionary’s shipbuilding. It has observed that shipping building and its associated industry is quite conservative, and they are more subjects to government influence and policies. This influence has provided fluctuation trends in the industry and of course the demand and supply for cargo are determinant for demand for new ships.

A summary of the balance of tonnage supply and demand for selected years appears in table - The total surplus tonnage in 2004 was about half that of the previous year – 6.2 million dwt. This was largely attributable to the high level of vessel scrapping over the last few years and to increased employment of ships. Supply Tonnage supply in the oil tanker sector increased in 2004 by 12.3 million dwt to 298.3 million dwt as newbuildings delivered outweighed tonnage scrapped, laid up or lost (see table and. figure). This, combined within increased shipments and extended haulage,

brought down overcapacity to 3.4 million dwt or 1.1 per cent of the total world tanker .eet. In 2004, the total dry bulk. Fleet supply increased by 27.6 million dwt to 325.1 million dwt. Over tonnage for this type of vessel reached 2.1 million dwt, equivalent to 0.6 per cent of the dry bulk .fleet. For the conventional general cargo. Fleet, overcapacity stood at the same level as in the previous year, with supply exceeding demand by only 0.7 million dwt or 1.6 per cent of the world .fleet of this sector. The surplus tonnage of general cargo vessels has been under 1 million dwt for the last four years.

Policy change Recent years have seen many countries coming up with revitalizing and their shipping building industry, in Nigeria cabotages law and ship financing scheme is recently established to encourage shipbuilding and ship acquisition. The US also introduced the National Shipbuilding and Conversion Act of 1993 and the expanded Title XI Federal Ship Financing Guarantee Program. .the same is introduced in other part

Demand The correlation between cargo volume generated by different country groups and their fleet ownership is summarized in table 29. Developed market-economy countries

generated 48.9 per cent of world seaborne trade in 2004, compared with 53.7 per cent in 1980. Over the same period, the tonnage share of the fleet of developed market-economy countries fell, from about 51 per cent in 1980 to about 27 per cent in 2004. However, in addition to tonnage under national flags, there is also the tonnage of vessels owned by nationals of particular countries but registered under foreign flags, and the two together bring the share of developed market-economy countries to 65 per cent. The share of developing countries in world cargo turnover has remained at about 40 per cent. Their tonnage owned and registered under national flags increased from 10 per cent of the world fleet in 1980 to 22.6 per cent at the beginning of 2005, Tonnage beneficially owned by developing countries has expanded to nearly one third of the total beneficially registered tonnage, bringing the total tonnage owned by developing countries to about 36 per cent of the world .fleet. The share of world cargo turnover generated by the countries of Central and Eastern Europe remained at about 3 per cent in 2004, unchanged from the levels of previous years but significantly less than the 4.7 per cent level of 1980. These countries’ fleet position also declined from 5.5 per cent to less than 2 per cent in 2004. The socialist countries in Asia increased their share in world trade to 8.1 per cent in 2004, while they improved their share in world tonnage from 1.6 per cent in 1980 to 3.7 percent in 2004. In addition, these countries have a small share of their fleet registered in the open registries. Information on the fleet ownership of the major trading nations appears in table 30. The major trading nations are also major owners of tonnage, which reflects the fact that in trade-supporting policies maritime transport can be exploited as a complement to trade. Maritime capabilities, specifically ownership of substantial tonnage, are generally considered essential for a country’s trade support and promotion. The table also highlights the similarities and differences among the shipping services of the leading trading nations. Major trading countries such as Japan, China (including Hong Kong), the Republic of Korea, Denmark and Sweden are outstanding among the nations with maritime services for cross trades. Other major trading

The information provided by Clarkson Research confirms the general downward trend in ship prices. This applies to all standard ship types and reflects the generally negative sentiment in the market, despite rising costs stemming from inflation, wage increases and higher prices for raw materials priced in USD in all major shipbuilding regions.

