Which one is better Ship Management Company or an Ownership Company?
Last updated on March 10th, 2023 at 11:16 am
The following blog will provide you a guide to help you choose between a ship management and an Ownership company-
As one would be quite familiar, employment at Merchant Navy remains to-date, one of the most fulfilling and reputable opportunities in the world. Well, the name says it all; it has made an everlasting impact on human history and will continue to do so in the future years. The possibility and responsibility to be operating a multimillion-dollar vessel, and its equipment, far out in the open oceans, while traversing the world, and living a vibrant life, is quite an exciting and enthralling thought.
However, once an individual has completed his / her university education, what sort of organisation should one work for? What are the companies that one could choose? Or, what job profile or income could one expect while sailing for their chosen company as an Engine or Deck Cadet?
In the Maritime Industry, there are two different types of Shipping Companies:
- Ship Management Company
- Ownership Shipping Company
Ship Management Company
Ship management, as the name implies, is basically concerned with the management of a ship. It is performed by independent companies that utilize ships owned by other corporations or individuals. The ship management firm oversees ships for the owner and pays him an annual fee agreed upon between the owner and the ship management company.
Furthermore, the vessel is leased to the Managing Company over a signed contract by the Ship’s owner for a given period of time. After the defined period, the owner may either continue with the same company or if he’s dissatisfied with the Managing Firm’s work, he/she could move over to a different Management Company. It is however, of importance, that the owner is responsible for deciding whether he/she would lease the entire ship or a portion of the services of the vessel to the Ship Management Company. So, the decision is at the Owner’s discretion.
What does Ship Management Involve?
Management of a ship is definitely not a piece of cake. Ship management entails a number of duties that must be completed before, during, and after the ship’s operation. Well, the first, most important thing on the list for a ship management business is to get the ship approved. The company must obtain all the requisite approvals from the various classification societies. The Management Corporation could run a variety of vessels or either, focus solely on one type of the vessel. For example, MSC (Mediterranean Shipping Corporation), works only with container vessels, whereas businesses like V ships and Anglo-Eastern manage various sorts of ships.
However, if a Management Company wishes to enter a new field by operating a different kind of vessel for the first time, the approval for the operation is granted for six months and their performance is reviewed. Further approval is only granted on the grounds of efficient work.
Popular Ship Management Businesses include Bernhard Schulte Shipmanagement (BSM), Executive Ship Management (ESM), Fleet Management Ltd., Anglo Eastern, et cetera.
A Ship Management Company is obliged to provide the following services:
- The Ship Management Corporation is responsible for overseeing the ship’s machinery maintenance. Further, the process entails numerous ship surveys and repairs.
- The Management Company is responsible for paying off all the expenses on the owner’s behalf for the entire lease duration.
- The Management Company would arrange for the ship to be admitted to the P&I (Protection and Indemnity) organisation.
- The Management Company would supply sufficient personnel to man the ship.
- The Management Company is responsible for loading and unloading the Cargo.
- The Management Company has the authority to hire the ship on behalf of the ship owner.
- The Management Company would negotiate bunker and lubricant oil contracts.
- The Management Company would handle insurance, salvage, and other claims.
- The Management Company should arrange for the ship’s insurance.
- The Management Company is also responsible for arranging for victualling and supplies for the ship’s crew.
Ownership Shipping Company
Shipping firms and vessels, like any other type of business, are owned by individuals with varying financial levels. Domestic shipping businesses are often smaller and operate in domestic waterways, whereas international corporations operate in international oceans. Just like any other business, the occupation of various levels here has no ownership limits. A businessman / businesswoman capable of affording a vessel sailing in international waters, is perfectly eligible to do so, as long as he/she abides by the IMO laws for safety and pollution avoidance. Chevron, Shell Shipping, Torm, BP Shipping, are some of the popular Ownership Shipping Companies.
a. Domestic Shipping Companies
These are particularly popular in countries with coastlines or coastal towns on the sea or ocean. They are typically smaller vessels that are used for a variety of tasks. They could be ferries, fishing boats, or freight carriers, although they are typically tiny in size. They have limited mobility and normally do not move long distances by land. They are also used to deliver cargo from ultra-large crude carriers (ULCCs) or massive cargo carriers that are unable to access harbours. These smaller vessels and barges take over the task of transporting cargo from the vessel to the harbour. These tiny businesses are also employed to convey freight along coastal towns and cities, and some are contracted to send to neighbouring nations.
