The Economic Operational Speed of a Time-Chartered Ship - A Cash Flow Approach Seminar

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It is well recognised that ship speed is an important variable used by ship operators in the bulk cargo and tanker shipping industry as a means to maximise profitability of these operations. Empirical data suggests that identical ships, travelling identical routes under identical conditions, still travel within a wide distribution of speeds. The reasons for this cannot be well understood from current speed optimisation models in the literature. The models developed in this article contribute towards increased understanding of how optimal speed decisions are dependent on conditions that determine the relevant future use of the ship that the charterer must consider. A wide range of different speeds would then be observed as a consequence of deliberate choice in the context of profit-maximising behaviour.