Source - clackson research

In accordance with market developments, Chinese shipbuilders have expressed their intention to aim for a large scale expansion of facilities, quoting South Korea as an example to follow. This is likely to lead to further price decline, unless China herself creates significant additional demand for ships. China being in WTO will equally creat effect in the market.

The index clearly shows the massive drop in prices following the Asian crisis of 1997/98 and the subsequent efforts to increase prices along the ordering boom in 2000. The (not very pronounced) trend towards better prices stopped in late 2000 and for the year 2001 the trend was reversed as had to be expected with the number of incoming orders falling. It is noteworthy that 2001 price levels did not keep pace e.g. with inflation. With very limited ordering expected for 2002, price recovery will be difficult to Achieve, although yards may be inclined to look for orders in those segments that have been less affected by price erosion. Past experience has, however, shown that this behaviour does not improve the financial results of yards, but rather leads to additional price erosion in the targeted sectors, as long as the market is characterized by over-supply.

New building Yards, such as Hyundai (HHI), Hanjin (HHIC) and Samsung (SHI), did not benefited from large scale debt restructuring and which operate comparatively “old” facilities show (slightly) higher production costs under the debt-based methodology, while yards, such as Daewoo (DSME) and Daedong, did benefited from debt reductions and moratoria but operate comparatively “new” facilities show (slightly) higher production costs when basing the investigations on the depreciation approach. The two approaches give very similar results for the other two major Korean yards, Hyundai Mipo and Samho. Of course, results are also influenced by the financing terms of the individual projects investigated.

New ship builders Source- European union

Prediction for future shipbuilding If we go through the trend of the shipping and shipbuilding above, we can create and project a new development in next few years’ construction. Here, what I am thinking that influence to the shipping and shipbuilding industries. 1.

Justification for Combined Carriers In order to discuss the need flexible ships on certain of the world’s trade routes, the following section looks at the justification put forward by the shipping industry for the design and operation of combined ore, bulk, oil carrier or ore, oil carrier. These ships are designed to carry either oil or dry bulk on separate voyages at different times and are potentially more productive than pure tanker or bulk carrier. In making the decision to invest in combined carrier tonnage as opposed to a pure oil carrier or dry bulk carrier, the ship-owner is presented with two possible operating scenarios. He can either combine voyages over a period by carrying dry bulk and oil in a sequence that keeps ballast to minimum or he can switch his ship between the dry bulk and the oil market sector. The independent ship-owner seeks

to minimize his earnings by operating ships; therefore he must adapt management performance to combine flexibility with greater earning power. 2.

Combined Voyages The operation of combined voyages seeks to mix short ballast passages with longer loaded ones. It takes a different management style and effort to negotiate a series of contracts that will keep the ship employed to that normally found in bulk shipping company. The use a contract where the ship is not named in the document, but a promise is given to deliver the fixed amounts of cargo in given time periods makes it possible to plan the schedules of a fleet of this type of ships. The problem may be encountered where the cargo owner may offer a lower freight rate than that currently found in the spot market in exchanged for this type of commitment.

3.

Spot Market Operation The basic assumption underlying this philosophy is that the shipping market follows a pattern, which enables the time, when it is advantageous to transfer the combined carrier from oil trading to dry bulk trading to be calculated. This means that when tanker rates are high, the ship is traded in the oil market as a tanker, but when this rate falls there comes a time when the dry bulk rate will be higher it is the profitable to transfer to dry bulk trading.

4.

Event Affecting Combined Carrier Utilization

5.

