The greatest single factor in cutting the expenses of ocean transportation is found in the improvements in the marine engine and the consequent reduction in coal consumption. Outlays for fuel constitute about 47 per cent of the total operating expenses of the average steamer. According to A. J. Maginnis: In 1810, 1 lb. coal propelled 0.578 displaced tons at S knots of which 0.057 was earning weight.
In 1898, 1 lb. coal propelled 3.5 displaced tons at 10 knots of which 2.1 was earning weight.
Expressed by years and in terms of knots times earning tons, the performance has been as follows: In 1840 1 lb. coal performed 0.456 knot-tons In 1850 1 lb. coal performed 1.44 knot-tons In 1860 1 lb. coal performed 52 . 7 knot-tons In 1870 1 lb. coal performed 9. knot-tons In 1880 1 lb. coal performed 10.5 knot-tons In 1890 1 lb. coal performed 19.3 knot-tons In 1898 1 lb. coal performed 21. knot-tons Such phenomenal increase in performance went hand in hand with a more favorable ratio of net to gross tonnage, a result of the substitution of steel for iron. Freight rates have declined steadily, tho not without fluctuations, as shown by Professor E. R. Johnson's table of the mean steamship rates from New York to Liverpool: 5. Distance does not determine rate.—From the various figures given, it will be seen that distance does not directly influence the rate. Whether Singapore is the final destination of the cargo or Naples, some 5000 miles nearer, the freight rates are practically the same. In short, freight rates are strictly competitive and are determined by "what you can get." The time consumed in travelling these longer dis tances is indeed a factor in cost, but the cost of opera ting a moderately sized freight steamer is so low that it does not figure as a very large item. The actual expense is estimated at about 10 cents per net register ton per day for a steamer of 10 knots speed.
6. The line rates.—The rates which the regular line steamers charge for their services are greatly affected by the condition of the charter market. The possi bility of chartered ships being put "on berth" to compete temporarily with the established lines is a constant danger. This situation is the more serious since the tramp can cut rates in a port without fear of reprisal. It may not return to that port for months or years, or even at all. On the other hand, the liner depends upon the local freight market. Moreover, there is a constant possibility of new lines being created temporarily or existing lines expanding by a chartering of more steamers.
The tramp is, as a rule, a "full-cargo" carrier. The liner finds its main support in the less-than-ship load lots. Tramp competition attacks mainly the bulky articles on the traffic list, those which the liner does not cover for the best of its business, but those to which it must look for its "measurement cargo" to give it the proper mixture of weight and bulk.
The competition between lines is more serious than that between lines and tramps because lines depend upon the same class of goods for their freight. They are direct competitors. If one cuts a rate the other lines must follow or see their boats leave without full cargoes. In order to remedy this situation the lines have in the past combined to control the rates.
7. Di ff erence in rates.—Freight rates are far from being uniform. Often different rates are paid by different shippers over the same lines. Professor J. R. Smith describes the situation as follows : A line steamer outward bound from an American port usually derives its freight profits from such commodities as machinery and manufactured articles, provisions, oil cake, flour, and other prepared foodstuffs. Grain is usually taken, but at rates that are rarely profitable and always below the full-cargo rate for grain. Grain is heavy, but easily handled, because it is usually handled in bulk, and it makes very desirable ballast to steady the ship. Accord ingly, the policy is to fill the ship as full as possible with good paying freight and finish her off with grain, some hun dreds or thousands of tons, as the case may be.
The variety in rates is further increased by the practice . of the managers of some lines to make as many long contracts as possible, sometimes for a year or a season, and secure other freight in advance during a certain month, or within a certain week. The year contracts and the month con tracts will probably differ in rate, and they are both likely to differ from the rate current at the time of sailing. The last shipments are contracted for in the light of the then' existing market conditions, and may be high or low, ac cording to the abundance or scarcity of freight at the time the vessel is finishing her cargo. If freight is scarce the final rate may be lower than the long contract rates, or if abundant the rate may rise.