As mentioned earlier, there are currently limitations, and one country may have numerous vessels, some of which operate on internal routes and others on international lines. These businesses are typically controlled by individuals or small partnerships who have been in the shipping business for generations, with only a few fresh and daring entrepreneurs venturing into the market.
b. International Shipping Companies
These are also well-established shipping companies that have been in business for decades and are owned by multi-millionaires. They often have well-organized people and managers in charge of the organisation. Their infrastructure is quite modern because their operations are multinational and they have significantly more boats sailing than domestic shipping businesses. Some of these companies are public, which means that their shares can be purchased by the general public, but the vast bulk of their stock remains in private hands.
These are the shipping corporations in charge of conveying the majority of the goods in international trade. They transport food, oil, and a variety of other manufactured items from one country to the next, accounting for a sizable portion of all cargo transported around the world.
With shipping companies expanding and more vessels required to transport more and more cargo, there is a greater chance that you will see more ships at the harbour, and now you will have an idea of the type of people who own shipping companies the next time you see that huge vessel drifting in to the harbour or out in the deep sea.
Distinctions between Ship Management and Ownership Shipping Firms
Because both sorts of businesses operate in the marine sector, they represent two sides of the same coin. An Ownership Shipping Company, often known as an owner, is the entity that purchased the vessel and thus is the in-charge of it and performs tasks like regular maintenance, timely inspections and onboarding of crew.
In essence, this body (Ownership Shipping Company) seizes control of the ship. The profit or loss they make is solely theirs; they are the ones that pay for repairs, spare parts, import duties, and the crew’s wages. A Ship Management Company, on the other hand, is essentially an operator who operates the vessel on behalf of the owner who leases out the ship to them in exchange for an independent payment or a commission. Profits and losses are often shared between the two bodies based on the terms of their contract.
To Choose or Not to Choose? What Should One Opt for?
Well, to be fair, working for either of these companies has its own list of advantages and disadvantages.
However, Ownership Shipping Companies typically pay their crew higher wages and under some conditions, also provide with comparatively better living conditions. The only disadvantage that one might encounter while working for them, is that promotions might be slower. On the contrary, at Ship Management Companies, the income might be a little lower, but it is compensated by the promotions, which are typically better. Since the COVID – 19 Pandemic, the world’s been grappling with the deadly Virus, and the shipping sector is currently in a slump as the supply of graduates reaches all-time highs, leaving many cadets jobless.
Hence, it’s advisable to join an offering company, for in the current scenario, one does not have the luxury of choice.
To Summarize, here is a quick look over the major differences between a Ship Management Company and an Ownership Shipping Company :
|Ship Management Company||Ownership Shipping Company|
|1. These companies ‘manage’ a vessel or its services on behalf of an Owner (corporations or individuals) who has leased a ship purchased by him/her for a given period of time to the Company.||These companies are the entities that purchased the vessel themselves and thus are in-charge of it.|
|2. It is at the discretion of the Owner, whether he wishes to lease the entire ship or a portion of the vessel’s services to the Management Company.|
Since the vessel has been purchased by them, they are the central decision-making body for the ship.
|3. The Management Company is bound by a contract and pays an annual sum, mutually agreed upon by them, to the Owner. Profits and losses are often shared between the two bodies based on the terms of their contract.||Any profit or loss that the Ownership Company makes, is solely theirs.|
|4. The Ship Management Corporation is responsible for overseeing the ship’s machinery maintenance, and for paying for all of the expenses during the lease’s duration, on the behalf of the Owner.||Being the Owning Entity of the Vessel, they are the ones that pay for repairs, spare parts, import duties, and the crew’s wages.|
|5. At Ship Management Companies, the income might be a little lower, but it is compensated by the promotions, which are typically better.||Typically, they pay their crew higher wages and sometimes, also provide with comparatively better living conditions. However, the promotions here could be slower.|
That’s all for the article, folks. For any doubts, queries or further discussion, do reach out to us, and we’d be happy to help! 🙂
Confused which shipping company to choose? Read our blog- “How to choose a good shipping company?”
Sir I am finished in diploma Marine Engineering 3years course
Great to know that.
Jai Mata Di Sir. Accurate blog. Keep inspiring, blessing the community.❤🙇♂️
Thankyou Vishal, glad it helped.
Working for a reputed Ownership Shipping Company is always better to have a sense of belonging.Further good owners always maintain their fleet well in direct consultation with the seafarers.
For a ship management company,the standard of maintenance is always governed by financial contract with the Owners.
Completely agree but slow promotions on the other hand can be big reason to switch over.
it’s very interesting to follow this website. many thanks
Thankyou benmansour😊. Keep an eye out for even more informative blogs coming soon!
Interested shiping felled
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Understood. Thank you Sir.
Your welcome Pratik!