Energy Almost all commercial merchant ships are powered by oil fed plant. However, the oil crisis of the last few years has highlighted the need to research the likely

power plant of the future. Amongst the many options, three alternatives to oil seem to have gained the most attention. •

Steam power

•

Wind power

•

Nuclear power

New project investigations Since the last shipbuilding report six more orders (all placed in South Korea) were investigated in detail, in order to establish the actual building costs. The investigated orders are: – VLCC, 48 120 cgt, to be built at Samho Heavy Industries; – LNG carrier (series of 5), 71 850 cgt, to be built at Daewoo Shipbuilding and Marine Engineering Co. Ltd. (DSME); – LNG carrier, 69 675 cgt, to be built at Samsung Heavy Industries (SHI); – LNG carrier (series of 2), 88 500 cgt, to be built at Hyundai Heavy Industries (HHI); – Suezmax crude oil tanker (series of 4), 30 800 cgt, to be built at Samho Heavy Industries; – 5 762 TEU containership (series of 2), 42 835 cgt, to be built at Samsung Heavy Industries (SHI); DSME has become the leading builder of LNG carriers in the world, with sixteen ships on order, giving the yard an economy of scale unseen before. However, the detailed analysis undertaken revealed that for the construction of LNG carriers there are limits to the improvement in efficiency as some yard equipment needs to be duplicated, leading to high up-front investment costs. Furthermore, DSME managed to start as a new company in late 2000, shedding most of the debts of its predecessor.

Therefore DSME can operate a very large state-of-the-art shipyard without the massive initial investment costs being reflected in their product prices. Nevertheless DSME still stands at a debt to equity ratio of 279 % (estimated for 2001), and although it is currently cash rich due to high order intake in 2001, this is likely to be dissipated when those orders need to go into production and the actual building costs begin to be incurred. SHI remains burdened with a comparatively high level of debt (the debt to equity ratio for 2001 is estimated to be still more than 200 %) and this fact is reflected in their cost base. SHI also suffers from a lower productivity than its Korean competitors, leading to higher wage costs. In addition SHI did not manage to attract multiple orders as Daewoo and Hyundai did and this has to show in the unit costs. After being able to dispose of some non-performing assets stemming from HHI’s previous engagement with other Hyundai subsidiaries, HHI seems now to be heading towards profitability. HHI’s debt to equity ratio is assumed to reach 183 % in 2001, but as with all Korean yards, an assessment of the yard’s financial situation is difficult to make. Very few meaningful financial figures are given and published accounts are not very recent and have little or no annotations. Conclusion The world shipbuilding market is characterized by a strong imbalance of supply and demand, that over-expansion of shipbuilding capacity in Korea has led to very low offer prices in most market segments and that the resulting losses for Korean yards, in some cases, have been compensated through financial restructuring which. The world merchant fleet expanded to 895.8 million deadweight tons (dwt) at the beginning of 2005, a 4.5 per cent increase. Newbuilding deliveries increased marginally to 49.4 million dwt, and tonnage broken up and lost was more than halved to 10.6 million dwt, leaving a net gain of 38.8 million dwt. The fleets of oil tankers and dry bulk carriers, which together make up 73.3 per cent of the total world fleet, increased by 6.1 per cent and 4.2 per cent respectively. There was a 8.4 per cent increase from 90.5 to 98.1 million dwt in the container ship fleet and a 7.6 per cent increase from 20.9 to 22.5 million dwt in the liqufied gas carrier’s fleet. The average age of the world fleet dropped marginally to 12.3 years, with almost 27.3 per cent of the fleet 20 or more years old. General cargo vessels had the highest average age (17.5 years) and container vessels the lowest (9.4 years). Registration of ships by developed market economy countries and major open-registry countries accounted for 27 and 45.1 per cent of the world leet respectively. Open registries increased their tonnage marginally; two thirds of this beneficially owned. Fleet

is owned by market-economy and developing countries. Developing countries’ share reached 22.6 per cent or 202.3 million dwt, of which 155.9 million dwt is registered in Asia.

References: I. S.R.Tolofari (1989), “Open Registry Shipping, AComparative Study of Costs and Freight Rates”, Gordon and Breach Science Publishers, Amsterdam II. Roy L. Nersesian (1981), “Ships and Shipping, A comprehensive Guide”, Penwell Books, Oklahoma III. www.ship4ever.com IV. www.nautikal4ever.com V. http://www.clarksons.net/. VI. http://www.fearnleys.com/. VII. UNCTAD Review of Maritime Transportation, 2004, Pg 19-53

Appendix Index reference

Arrangement of work The merchant fleet statistics are based on Lloyd’s Register-Fairplay data supplied to DfT every quarter. Vessels The statistics include all known sea-going ships (and a few non-seagoing vessels) of 100 gross tons (gt) and above. United States reserve fleet (except for mid-year 1998) and Great Lakes fleet are included but most naval vessels are excluded. Registry Ships are registered at ports, and registry (or ‘flag’) refers to the country of the port at which a ship is registered. The breakdown of flags and flag groups by country is as follows: United Kingdom - Great Britain and Northern Ireland. Crown Dependencies - Isle of Man and the Channel Islands. Dependent Territories - Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Falkland Islands, Gibraltar, Hong Kong (until 1 July 1997), Montserrat, St Helena, Turks and Caicos Islands. European Community at 30 April 2004 - United Kingdom (including Isle of Man and the Channel Islands), Austria, Belgium, Denmark (including DIS, Faeroes and Greenland), Finland, France (including French Antarctic Territory, French Guiana, French Polynesia, Guadeloupe, Martinique, Mayotte, New Caledonia, Reunion, St Pierre & Miquelon and Wallis and Futuna Islands), Germany, Greece, Irish Republic, Italy, Luxembourg, Netherlands (including Netherlands Antilles and Aruba), Portugal (including Madeira, MAR, Azores and Macao), Spain (including Canary Islands and CSR) and Sweden. Countries acceded to EU on 1 May 2004 - Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovak Republic and Slovenia Canada - Canada (including Great Lakes fleet) Norway - Norway (including NIS) USA - USA (including Great Lakes fleet, American Samoa, Virgin Islands of the USA, Northern Mariana Islands, Guam, Puerto Rico and USA reserve fleet (except for mid-year 1998). UK ownership UK owned (or directly owned) ships, wherever registered, are those for which the nationality of the owner is United Kingdom (not including the Crown Dependencies). Where a company owns a vessel, its nationality is deemed to be that of the country in which the company is incorporated.

UK parent owned ships are those for which the nationality of the company having the controlling interest in the direct owner is United Kingdom. Units of measurement Under the International Convention on the Tonnage Measurement of Ships, 1969, gross tonnage (GT) is defined as the following function of the total volume of all enclosed spaces in the ship (V), in cubic metres: GT = K1V Where K1 = 0.2 + 0.02log10V. Although the Convention is fully in force, the old "gross registered tons" measure is still the measure recorded on Lloyd’s Register-Fairplay World Fleet Database for a substantial proportion of world tonnage. This was directly related to the capacity of the space within the hull, and of the enclosed spaces above the deck, which were available for cargo, stores, passengers and crew, with certain exceptions. In practice, old and new tonnage measures are fairly similar, except for ships with substantial exempt spaces under the old system, such as Ro-Ro vessels. Deadweight tonnes (dwt) is the weight of cargo, stores, fuel, passengers and crew carried by the ship when loaded to her maximum summer loadline. Up to 1986, statistics were compiled for imperial deadweight but from 1987 metric units are used (one deadweight ton (imperial) = 1.016 deadweight tonnes). TEU (twenty-foot equivalent units) is a measure of the container-carrying capacity of certain types of ships, being the number of standard twenty-foot containers, which the vessel could carry. Trading vessels Trading vessels are those, which carry cargo or passengers for commercial purposes. Certain vessel types, for example dredgers and fishing vessels, are therefore deemed to be ‘non-trading’. Other vessels, whilst constructed for ‘trading’ purposes, are also deemed to be non-trading because they have been converted for a non-trading use, for example storage or a floating restaurant, or because they are non-seagoing. Ship prices (Table 7.5) These figures, which are priced in US dollars, are taken from the annual Reviews published by Fearnleys of Oslo, Norway.